Economics Essay 83: Commercial Banks

 Explain the role of commercial banks in the economy.

Commercial banks are financial institutions that play a vital role in the economy by offering a range of financial services to individuals, businesses, and other entities. Here's an explanation of the role of commercial banks:

1. Facilitating deposits and withdrawals: Commercial banks provide a safe and convenient place for individuals and businesses to deposit their funds. They accept deposits, such as savings accounts and checking accounts, allowing customers to securely store their money. Additionally, banks facilitate withdrawals, providing customers with access to their funds through various channels like ATMs, checks, and electronic transfers.

2. Lending and credit creation: One of the primary functions of commercial banks is to provide loans and credit to individuals and businesses. Banks use the deposits they receive to extend loans to borrowers for various purposes, including personal loans, mortgages, business loans, and working capital. By providing credit, banks stimulate economic activity, support investment, and facilitate the growth and expansion of businesses.

3. Payment processing and money transfers: Commercial banks play a crucial role in facilitating payments and money transfers within the economy. They offer services such as online banking, electronic funds transfers, wire transfers, and payment cards (debit cards, credit cards). Banks act as intermediaries, ensuring the smooth and secure transfer of funds between individuals and businesses, both domestically and internationally.

4. Financial intermediation: Commercial banks act as intermediaries between savers and borrowers. They channel funds from depositors (savers) to borrowers (individuals, businesses, governments) in need of capital. By connecting surplus funds with those in need, banks facilitate the efficient allocation of capital in the economy, promoting investment, entrepreneurship, and economic growth.

5. Currency exchange and foreign trade facilitation: Banks provide currency exchange services, allowing individuals and businesses to convert one currency into another for international transactions. They also offer trade finance services, such as letters of credit, export/import financing, and foreign exchange services, to facilitate international trade and cross-border transactions.

6. Risk management and financial advisory services: Commercial banks assist customers in managing financial risks and offer advisory services. They provide insurance products, investment products, and wealth management services to help individuals and businesses safeguard their assets, plan for the future, and navigate complex financial decisions.

7. Monetary policy implementation: Commercial banks play a critical role in the implementation of monetary policy set by the central bank. They are responsible for managing reserves, lending to other banks, and influencing interest rates through their lending and deposit activities. Commercial banks' actions affect the overall money supply and liquidity in the economy, impacting economic conditions and inflation.

Overall, commercial banks are essential institutions that support the functioning of the economy by providing financial services, mobilizing savings, facilitating lending, and contributing to economic growth and stability.

Privatisation is at the heart of the UK's disastrous coronavirus response

George Monbiot in The Guardian

Amid the smog of lies and contradictions, there is one question we should never stop asking: why has the government of the United Kingdom so spectacularly failed to defend people’s lives? Why has “this fortress built by Nature for herself against infection”, as Shakespeare described our islands, succumbed to a greater extent than any other European nation to a foreseeable and containable pandemic?

Part of the answer is that the government knowingly and deliberately stood down crucial parts of its emergency response system. Another part is that, when it did at last seek to mobilise the system, crucial bits of the machine immediately fell off. There is a consistent reason for the multiple, systemic failures the pandemic has exposed: the intrusion of corporate power into public policy. Privatisation, commercialisation, outsourcing and offshoring have severely compromised the UK’s ability to respond to a crisis.

Take, for example, the lethal failures to provide protective clothing, masks and other equipment (PPE) to health workers. A report by the campaigning group We Own It seeks to explain why so many doctors, nurses and other hospital workers have died unnecessarily of Covid-19. It describes a system built around the needs not of health workers or patients, but of corporations and commercial contracts: a system that could scarcely be better designed for failure.

Four layers of commercial contractors, each rich with opportunities for profit-making, stand between doctors and nurses and the equipment they need. These layers are then fragmented into 11 tottering, uncoordinated supply chains, creating an almost perfect formula for chaos. Among the many weak links in these chains are consultancy companies like Deloitte, whose farcical attempts to procure emergency supplies of PPE have been fiercely criticised by both manufacturers and health workers.

At the end of the chains are manufacturing companies, some of which have mysteriously been granted monopolies on the supply of essential equipment. These private monopolies have either failed to meet their contracts, or provided defective gear to the entire NHS, like the 15m protective goggles and the planeload of useless surgical gowns that had to be recalled.

Instead of stockpiling supplies, as emergency preparedness demands, companies in these chains have been using just-in-time production systems, whose purpose is to cut their costs by minimising stocks. Their minimised systems could not be scaled up fast enough to meet the shortfall. Where there should be a smooth, coordinated, accountable programme, there’s opacity, byzantine complexity and total chaos. So much for the efficiencies of privatisation.

The pandemic has also exposed the privatised care system as catastrophically unfit and ill-prepared. In 1993, 95% of care at home was provided publicly by local authorities. Now, almost all of it – and almost all residential care – is provided by private companies. Even before the pandemic, the system was falling apart, as many care companies, unable to balance the needs of their patients with the demands of their shareholders, collapsed, often with disastrous consequences.

Now we discover just how dangerous their commercial imperatives have become, as the drive to make care profitable has created a fragmented, incoherent system, answerable sometimes to offshore owners, that fails to meet basic standards, and employs harassed workers on zero-hour contracts. If there is one thing we have learnt from this pandemic, it’s the need for a publicly owned, publicly run National Care Service – the care equivalent of the NHS.
It could all become much worse, due to another effect of corporate power. A report by the Corporate Europe Observatory shows how law firms are exploring the possibility of suing governments for the measures they have taken to stop the pandemic. Many trade treaties contain a provision called “investor state dispute settlement”. This enables corporations to sue governments in opaque offshore tribunals, for any policies that might affect their “future anticipated profits”.

So when governments, in response to coronavirus, have imposed travel restrictions, or requisitioned hotels, or instructed companies to produce medical equipment or limit the price of drugs, the companies could sue them for the loss of the money they might otherwise have made. When the UK government commandeers private hospitals or the Spanish government prevents evictions by landlords, and stops water and electricity companies from cutting off destitute customers, they could be open to international legal challenge. These measures, which override democracy, have already hampered attempts by many governments, particularly of poorer nations, to protect their people from disasters. They urgently need to be rescinded.

The effectiveness of our health system is also threatened by the trade treaty the UK government hopes to sign with the US. The Conservatives promised in their manifesto that “the NHS is not on the table” in the trade talks. But they have already broken their accompanying promise, “we will not compromise on our high environmental protection, animal welfare and food standards”. Earlier this month, they voted that measure out of the agriculture bill. US companies are aggressively demanding access to the NHS. The talks will be extremely complex and incomprehensible to almost everyone. There will be plenty of opportunities to give them what they want while fooling voters.

Boris Johnson’s central mission, overseen by Dominic Cummings, is to break down all barriers between government and the power of money. It is to allow private interests to intrude into the very heart of government, while marginalising the civil service. This helps to explain why Johnson is so reluctant to let Cummings go. The disasters of the past few weeks hint at the likely results.

Ease of Doing Business - How Dena Bank, CIBIL Harass Ordinary Indians

By Giffenman

India may have climbed the global scale in 'Ease of Doing Business'. But this letter below shows the extent of harassment a small Gujarati businessman, domiciled in India, faced from Dena Bank and CIBIL as he tried to run his business and educate his daughter with a non delivered educational loan.

The case in a nutshell:

Vipul Vora took a business loan from Dena Bank which was repaid in full. However Dena Bank held on to the ownership documents.

Vipul Vora's daughter took an educational loan to be paid directly to the college his daughter was studying in abroad. The loan never reached the daughter's college. Dena Bank insisted that Vipul Vora should repay the non-delivered loan amount. To coerce him to pay up the educational loan Dena Bank impounded the business documents used as collateral in the earlier business loan. 

CIBIL has used the Dena Bank's version of events to lower Vipul Vora's credit rating causing him great monetary and emotional distress.

Vipul Vora has been paralysed as he cannot grow his business without the impounded ownership documents and with no hope of the case being easily resolved.


------ Copy of Legal Notice sent by Vipul Vora to Dena Bank and CIBIL (Sic)

RVD/OG/MD ___October, 2018

To,
1. The Chief Manager,
Dena Bank,
Vashi Sector 19 Branch,
K-34, Masala Market,
APMC Market – II, Vashi,
Navi Mumbai 400705.


2. The Zonal Manager
Dena Bank, Zonal Office,
272 Amrut Industries, Gokhale Road
Opposite Gokul Society Bus Stop,
Gokul Nagar, Thane West 400 602


3. The General Manager
Mr. Sanjeev Dhobal
Dena Bank, 5th Floor,
C-10, Dena Bank Building,
G block, Band BKC, Bandra East,
Mumbai 400 051.


4. TransUnion CIBIL Limited
(Formerly: Credit Information Bureau (India) Limited)
One Indiabulls Centre, Tower 2A, 19th Floor, Senapati Bapat Marg, Elphinstone Road, Mumbai - 400 013.


Dear Sirs,

Sub: Deficiency in service, loss of reputation and claim for damages
----------------------------------------------------------------------------
We are concerned for our clients Mrs. Jagruti Vipul Vora and Mr. Vipul Vora and Ms. Shayali Vora, all residing at E-38, 1:2 Shanti Niketan CHS, Sector 4, Nerul – 400 706, who have instructed us to address to you as under:-

1. Our clients state as under:


a. Our client Ms. Shayali Vora was at all material times in or about 2010 to 2016 pursuing her M.B.B.S. course through Crimea State Medical University, Ukraine[Till 2014] and then Federal Medical University, Russia. (“the University”);

b. On account of annexation of Crimea by Russia in or about 2014, Crimea came under the control of Russia and consequently the University was at that material time then on May 2016 is governed by the laws of Russia;

c. Our client Ms. Shayali Vora received an invitation letter from the Crimea State Medical University for completing her 12 semester MBBS course with the Crimea State Medical University on or about September 2010;

d. Our client Ms. Shayali Vora(“the Borrower”) applied to you No. 1 for granting her an Education Loan of Rs.1,95,000/- (Rupees One Lakh Ninety Five Thousand Only)in order to enable her to complete her final semester at the Federal Medical University, Russia which was then governed by the laws of Russia;




e. The Borrower’s application for an Educational Loan was sanctioned by you No. 1 under the DENA VIDYALAXMI LOAN SCHEME. The Borrower had to leave for the University on September 2015 and you No. 1 insisted that in order to pay the amount of the Educational Loan to the University, the Borrower would have to execute a DENA VIDYALAXMI LOAN AGREEMENT (“Loan Agreement”) with you. You handed over a printed standard form of the Loan Agreement to the Borrower, who only signed without filling in the blanks in the Loan Agreement including the date of the Loan Agreement. Our client Mr. Vipul Vora handed over to you the signed copy of the Loan Agreement and your representatives promised Mr. Vipul Vora that they would fill in the blanks in the Loan Agreement in terms of the application of the Borrower and thereafter provide a copy of it to our clients. The Borrower was required to report to the University on or before 15th September 2015 and therefore she left India on 12th September 2015;

f. After constant follow up, your representatives provided to our client Mr. Vipul Vora copy of the Loan Agreement. Our client Mr. Vipul Vora noticed that the date of the Loan Agreement signed by the Borrower was 6th December 2015. Our clients were shocked and surprised to see that your representatives had inserted a sum of Rs.2,35,000/- instead of Rs.1,95,000/- as the amount of loan sought by the Borrower in the Loan Agreement signed by the Borrower. Our client Mr. Vipul Vora immediately brought the above mistake of the amount in the Loan Agreement to the notice of your representatives, however, your representatives informed him that they could not lend a small amount for educational loan to the Borrower as it was not commercially feasible. Our clients required the loan amount and in view thereof did not raise any issue at that time;

g. Our clients submit that while applying for the Education Loan, the Borrower was asked to fill A2 Form, as per Crimea State Medical University as indicated in their invitation letter and the Borrower pointed it out to the representatives of you No. 1., Before filling Form A2, our clients informed the representatives of you No. 1 about the sanctions by the USA against Russia and Crimea territories under the control of Russia which included non-transfer of US dollars to the above mentioned Region. Our clients also informed your representative No. 1 that Crimea, Ukraine where the University was located is under the control of Russia and that payment could not be made in US dollars. In view of the aforesaid our clients requested you No. 1 to transfer the Educational Loan Amount either in Russian currency or Indian currency to the Borrower’s savings account so that the Borrower can withdraw the same from ATM in Russia Main Land and pay her fees;


h. On and after 4th January 2016, our client Mr. Vipul Vora enquired with you No. 1 regarding the status of the transfer of the loan amount to the University. Your representative No. 1 informed him that the loan amount is being processed. Finally, in or about 5th January 2016, your representatives No. 1 informed our client Mr. Vipul Vora that they had Processed the Transfer through their associate Bank Citibank to pay the loan amount to the University in US Dollars through Bank of New York Mellon, New York[ Diversion of Funds other then the intended Purpose as per Indian Law, Clause 9 of Agreement, as loan was applied as per the Indian Laws] and that in terms of the international process of the transfer of US Dollars the loan amount required the License of the OFAC, US Treasury, USA. Bank of New York Mellon had stopped the transfer to the University under the instructions of OFAC Treasury, USA on account of the sanctions by USA against Russia and made Fixed Deposit in the name Of DENA BANK, Sender Bank.;

i. Our client Mr. Vipul Vora was shocked and surprised at the aforesaid grossly negligent conduct of your representative No. 1 (which they termed it as erroneous). He asked your representatives No. 1 about the manner in which you No. 1 intended to get back the loan amount to which you replied that you were considering applying for a license to OFAC Treasury, USA to get the refund of the loan amount. It has been over 2years 9 months since the grossly negligent transfer of public funds of Bank Loan by your representatives No. 1 to the USA, but you have not taken any steps to get the loan amount back, save and except to harass our clients as stated in sub-paragraph k. below;

j. In view of the aforesaid shocking disclosure made by you No. 1 about the non-transfer of the loan amount to the University, our clients had no option but to pay to the University from their own funds after taking a gold loan from Greater Bank;

k. Instead of obtaining refund from the USA of the loan amount negligently transferred by you No. 1, your representatives No. 1 started demanding payment of the loan amount from our client. Our clients informed you No. 1 that they were not liable to pay to you the loan amount, since the Loan Agreement was not honoured by you by paying the loan amount to the University[Agreement Clause No.8B], however, your representatives kept on harassing our clients. Your representatives No. 1 illegally and unauthorized withheld the securities provided in a Term Loan Account granted by you No. 1 to a Partnership Firm “Sai Pharma” (“the Firm”) in which our client Mr. Vipul Vora was a partner even though the Term Loan had been fully paid by the Firm;

l. On account of your illegal tactics aforesaid, the Borrower informed to OFAC Treasury, USA, for the release License[ Application made by Ms. Shayali Vora on 7th January 2016] to release the loan amount along with the Swift Report and also bought to the notice of OFAC Treasury, USA the above facts, which in turn led to conversion of the loan amount into commercial category and the License application was rejected;

m. After constant follow up and requests by our client Mr. Vipul Vora to your representatives, you No.1 informed our clients that you had in June 2018 finally applied to OFAC Treasury, USA, for a License for release of the loan amount from Bank of New York Mellon, USA. You also returned the securities of the Firm to the Firm which had been illegally and unauthorized withheld along with the funds in Sai Pharma and Vipul Vora’s Account, which were closed on 6th June 2017 by you No. 1;

n. Not satisfied with the shocking ordeal you had put our clients to, you No.1informed No.4that our clients were loan defaulters and consequently No. 4 even with the knowledge[By personal Visits to the Office and Mail Communications] of the above events have lowered the credit ratings of our clients. The aforesaid conduct of you No. 1 was malicious and made with the deliberate intention to harm the financial credit worthiness of our clients with No. 4 as also their reputation in society;
o. Our clients state that you No. 1 were grossly negligent in transferring the loan amount by US Dollars. As a banker you were aware or ought to have been aware that US Dollars could not have been transferred to the University on account of the sanctions of the USA against Russia. You were informed by our clients of the fact that US Dollars could not be transferred to the University and yet you did not pay heed to the warning and transferred the loan amount by US Dollars.

p. Our clients state that for about two years you did not take any steps to obtain refund of the loan amount from the USA. Your conduct is blameworthy in the sense that you were unconcerned about the public money of Indian Bank lying in the USA.

q. Our clients state that you illegally and unauthorised withheld the securities of the Firm (in which our client Mr. Vipul Vora is a partner) in spite of the fact that all the payments under the Term Loan granted by you to the Firm had been made to you and the account was clean and clear, in order to pressurise our clients to pay to you the loan amount even though you had not performed your promise under the Loan Agreement.

Our clients state that you No. 1 have defamed them by giving wrong and false information to No. 4 about our clients being loan defaulters and due to which No. 4 has lowered the credit ratings of our clients and Transmitted Electronically wrong information to Various Financial Institutions;

s. Our clients state that you No. 1 are a public sector bank. Public money is parked in your bank. You are required to utilize public money deposited with you for the welfare of society. You are required to act with utmost care and caution in carrying on your duties. Last but not the least, you required to act honestly and with integrity in dealing with your account holders, creditors including your borrowers and other stake holders. Our clients further submit that it has pained them immensely to be associated with you not to mention the losses, mental agony and harassment that have been caused to them.


2. In the circumstances aforesaid:-

(a) Our clients hereby request you No. 4, to remove the information provided to you No. 4 by No. 1 in respect of our clients’ being “loan defaulters” of No. 1, from your website and publish the correct CIBIL ratings of our clients on your website and, if you so desire No. 4, our clients are prepared to provide to you any information or document with regard to the above; and

(b) Call upon you No. 1 to pay to our clients individually and to company a sum of Rs. 5,00,00,000/- for breach of contract, loss, gross negligence, defamation, mental agony and harassment among other things within 15 days from the date of receipt of this notice by you, failing which our clients shall be constrained to adopt such legal proceedings against you as they may be advised at your entire risk as to the costs and consequences, which please note.

Yours faithfully,
Malvi Ranchoddas & Co.
Partner

--------End of letter.

Offshore secrets revealed: the shadowy side of a booming industry

A worldwide research effort in collaboration with BBC Panorama and the ICIJ reveals the people behind these anonymous companies

• David Leigh, Harold Frayman and James Ball
• The Guardian, Sunday 25 November 2012 20.00 GMT

The existence of an extraordinary global network of sham company directors, most of them British, can be revealed.

The UK government claims such abuses were stamped out long ago, but a worldwide joint investigation by the Guardian, the BBC's Panorama and the Washington-based International Consortium of Investigative Journalists (ICIJ) has uncovered a booming offshore industry that leaves the way open for both tax avoidance and the concealment of assets.

More than 21,500 companies have been identified using this group of 28 so-called nominee directors. The nominees play a key role in keeping secret hundreds of thousands of commercial transactions. They do so by selling their names for use on official company documents, using addresses in obscure locations all over the world.

This is not illegal under UK law, and sometimes nominee directors have a legitimate role. But our evidence suggests this particular group of directors only pretend to control the companies they put their names to.

The companies themselves are often registered anonymously offshore in the British Virgin Islands (BVI), but also in Ireland, New Zealand, Belize and the UK itself. More than a score of UK agencies sell offshore companies, several of which also help supply sham directors.

One British couple, Sarah and Edward Petre-Mears, who migrated from Sark in the Channel Islands to the Caribbean island of Nevis, have sold their services to more than 2,000 entities, with their names appearing on activities ranging from Russian luxury property purchases to pornography and casino sites.

In 1999, the government claimed Britain's sham director industry had been "effectively outlawed" after a judge, Mr Justice Blackburne, said the court would not tolerate "the situation where someone takes on the directorship of so many companies and then totally abrogates responsibility". But our findings show this has failed to be policed.

These nominee fronts conceal a wide variety of real owners, including those that are perfectly legal, from Russian oligarchs to discreet speculators in the British property market. Their only common factor is the wish for secrecy. Some of the owners we have identified include:

• Vladimir Antonov, the London-based billionaire Russian purchaser of Portsmouth FC, who is currently fighting an extradition request from Lithuania, where he controlled a bank. He denies wrongdoing.

• Yair Spitzer, a north London software engineer who bought and sold London flats. He said: "We were advised by UK accountants that this structure … was perfectly legal."

• The Hackmeys, a wealthy Israeli family, one of whom used a BVI company to buy a £26m London office block. Their spokesman said: "The deal was introduced by a [confidential] joint venture partner who set up the deal and structure."

• Nicholas Joannou, whose Armstrong Group sold shares from an address in Berkeley Square, central London. The Guardian was unable to contact him.

• SP Trading, which was linked in 2009 to a Kazakh businessman and an arms to Iran scandal. The nominee directors in Vanuatu turned out to have no knowledge of the company's true activities. They told us there were "very few cases of misuse by clients".

In a parallel investigation Monday's Panorama on BBC1 is due to show a company formation agent offering to assist its undercover reporter to escape tax. The agent, James Turner, of Turner Little in York, offers nominee directors in Belize and says: "They won't even know that they were a director, they just get paid."

A representative of a second company, Atlas Corporate Services, is asked for maximum confidentiality. He explains that many of its nominees are not even aware of how their names are being used. Jesse Hester, who runs Atlas Corporate Services from Mauritius, is seen assuring a potential client that the UK is unlikely to catch up with him. "Tax authorities don't have the resources to chase everybody down … They reckon it's probably the same rough odds as probably winning the lottery," he says.

The revelations launch a week-long series onthe Guardian site designed to strip away anonymity from offshore companies, the most shadowy aspect of the UK's financial industry. The British Virgin Islands are a particularly successful hideaway, thanks to the exceptional secrecy on offer. This Caribbean territory, which is ultimately controlled by the UK, has sold more than a million anonymously-owned offshore entities since launching itself in 1984 as a tax haven.

The purchasers are often people who, for a variety of reasons, some perfectly legitimate, do not wish to advertise what they are doing with their wealth.

But a worldwide research effort has been launched this year by the ICIJ. It aims to identify, country by country, thousands of the true owners.

The Guardian has collaborated with the ICIJ, a non-profit organisation, to analyse many gigabytes of the British data. This week we intend to reveal the names of more owners. We do not suggest criminal wrongdoing by them. Among those we have contacted, not all go so far as to employ nominee directors. Some insist they have done nothing improper, and are merely taking advantage of legitimate tax breaks or the opportunity for privacy. Critics say, however, that the islands' system can be open to abuse because of its lack of transparency.

Gerard Ryle, the director of the ICIJ, said: "We are applying specialist software to crunch through literally hundreds of thousands of offshore entities to look for patterns. We are marrying our findings with old-fashioned shoe leather and interviews from key insiders who can provide further context on this little known and loosely regulated world. We are satisfied that the information we have is authentic."

Ryle believes the ICIJ's global project, when it is completed next year, will haul into the open a shadowy financial system estimated to conceal the movement around the world of trillions of dollars.

Offshore secrets

Guardian team: David Leigh, Harold Frayman and James Ball.

The project is a collaboration between the Guardian and the International Consortium of Investigative Journalists (ICIJ) headed by Gerard Ryle in Washington DC. Guardian investigations editor David Leigh is a member of ICIJ, a global network of reporters in more than 60 countries who collaborate on in-depth investigative stories that cross national boundaries. The ICIJ was founded in 1997 as a project of the Center for Public Integrity, a Washington DC-based non-profit.

BBC's TOP GEAR and Creative Truth

Top Gear's electric car shows pour petrol over the BBC's standards

Why is Top Gear apparently exempt from the BBC's editorial guidelines and the duty not to fake the facts?

Jeremy Clarkson test drives the Leaf electric car Photograph: BBC

 

What distinguishes the BBC from the rest of this country's media? There's the lack of advertising, and the lack of a proprietor with specific business interests to defend. But perhaps the most important factor is its editorial guidelines, which are supposed to ensure that the corporation achieves "the highest standards of due accuracy and impartiality and strive[s] to avoid knowingly and materially misleading our audiences."
Here's a few of the things they say:

"Trust is the foundation of the BBC: we are independent, impartial and honest."
"We will be rigorous in establishing the truth of the story and well informed when explaining it. Our specialist expertise will bring authority and analysis to the complex world in which we live."
"We will be open in acknowledging mistakes when they are made and encourage a culture of willingness to learn from them."

Woe betide the producer or presenter who breaches these guidelines. Unless, that is, they work for Top Gear. If so, they are permitted to drive a coach and horses – or a Hummer H3 - through them whenever they please.

Take, for example, Top Gear's line on electric cars. Casting aside any pretence of impartiality or rigour, it has set out to show that electric cars are useless. If the facts don't fit, it bends them until they do.

It's currently being sued by electric car maker Tesla after claiming, among other allegations, that the Roadster's true range is only 55 miles per charge (rather than 211), and that it unexpectedly ran out of charge. Tesla says "the breakdowns were staged and the statements are untrue". But the BBC keeps syndicating the episode to other networks. So much for "acknowledging mistakes when they are made".

Now it's been caught red-handed faking another trial, in this case of the Nissan LEAF.
Last Sunday, an episode of Top Gear showed Jeremy Clarkson and James May setting off for Cleethorpes in Lincolnshire, 60 miles away. The car unexpectedly ran out of charge when they got to Lincoln, and had to be pushed. They concluded that "electric cars are not the future".

But it wasn't unexpected: Nissan has a monitoring device in the car which transmits information on the state of the battery. This shows that, while the company delivered the car to Top Gear fully charged, the programme-makers ran the battery down before Clarkson and May set off, until only 40% of the charge was left. Moreover, they must have known this, as the electronic display tells the driver how many miles' worth of electricity they have, and the sat-nav tells them if they don't have enough charge to reach their destination. In this case it told them – before they set out on their 60-mile journey – that they had 30 miles' worth of electricity. But, as Ben Webster of the Times reported earlier this week, "at no point were viewers told that the battery had been more than half empty at the start of the trip."

It gets worse. As Webster points out, in order to stage a breakdown in Lincoln, "it appeared that the Leaf was driven in loops for more than 10 miles in Lincoln until the battery was flat."

When Jeremy Clarkson was challenged about this, he admitted that he knew the car had only a small charge before he set out. But, he said: "That's how TV works". Not on the BBC it isn't, or not unless your programme is called Top Gear.

Top Gear's response, by its executive producer Andy Wilman, is a masterpiece of distraction and obfuscation. He insists that the programme wasn't testing the range claims of the vehicles, and nor did it state that the vehicles wouldn't achieve their claimed range. But the point is that it creates the strong impression that the car ran out of juice unexpectedly, leaving the presenters stranded in Lincoln, a city with no public charging points.

Yes, this is an entertainment programme, yes it's larking about, and sometimes it's very funny. But none of this exempts it from the BBC's guidelines and the duty not to fake the facts.

The issue is made all the more potent by the fact that Top Gear has a political agenda. It's a mouthpiece for an extreme form of libertarianism and individualism. It derides attempts to protect the environment, and promotes the kind of driving that threatens other people's peace and other people's lives. It often creates the impression that the rules and restraints which seek to protect us from each other are there to be broken.

This is dangerous territory. Boy racers, in many parts of the countryside, are among the greatest hazards to local people's lives. Where I live, in rural mid-Wales, the roads are treated as race tracks. Many of the young lads who use them compete to see who can clock up the fastest speeds on a given stretch. The consequences are terrible: a series of hideous crashes involving young men and women driving too fast, which kill other people or maim them for life. In the latest horror, just down the road from where I live, a young man bumped another car through a fence and into a reservoir. Four of the five passengers drowned.

Of course I'm not blaming only Top Gear for this, but it plays a major role in creating a comfort zone within which edgy driving is considered acceptable, even admirable. Top Gear's political agenda also persists in stark contradiction to BBC rules on impartiality.

So how does it get away with it? It's simple. It makes the BBC a fortune. Both the 15th and 16th series of Top Gear were among the top five TV programmes sold internationally by BBC Worldwide over the last financial year. Another section of the editorial guidelines tells us that "our audiences should be confident that our decisions are not influenced by outside interests, political or commercial pressures". But in this case we can't be. I suggest that it is purely because of commercial pressures that Top Gear is allowed to rig the evidence, fake its trials, pour petrol over the BBC's standards and put a match to them. The money drives all before it. 

• guardian.co.uk © Guardian News and Media Limited 2011