Corporates: the wages of greed

By Richard North - February 18, 2023

Offering a somewhat different perspective on the predatory activities of the energy suppliers is the stupid man’s idiot, Matthew Lynn, in the Telegraph, who tells us: “We are falling for the Left’s childish anti-wealth hysteria”.

“Businesses”, the sub-heading to his column reads, “shouldn’t apologise for success – we should be celebrating them instead”, although he does concede that “there are occasions when a company makes excessive amounts of money through little effort of its own”.

Nevertheless, Lynn argues that it is “completely normal for energy giants to rake in more cash when prices are high”. It is, he says, “part of an economic cycle. When prices are low, they lose money, and when they go up, the profits start to flow again, at least until the market tanks”.

It is interesting that, as a newspaper, the Telegraph has probably shown least interest in the prepayment meter scandal and, presumably, Lynn thinks it “completely normal” – as reported yesterday – for eighty-two-year-old pensioner Barry Seckerson to be in so much trouble.

He is the man who made the front page of the Mirror, telling us how he has been faced with a winter bill of £1,171, over £900 more than the £266 for the previous three months, and well over the £400-500 he was expecting, and thus has been forced to raid his funeral fund to pay this debt.

Lynn seems equally happy with “profiteering” banks, such as NatWest which has reported a “surge” in profits, up by a third on the year to reach £5.1 billion.

Says the egregious Lynn, banks make more money when rates rise because they can earn a lot more interest on the money they have lent out. They make a lot less if there is a recession, and a lot of those loans turn sour.

Certainly, as we see from this report, the rise in NatWest’s profits have followed an increase in net interest income – the difference between what the bank charges for loans and what it pays in interest on deposits – which went up by 30 percent to £9.8 billion, the best part of a £3 billion increase.

Perhaps, though, Lynn hasn’t had time to read his own newspaper, which is carrying an article headed, “How high street banks shortchanged a nation of savers”. It notes that, although the Bank of England has hiked interest rates by 3.9 percentage points since December 2021, high street banks have passed on just 0.54 percentage points to savers on average.

That includes NatWest, which is currently offering 1.51 percent interest on its Flexible Saver accounts. By contrast, it is advertising personal loans at a representative 24.9 percent APR to longstanding customers.

It is this easy flow of funds which has doubtless inspired the bank to increase the pay package of its chief executive to £5.2 million, celebrating the “success” of ripping off its savers. This “strong year for the business”, the bank said, was “directly reflected” in the pay it handed to its top bosses.

Whether it was such a “strong year” for the water industry is perhaps open to question after the water companies managed to pollute their way into the history books and failed to address their treated water leakage problems, allowing up to a fifth of their product to run to waste.

Nevertheless, this did not stop the industry hiking the pay of its chief executives by an average of 20 percent for the ten firms in England and Wales, climbing to £1.1 million in 2021-22, up by £193,000 on average. Collectively, executives across the sector were paid almost £25 million.

Total executive remuneration, we are told, was highest at Severn Trent, with two executives paid a total of almost £6 million. The company’s chief executive, Liv Garfield, is the highest-paid boss in the sector, on a £3.9 million package. Thames Water, the biggest water company, had the second highest total executive remuneration, with four executives sharing £3.24 million.

In a classic example of corporate-speak, a Thames Water spokesman said: “Our executive reward packages are benchmarked with those at other similar-sized organisations. We must pay competitive packages to attract and retain the best people”.

If current performance is an example of what the “best people” do, one wonders how much we might have to pay to get a half-way efficient water industry, although neither the banking industries nor the energy utilities provide any evidence that higher rates of pay have an obvious influence on standards of service.

But then a Water UK spokesman did say that: “Bonuses and incentives for water company leaders are linked to their delivery for customers and the environment”. If delivery falters, he said, “then levels of reward will, rightly, be lower”. Which, of course, is why levels of reward have just increased.

Here, one finds it difficult to avoid the thought that the corporate elites are exhibiting the same death-wish tendencies which had the Bourbons make their one-way trips in tumbrels for their appointments with Madame Guillotine.

Others would have the water bosses facing criminal charges for their misdeeds, but perhaps a more gentle, if ultimately less satisfying, answer to corporate greed is to deprive the profiteers of the cash they need to pursue their vices.

This seems to be the preferred tactic of some Southern Water customers, who are reported to be withholding payments until the firm cleans up its act.

While the “Uncle Toms” of the debt industry will always advocate paying unto Caesar, The Times cites one refusnik who lives in the Medway Towns in Kent and owed £106 including an administration fee.

Going under the name of Clare, she initially reduced her direct debit about a year ago, to reflect non-payment of the wastewater element of the bill. After being chased for the outstanding sum by Moorcroft Debt Recovery, a letter from the company dated January 16 referred the debt back to Southern Water. “We have closed the account on our system and referred your correspondence to our client”, the agency wrote.

Clare is cited as saying: “My mother wants me to keep the pressure on Southern Water over this as she believes all the raw sewage pollution is truly disgusting. She’s lived in Kent her whole life and has never seen such acts of environmental damage”.

Southern Water, she said, had not talked to her about the grounds of her refusal to pay and, although the paper warns that withholding the wastewater element of water bills poses a risk to people’s credit records. Clare says her 80-year-old mother was unlikely to need a loan.

Another activist, writer Julie Wassmer, who lives in Whitstable, asserts that boycotting the company’s wastewater charges felt like the only option. She owes Southern Water about £600.

“We’re not paying because of Southern Water’s atrocious record on wastewater services. In any other circumstance, a consumer would be able to go to another company to perform a service adequately, and we can’t do that”, she says.

She thus concludes: “The only way we can show resistance and opposition to this environmental disaster, the pollution of our waterways, is to take a principled stand and withhold payment”.

One can see immediately why the energy utilities are so keen to keep their powers to force prepayment meters – an option not open to the water companies. In the absence of being able to change suppliers (which one can’t do with energy suppliers if there are debts of more than £500 outstanding), the most potent weapon against corporate intransigence is the withholding of payment.

Another, more subtle technique – and one posing less risk – is to increase the suppliers’ administration costs. Given that a single letter can cost a company as much as £10, constant complaints and demands for information and explanations can quickly erode profit margins which, for some companies, are perilously slim.

On the basis that there are more of us than there are of them, collectively we have far more power than the appeasers would recognise.

No doubt, Matthew Lynn would not approve. He dismisses the “instant, unthinking condemnation of any company that makes a lot of money” as “childish”. We need, he says, “to stop demonising these businesses and start celebrating them instead”.

On the other hand, those of us not given to “unthinking” condemnation might think it is time to stop giving a free pass to the greedy corporates and time to make them work for our money.