Royal Mail quality tests ‘rigged’

The postal watchdog is considering taking action against Royal Mail after finding quality tests had been rigged.Postcomm, acting on an insider tip-off, found that addresses involved in testing deliveries in some areas had been passed on to staff. Staff had also learned to recognise test mail and were able to prioritise it to ensure it arrived on time. Royal Mail said that there had been “no material impact whatsoever” on its quality of service figures. Tip-offPostcomm’s preliminary report said it was “minded” to find the company had breached its licence conditions for quality of service since 2006. Royal Mail was obliged to use market research firm Research International to monitor the standard of its service. Part of this clause also meant Royal Mail should make sure that the panellists used to send mail between each other to test delivery times remained anonymous. But a 10-month investigation, launched after the tip-off, found test delivery addresses were circulated to Royal Mail workers and senior managers. Postcomm was also told by its whistleblower that a microchip used to identify test mail could be felt through the covering of post, allowing staff to search for the relevant items. However, the rigging did not make a “material difference” to the firm’s published quality of service figures, the watchdog said. Postcomm is expected to make a final decision on whether to take action against Royal Mail in May. During Royal Mail’s own investigation into what had happened a number of staff were suspended, it said. It also said that the company had co-operated fully with the probe. In a statement, a Royal Mail spokesperson said: “Following investigations by Royal Mail and Postcomm into allegations concerning quality of service measurement, primarily in local mail operations in the Motherwell area - announced last year - both Royal Mail and Postcomm found that there has been no material impact whatsoever on Royal Mail’s Quality of Service figures.”

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BA union announces strike dates

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Willie Walsh, BA chief executive: “We’ll do whatever we can to keep BA flying”

The union representing British Airways cabin crew has said its members will go on strike for three days from 20 March and for four days from 27 March.The Unite union confirmed it would not strike over Easter, but warned there could be further action after 14 April if a resolution had not been agreed. BA cabin crew are striking over changes to pay and staffing levels imposed by the airline last November. Another row has broken out between BA and the union about a new offer. In addition to strike action, the union announced at a press conference that it would also ballot its members on a new offer from BA tabled earlier this week, but said it would not recommend it. But shortly afterwards, BA boss Willie Walsh told the BBC that the airline’s offer was no longer available. He said the offer was conditional on strike action being averted, and so had been withdrawn. Unite’s assistant general secretary Len McCluskey said this latest move by British Airways “beggared belief” and denied that the offer was ever conditional. Far apartAlthough both sides reasserted that they were available for further talks, the language on both sides has hardened since the strikes were announced.

Mr Walsh said the two parties were “not close at all” to coming to an agreement. The union’s proposals to save more than £60m at the loss-making airline included staff pay cuts that BA described as “morally wrong”. Mr Walsh said Unite had failed to provide any credible plan to date. The union contended that it had “made enormous strides and significant offers that meet the demands of BA”. Mr McCluskey said that the withdrawal of the offer showed that the airline’s management was “bent on confrontation and never had any intention of an agreement”. The Conservatives accused the government of “looking the other way” because the union was “channelling millions” into “Labour’s election coffers”. Prime Minister Gordon Brown urged the two sides to resume negotiations. “It’s in my view essential that the parties continue to talk now even at this 11th hour,” he said. “I hope they will do so but I remind them of the danger and risk to the British economy of disruptive strikes going ahead.” Flight cancellationsBA said all flights to and from London City Airport would be unaffected by strike action, as would all long-haul flights from Gatwick.

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Vauxhall gets UK loans guarantee

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Vauxhall gets UK loans guarantee

Business Secretary Lord Mandelson has announced a 300m-euro ($412m; £270m) loan guarantee to the European arm of General Motors (GM).The money will help secure operations at the carmaker’s two Vauxhall plants in the UK and those of Opel in Europe. Lord Mandelson told the BBC he thought the move would secure the future of Vauxhall plants in the UK. GM had planned to sell Opel after going into bankruptcy protection last year, but then changed its mind. After announcing last week an increase in its investment in Opel and Vauxhall to 1.9bn euros, GM said it needed 2bn euros of loans and guarantees from European governments. It has asked for about 60% of this total to come from Germany, where the majority of GM’s European workers are based. GM estimates that Opel - which includes the UK’s Vauxhall business - needs 3.3bn euros to be turned around. The US firm decided to keep Opel rather than sell it to Canadian car parts maker Magna, which Germany had supported. The UK government loan will come from the government’s Automotive Assistance Programme. Vauxhall said it represented “a strong vote of confidence in UK automotive industry”. Luton concernsGM is cutting 8,300 jobs across Europe and is closing plants as it seeks to revive the brand. No jobs will be lost at the Ellesmere Port factory in Cheshire, which employs 2,166 people and makes the Vauxhall Astra. But it confirmed earlier this year that more than 360 jobs were to go at Vauxhall’s Bedfordshire van plant, 150 from its administrative department and 369 posts would be lost at its Luton plant. There have been concerns about the future of the Luton plant - which makes the Vivaro commercial van - beyond the current contract, which ends in 2012-2013. “It’s too early to say what new product will replace the current production at Luton,” Lord Mandelson told the BBC. “But I have spoken to the head of GM Europe and he is working very hard… in finding a further product that can be produced at Luton.” RestructuringGM also plans to invest 11bn euros “in a new product offensive” over the next five years Opel plans to launch eight new models this year, and another four in 2011. A big slump in sales during the global downturn forced GM into bankruptcy protection last summer, and it emerged 62%-owned by the US government. It has since sold its Swedish brand Saab and closed a number of classic US car brands such as the Pontiac and Saturn. Last month, it decided to wind down operations of the off-road Hummer brand after failing to complete a planned takeover by a Chinese firm.

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Lloyds aids mortgage overpayments

Lloyds Banking Group is encouraging its borrowers to pay off their mortgages early.Customers on variable rate deals can, for one year, overpay their mortgages by up to 20% of their loans. Ultra-low interest rates mean UK households have saved about £20bn in interest repayments in the past year, the Bank of England has estimated. Figures suggest that about one in four borrowers have used the money to accelerate their repayments. Lloyds’ current annual limit, common among lenders, is a 10% overpayment per year. The Halifax, the main mortgage lending arm of the Lloyds group, was unable to say how many of its existing customers were using the current 10% facility, but a spokeswoman said it was responding to customer interest. “We have had people phoning us up asking how much they can pay off,” she said. Reduced interestThe advantage of overpaying is that it enables a borrower to pay off a loan more quickly, thus saving interest.

The one exception might be where the mortgage interest rate was so low that a borrower would be better off putting the extra payments into a savings account paying a higher rate of interest, after tax. An analysis by the Council of Mortgage Lenders (CML) last year suggested that a quarter of the £20bn annual interest saving, brought about by the Bank of England’s 0.5% bank rate, was showing up in higher mortgage capital repayments. This analysis was backed up by a survey for Lloyds, suggesting that a quarter of mortgage holders were taking advantage of their much lower interest rates to pay off capital at a faster rate. Stephen Noakes, commercial director of mortgages, Lloyds Banking Group said: “The average mortgage repayment has dropped by around £188 per month. “And those on tracker mortgages have done even better - on average they are just over £400 a month better off.” ‘Not widespread’It is normal for lenders to allow some overpayment on mortgage loans, each month or each year, before levying charges for the privilege. Some allow up to £500 in overpayments each month; others stipulate a ceiling of 5% of the outstanding loan; and some allow 25% extra to be paid over the course of the particular deal, for instance during the two or three years of a fixed-rate mortgage. Ray Boulger of mortgage brokers John Charcol, said: “Offset mortgages can allow you to overpay as much as you like, so long as you don’t pay off the whole mortgage.” Despite the obvious attraction of making overpayments, January’s edition of Trends in Lending, published by the Bank of England, found that they have not been common. “The major UK lenders reported that overpayment of mortgages has not been widespread, partly because reduced payments had been used to finance spending and in some cases used to repay more expensive unsecured debts or held as precautionary saving,” it said.

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The FSA got us into this mess; it can get us out

Published: 6:57AM GMT 13 Mar 2010

If the Conservatives win the general election, the Financial Services
Authority will be the one to carry the can for its part in the banking
crisis.

The Tories want a split regulatory system, with the Bank of England returning
to regulate the banks and a new Consumer Protection Agency to safeguard the
interest of the consumer. The FSA will be no more.

But while George Osborne, the shadow chancellor, talks of a “powerful new
regulator” and a “powerful new consumer protector”, I doubt
whether the upheaval will be worth it.

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‘Shame’ on supermarkets over abuse of supply staff

Evidence of widespread physical and verbal abuse of migrant workers in the meat and poultry industry that supplies Britain’s supermarkets has been uncovered by the Equality and Human Rights Commission.
A two-year investigation revealed frequent breaches of licensing and safety standards in meat processing factories, as well as at the employment agencies providing the labour.
Migrant workers make up most of the agency workforce, according to a report by the commission, because few British workers want to do the physically demanding, low-paid work. It also found that agency employees were routinely more poorly paid than directly employed staff.
Neil Kinghan, director-general of the commission, said: “The inquiry reveals widespread and significant ill-treatment in the industry. We have heard stories of workers subjected to bullying, violence and being humiliated and degraded by being denied toilet breaks. Some workers feel they have little choice but to put up with these conditions out of economic necessity. Others lack the language skills to understand and assert their rights.

“While most supermarkets are carrying out audits of their suppliers, our evidence shows that these audits are not safeguarding workers and they clearly need to take steps to improve them. The processing firms themselves and the agencies supplying their workers also need to pay more than lip- service to ensuring that workers are not subjected to unlawful and unethical treatment.”
Jack Dromey, deputy general secretary of Unite, the union that has been campaigning for change in an industry that employs 88,000 workers, said that supermarkets should hang their heads in shame. “[They] have driven down costs along their supply chain with tens of thousands of workers paying the price, suffering discrimination and unfair treatment,” he said. “A two-tier labour market has been created, exploiting migrant agency workers on poorer conditions of employment.
“The report exposes labour practices in the supply chain that are an affront to human decency — physical and verbal abuse, a lack of health and safety protection, shameful treatment of pregnant women and a culture of fear. The report says, and rightly so, that there are reputable employers but they are undercut by the rogues.”
Asda has signed new arrangements with its suppliers, but no other leading supermarket has followed suit.
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Tricks of the Trade

The trade of banking contains activities so different that it is hard to see why they are all covered by the same term. On Thursday night the sad news arrived of the death of Sir Brian Pitman, the highly respected former chief executive of Lloyds Bank. Then, yesterday, the report into the Lehman Brothers collapse, by the court-appointed examiner Anton Valukas, revealed what happens when integrity of the kind embodied by Sir Brian goes missing (See Obituary, page 90).
Bart McDade, the former head of equities at Lehmans, admitted in an e-mail that the bank was addicted to the Repo 105, an accounting device to flatter their performance. “I am very aware” he said, “… it is another drug we’re on.” It is impossible to imagine that sentiment coming from Sir Brian, or indeed anyone who worked for Lloyds while he was its chief executive. Sir Brian came from an older, wiser tradition in which bankers actually knew their customers. They knew the limits of sensible lending and on terms beneficial to both the customer and the bank. Those of Sir Brian’s generation and type were bankers who didn’t necessarily like to say “no”, but knew how to.
There could scarcely be a greater contrast between this prudence and the anything-goes attitude of the final days of Lehmans or the unrepentant arrogance of Dick Fuld. Even when Lehmans was being warned that the US sub-prime mortgage was vulnerable, it carried on cranking up its leverage. Even worse, the Valukas report reveals that, astoundingly, the bank actively used accounting tricks to disguise those levels of leverage.
But the culprits of the Valukas report are not confined to the executives at Lehmans. There are some worrying thoughts for the City of London too. The City’s investment banks are already in the doghouse and its regulators emerged with little credit but London’s professional services sector, the lawyers and accountants whose contribution to the prosperity of the Square Mile is every bit as important as the bankers, have emerged from the chaos with their reputations largely intact. Until now. Valukas singles out the auditor Ernst & Young and the law firm Linklaters for their inglorious role in the Lehmans debacle.

This is especially inauspicious in the week that the City of London Corporation declared that New York has now overtaken London for the quality of its banking and regulatory regime. That report did say that London remains pre-eminent in the field of professional services. Britain does not lead the world in many business sectors but its accountancy firms and its law firms have an enviable reputation worldwide. The top UK law firms — Slaughter and May, Allen & Overy, Freshfields Bruckhaus Deringer and Linklaters — are among the best in the world. All of them are run from London. Two of the “big four” global accounting firms, PricewaterhouseCoopers and Deloitte, are also strongly British in flavour. The latter even has a British chairman of its global board.
Less glamorous than the investment banks they may be, but Britain’s invisible export earnings would be greatly depleted without them. The financial crisis and its aftermath has seriously diminished the ability of many of Britain’s banks — Lloyds, sadly, among them — to compete on the world stage. The legal and accounting firms, therefore, are now more valuable than ever. If the Valukas report were the harbinger of decline it would be a serious affair indeed.
The collapse of Lehmans in September 2008 threw market orthodoxies into question. The regulatory response to the crisis is not yet clear. But, if bankers wish to withhold the dead hand of government, then they need impeccable business ethics. Even as the form of banking he practised has disappeared, for the way he conducted himself, Sir Brian Pitman was, and is, exemplary.

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At leisure: Theatre fan revels in racecourse drama

“Wouldn’t it be just terrific?” Edward Gillespie exclaims. “Kauto Star
and Denman have slugged it out over three miles, but as they come up the
hill at the finish, they are passed by Tricky Trickster, who wins. Wouldn’t
that be a story?”

It would be strange if the managing director of Cheltenham Racecourse were not
excited about next Friday’s battle of the two heavyweights of jump racing —
Kauto and Denman — which, for a third time, oppose each other in the Gold
Cup. The tally thus far is one each in this equine equivalent of Ali and
Foreman, or Borg and McEnroe. With the battle billed as The Decider, Mr
Gillespie is playing a full part in ratcheting up the buzz ahead of the duel
between the Big Two.

To mischievously suggest that the two great steeplechasers and leaders in the
Gold Cup betting — two horses for which scarves have been woven, T-shirts
printed and bracelets minted — may be beaten is not a discourtesy to their
jockeys, Ruby Walsh and A. P. McCoy, two of racing’s modern greats. Rather,
it indicates Mr Gillespie’s love affair with the pure theatre of Cheltenham
and the magic, in jump racing in general, of the unexpected.

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If the story is good, investors will buy it

Travelport, the airline ticketing company, Merlin Entertainments, the theme
park operator, and New Look, the fashion retailer, postponed initial public
offerings within days of each other last month, there was much comment
blaming both market turbulence and a reluctance on the part of institutional
investors to buy shares in businesses being sold by private equity firms.

However, since New Look — the last of the trio to shelve IPO plans — took its
decision, the FTSE 100 has rallied by 9 per cent. This has led many
companies to think again about a possible IPO in this year’s first half.
Merlin indicated on Tuesday that it may look again at floating in the next
three months.

In what might be seen as further positive developments, Promethean, the
educational services company, completed a successful flotation yesterday and
SuperGroup, a fashion retailer, said that it was pressing ahead with its IPO.

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How Repo Man’s vanishing accounting trick got a London link

By Alistair Osborne

Published: 10:04PM GMT 12 Mar 2010

Maybe Dick Fuld and his chums at Lehman Brothers are closet fans, given how
they finessed their Repo 105 accounting stunt – with a helping hand from
auditors Ernst & Young and lawyers Linklaters.

Even in this post-credit crunch world, it does seem rich that a bank can play
now-you-see-me, now-you-don’t with $50bn of assets – and get the deal signed
off. Banks constantly manage their balance sheets by trading assets for
short-term liquidity. But they don’t usually make them vanish altogether by
valuing the assets at 105pc of the cash received and calling that a sale.

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