'You've got to eat': Energy bills are squeezing businesses and people as UK costs soar | Big Indy News
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‘You’ve got to eat’: Energy bills are squeezing businesses and people as UK costs soar



A high street decorated with British Union Jack bunting in Penistone, UK. The End Fuel Poverty Coalition has warned “a tsunami of fuel poverty will hit the country this winter.”

Bloomberg | Bloomberg | Getty Images

LONDON — Facing soaring energy bills, rising costs and rapidly declining consumer purchasing power, small businesses across the U.K. are struggling to make ends meet.

New data on Wednesday showed U.K. inflation jumped to a 40-year high of 10.1% in July as food and energy costs continued to soar, exacerbating the country’s cost-of-living crisis.

The Bank of England expects consumer price inflation to top out at 13.3% in October, with the country’s average energy bills (set via a price cap) expected to rise sharply in the fourth quarter to eventually exceed an annual £4,266 ($5,170) in early 2023.

On Wednesday, a director of U.K. energy regulator Ofgem quit over its decision to add hundreds of pounds to household bills, accusing the watchdog of failing to strike the “right balance between the interests of consumers and the interests of suppliers.”

Real wages in the U.K. fell by an annual 3% in the second quarter of 2022, the sharpest decline on record, as wage increases failed to keep pace with the surging cost of living.

A new survey published Friday also showed consumer confidence falling to its lowest level since records began in 1974.

‘Absolute madness’

“While the energy price caps do not apply to businesses directly, millions of small business owners are still experiencing increased energy bills at a time when costs are rising in most operational areas,” said Alan Thomas, U.K. CEO at insurance firm Simply Business.

“Simultaneously, consumer purchasing power is going down as Brits cut back on non-essential spending, harming the books of SME [small and medium-sized enterprise] owners.”

This assessment was echoed by Christopher Gammon, e-commerce manager at Lincs Aquatics — a Lincolnshire-based store and warehouse providing aquariums, ponds and marine livestock.

The business has seen its energy costs rise by 90% so far since the war in Ukraine began, Gammon told CNBC on Thursday, and its owners are provisioning for further increases in the coming months.

“We are combating the rising cost with switching everything to LED, solar panels, wind turbines (planning in process) and closing down unused systems,” Gammon said.

“We have also had to increase the price of products — most of these have been livestock as they are now costing more to look after.”

Customers are increasingly withdrawing from keeping fish and reptiles due to the cost of maintenance, and on Wednesday the store had a customer bring in a snake they could no longer afford to care for.

The spiraling costs forced Lincs Aquatics to close a store in East Yorkshire, laying off several workers, while trying to offer pay rises to staff at its two remaining locations in Lincolnshire in order to help them through the crisis.

The business is also working to expand its online shop due to rising in-store upkeep costs, as heating water for marine aquariums and purchasing pump equipment become ever more expensive.

In early July, a quarterly survey from the British Chambers of Commerce found that 82% of businesses in the U.K. saw inflation as a growing concern for their business, with growth in sales, investment intentions and longer-term turnover confidence all slowing.

“Businesses face an unprecedented convergence of cost pressures, with the main drivers coming from raw materials, fuel, utilities, taxes, and labor,” said BCC Head of Research David Bharier.

“The continuing supply chain crisis, exacerbated by conflict in Ukraine and lockdowns in China, has further compounded this.”

BCC Director General Shevaun Haviland added that “the red lights on our economic dashboard are starting to flash,” with almost every indicator deteriorating since the March survey.

Phil Speed, an independent distributor for multiservice company Utility Warehouse, based in Skegness, England, liaises with brokers to find energy deals for business clients.

He told CNBC earlier this week that for the first time in 10 years, he had been unable to obtain a better deal for a client than their out-of-contract rate — the typically expensive rates paid when a business or individual does not have a contracted deal in place.

“I think the unit rate she was quoting was 60p [pence] a unit for gas, which is just ridiculous. I’d imagine a year ago, we’d have been looking at 5 or 6p. It’s just absolute madness,” Speed said.

“We’ve got no idea what’s going to be presented to us, because we’ve got no idea what’s going to happen. The price is just going ballistic. No-one’s going to buy it.”

The cost of gas for both businesses and consumers are only expected to increase through the colder winter months. Speed noted that local cafes cooking on gas will likely struggle, as they have no choice but to continue using it, unless they can replace gas appliances with electric ones.

‘Scream very loudly at somebody’

Rail strikes have already brought the country to a halt on multiple days throughout the summer and look set to continue, while postal workers, telecoms engineers and dock workers have all voted to strike as inflation erodes real wages.

Conservative leadership favorite Liz Truss was earlier this month forced into a dramatic U-turn on a plan to cut public sector pay outside London, which would have axed wages for teachers, nurses, police and the armed forces alike.

Local authorities recently offered state school support staff a flat pay rise of £1,925 per year, meaning a 10.5% increase for the lowest-paid staff and just over 4% for the highest earners, after pressure from three of the country’s largest unions.

One woman in her early fifties – a member of support staff at a state school in Lincolnshire who asked not to be named due to the sensitive situation and concerns on public reprisals – told CNBC that years of real-terms pay cuts had left many low-paid public sector workers struggling to make ends meet.

The British government in 2010, in the aftermath of the global financial crisis, announced a two-year pay freeze for public sector workers, followed by a 1% average cap on public sector pay awards which was lifted in 2017, with average pay rises increasing to roughly 2% by 2020.

While the 10.5% rise for the lowest-paid school support staff will ease the pressure, the woman said her energy costs had doubled and her private landlord had attempted to increase her rent by £40 per month, which she had not agreed to and which may mean she would need to sell her car to cover basic living expenses.

She called on the government to temporarily reduce the “standing charge,” a fixed daily amount households have to pay on most gas and electricity bills no matter how much they actually use, and to up its efforts to recoup one-off “windfall taxes” from energy companies such as BP, Shell and Centrica, which are reporting record profits..

“I think this is an even bigger crisis than [the Covid-19 pandemic], because this is going to affect not just lower earners, but maybe even middle earners as well, because I don’t see how anybody can absorb those kinds of energy costs,” she said.

The pressure being exerted on businesses and the government to increase wages in the face of skyrocketing living costs has raised further concerns about inflation becoming entrenched – but this consideration is far removed from the reality of working families increasingly being forced to cut back on essentials.

“It’s alright saying ‘we can’t keep putting people’s pay up, that will make the cost of living worse,’ but the cost of living is out of control already, and the only way for people to survive is if their wages increase,” the woman said.

“I know it’s a catch 22, but I don’t see a way around that really — you’ve got to eat.”

The situation in recent months, even before the anticipated worsening of the energy crisis, has already begun to take a toll.

“I just think I’m a very honest, hardworking person. I’ve never committed a crime, always done things right, but now I’m starting to feel like that gets you nowhere in this country,” she said.

“For the first time in my life, I want to go out and march in protest and scream very loudly at somebody, and you just think ‘what does it take?'”

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Sister Patricia Daly, 66, Dies; Took On Corporate Giants on Social Justice



For years, Sister Pat and other environmentalists had urged ExxonMobil to take significant steps to reduce greenhouse-gas emissions from its operations and products. In 2007, she proposed a resolution that called on that energy giant to set a firm date to report on its progress.

“We’re the most profitable company in the history of the planet,” she told Rex Tillerson, then the company’s chief executive (and later secretary of state in the Trump administration), at the company’s annual meeting, “but what will be our long-term health when we are really faced with the regulatory and other challenges around global warming?”

She added: “We are now, this company and every single one of us, challenged by one of the most profound moral concerns. And we have the wherewithal to respond to that.”

The proposal won 31 percent of the ballots, or about 1.4 billion shares, the largest tally for an ExxonMobil climate-change resolution. If not an outright victory, it was a page in a decades-long narrative that led ExxonMobil to put a climate scientist on its board in 2017. Three executives who recognized the urgency to address climate change joined the company’s board in 2021, nominated by a tiny activist hedge fund, Engine No. 1.

“The arc of her work led us to those victories by working from the inside and the outside,” John Passacantando, the founder of Ozone Action, an anti-global warming group, and a former executive director of Greenpeace, said in a phone interview.

In 1999, Vanity Fair named her to its Hall of Fame, applauding her as one who “translates belief into commitment and never backs down from a fight.”

Mary Beth Gallagher, who replaced Sister Pat as executive director of the Tri-State Coalition in 2017, said Sister Pat had not become frustrated when her resolutions were routinely voted down.

“She lived in hope,” Ms. Gallagher said. “We never talked about winning or losing. It was about raising consciousness and educating. If we’re not asking these questions, who will?”

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Families can make a tax-free rollover from 529 plans to Roth individual retirement accounts starting in 2024



Maskot | Maskot | Getty Images

Americans who save for college in 529 plans will soon have a way to rescue unused funds while keeping their tax benefits intact.

A $1.7 trillion government funding package has a provision that lets savers roll money from 529 plans to Roth individual retirement accounts free of income tax or tax penalties.

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The House passed the measure Friday and the Senate did so Thursday. The bill heads to President Biden, who’s expected to sign it into law.

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The rollover measure — which takes effect in 2024 — has some limitations. Among the largest: There’s a $35,000 lifetime cap on transfers.

“It’s a good provision for people who have [529 accounts] and the money hasn’t been used,” said Ed Slott, a certified public accountant and IRA expert based in Rockville Centre, New York.

That might happen if a beneficiary — such as a child or grandchild — doesn’t attend a college, university, vocational or private K-12 school, or other qualifying institution, for example. Or, a student may receive scholarships that mean some 529 funds are left over.

Millions of 529 accounts hold billions in savings

There were nearly 15 million 529 accounts at the end of last year, holding a total $480 billion, according to the Investment Company Institute. That’s an average of about $30,600 per account.

529 plans carry tax advantages for college savers. Namely, investment earnings on account contributions grow tax-free and aren’t taxable if used for qualifying education expenses like tuition, fees, books, and room and board.

Retirement plan changes in the omnibus spending bill

However, that investment growth is generally subject to income tax and a 10% tax penalty if used for an ineligible expense.

This is where rollovers to a Roth IRA can benefit savers with stranded 529 money. A transfer would skirt income tax and penalties; investments would keep growing tax-free in a Roth account, and future retirement withdrawals would also be tax-free.  

Some think it’s a handout for the rich

However, some critics think the rollover policy largely amounts to a tax handout to wealthier families.

“You’re giving savings incentives to those who can save and leaving behind those who cannot save,” said Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center.

A 2012 analysis conducted by the Government Accountability Office found the typical American with a 529 account had “much more wealth” than someone without: $413,500 in total wealth for the median person, about 25 times the amount of a non-accountholder.

You’re giving savings incentives to those who can save and leaving behind those who cannot save.

Steve Rosenthal

senior fellow at the Urban-Brookings Tax Policy Center

Further, the typical owner had a roughly $142,000 annual income versus $45,000 for other families, the GAO report said. Almost half, 47%, had incomes over $150,000.

The new 529-to-Roth IRA transfer provision doesn’t carry income limits.

Limitations on 529-to-IRA transfers

While the new tax break primarily benefits wealthier families, there are “pretty significant” limitations on the rollovers that reduce the financial benefit, Jeffrey Levine, a certified financial planner and certified public accountant based in St. Louis, said in a tweet.

The restrictions include:

  • A $35,000 lifetime cap on transfers.
  • Rollovers are subject to the annual Roth IRA contribution limit. (The limit is $6,500 in 2023.)
  • The rollover can only be made to the beneficiary’s Roth IRA — not that of the account owner. (In other words, a 529 owned by a parent with the child as beneficiary would need to be rolled into the child’s IRA, not the parent’s.)
  • The 529 account must have been open for at least 15 years. (It seems changing account beneficiaries may restart that 15-year clock, Levine said.)
  • Accountholders can’t roll over contributions, or earnings on those contributions, made in the last five years.

In a summary document, the Senate Finance Committee said current 529 tax rules have “led to hesitating, delaying, or declining to fund 529s to levels needed to pay for the rising costs of education.”

“Families who sacrifice and save in 529 accounts should not be punished with tax and penalty years later if the beneficiary has found an alternative way to pay for their education,” it said.

Are 529 plans already flexible enough?

Some education savings experts think 529 accounts have adequate flexibility so as not to deter families from using them.

For example, owners with leftover account funds can change beneficiaries to another qualifying family member — thereby helping avoid a tax penalty for non-qualified withdrawals. Aside from a kid or grandkid, that family member might be you; a spouse; a son, daughter, brother, sister, father or mother-in-law; sibling or step-sibling; first cousin or their spouse; a niece, nephew or their spouse; or aunt and uncle, among others.

Owners can also keep funds in an account for a beneficiary’s graduate schooling or the education of a future grandchild, according to Savingforcollege.com. Funds can also be used to make up to $10,000 of student loan payments.

The tax penalty may also not be quite as bad as some think, according to education expert Mark Kantrowitz. For example, taxes are assessed at the beneficiary’s income-tax rate, which is generally lower than the parent’s tax rate by at least 10 percentage points.

In that case, the parent “is no worse off than they would have been had they saved in a taxable account,” depending on their tax rates on long-term capital gains, he said.

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Goldman grumbling grows for banking giant to sack CEO David Solomon



The knives are out for Goldman Sachs CEO David Solomon, and this time the people brandishing them aren’t the usual suspects — his junior staffers annoyed that they have to work late or come into the office several times a week.

Solomon’s problems are more serious and existential, I am told, and how he handles what can best be described as a revolt in some quarters of Goldman’s middle and upper management ranks could determine how much longer he stays in his job.

Solomon, 60, took the job in 2018 and was always somewhat of an odd choice to run the white-shoe investment bank that usually cultivated its leaders from within. He cut his teeth at a decidedly un-Goldman-like venue: the scrappy investment bank Bear Stearns (ultimately one of the causalities of the 2008 financial crisis).

He joined Goldman in 1999, as a partner, no less, because his deal-making chops allowed him to skip layers of management.

In other words, Solomon is an outsider at a firm with a wickedly insular culture. He has a quirky side gig as a DJ in the summer Hamptons party circuit. He’s also not one for small talk, and doesn’t consult with a lot of people before handing down his edicts. 

“He doesn’t breed a lot of love,” said one former Goldman executive who knows Solomon well.

Lots of people at Goldman don’t like him, and they’re letting their views be heard both internally and with pals at rival firms.

Solomon as a DJ
Solomon is an outsider at a firm with a wickedly insular culture.
David Solomon/Instagram

For the record: I’ve met Solomon and like him for his no-BS style. And until pretty recently, the numbers show him doing a great job. Goldman was running on all cylinders in deals and trading. Even as the market corrects, shares are up about 60% since Solomon took over as CEO in 2018 compared to around a 44% rise in the S&P during that time.

Goldman is still the top M&A shop, even widening its market share over rivals in that important business line. Solomon was the first among his fellow CEOs to see the downturn and enact significant layoffs to cut costs.

Still, the grumbling about Solomon is spreading to the managing director and partner class. High-priced Wall Street talent don’t call all the shots at any firm, of course. But Goldman’s MDs and partners have historically been a powerful force when the board decides the fate of current management, which makes Solomon’s hold on his job increasingly precarious as more and more of them defect from his camp.

David Solomon as a DJ
Solomon was the first among his fellow CEOs to see the downturn and enact significant layoffs to cut costs.
David Solomon/Instagram

Here’s how they’re building a case against him: Goldman’s longtime archrival investment bank Morgan Stanley now easily dwarfs Goldman in market value, $144 billion to $116 billion, continuing a trend that predates Solomon. That comes amid a slowdown in banking deals, Goldman’s bread-and-butter business, and Solomon’s home turf.

Morgan’s CEO James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues. Solomon’s effort to diversify was an overindulgence in something called Marcus, a digital retail bank launched by his predecessor Lloyd Bankfein that Solomon made his baby. So far, it’s been a disaster, so much so that Solomon has been forced to scale back, possibly on the way to winding it down.

Goldman, meanwhile, has missed targets in its recent earnings announcements, and more downward surprises could be in store as markets continue to wobble. Bonuses are down, in some places cut in half, albeit from the nosebleed levels of 2021.

Goldman Sachs headquarters
The grumbling about Solomon is spreading to the managing director and partner class.
AFP via Getty Images

Traders did well in 2022 because Goldman’s are particularly adept in profiting off turbulence, but part of their pool is being diverted to bankers to keep them in-house until the deal slowdown ends.

Since Solomon is a banker, he’s also being accused of favoritism, which in truth is a pretty lame charge, since bankers often subsidize trader bonuses when the markets aren’t profitable. Still, the Goldman trading department is powerful and can spark management change, as it has done in the past.

There’s also a question about Solomon’s allegiance to Goldman’s stand-alone culture. In its 153-year existence, Goldman has operated on the assumption that it would be the acquirer in any major strategic acquisition. Solomon’s experience at Bear, then one of the most transactional places on Wall Street, means he could be looking for a deal and not one that keeps Goldman in charge.

Morgan Stanley CEO James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues.
Morgan Stanley’s James Gorman deftly expanded the firm’s wealth management operations, which provide steady revenues.
AFP via Getty Images

At a time when most Goldman insiders believe he needs to do a “transformational deal,” i.e., something big that allows it to better compete against Morgan Stanley and super banks like JP Morgan, there is speculation that Solomon might allow Goldman to be swallowed whole by, say, a big asset manager or bank if the price was right.

As best I can tell, this grumbling, though real, doesn’t immediately threaten Solomon’s job. Then again, there is something to be said for keeping your producers happy.

Jack Welch, the legendary CEO of General Electric, was a notorious screamer and demanding beyond belief. Yet Welch knew how to nurture his people.

Former General Electric CEO Jack Welch
Jack Welch was a notorious screamer and demanding beyond belief. Yet Welch knew how to nurture his people.
Getty Images

“Jack could chew your ass, then put his arm around you and make you feel great,” one of his longtime executives, Bob Nardelli, once told me.

It’s why so many other talented execs chose to stay around under Welch, abuse and all, and left when his successor took over, watching GE implode from the outside.

Maybe it’s a good time for Solomon to take a page from Welch and start hugging it out.

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