So how long can the US hold the world to ransom with the dollar?

Satyajit Das

On 8 November 2010, the German finance minister Wolfgang Schäuble told the Wall Street Journal: "The USA lived off credit for too long, inflated its financial sector massively and neglected its industrial base."

US gross government debt currently totals around $16trillion (£10trn). The US government holds around 40 per cent of the debt through the Federal Reserve and government funds. Individuals, corporations, banks, insurance companies, pension funds, mutual funds, state or local governments, hold 25 per cent. Foreign investors, China, Japan and "other" (principally oil exporting) nations, Asian central banks or sovereign wealth funds hold the rest.

Historically, America has been able to run large budget and balance of payments deficits because it had no problem finding investors in US Treasury securities. The unquestioned credit quality of the US, the unparalleled size and liquidity of its government bond market, ensured investor support. Given its reserve currency and safe haven status, US dollars and US government bonds were a cornerstone of investment portfolios of foreign lenders.

During this period, emerging countries such as China fuelled American growth, supplying cheap goods and cheap funding – recycling export proceeds into US bonds – to finance the purchase of these goods. It was a mutually convenient addiction .

Asked whether America hanged itself with an Asian rope, a Chinese official told a reporter: "No. It drowned itself in Asian liquidity."

Given the sheer quantum of US debt, foreign investors may become increasingly less willing to finance America. Japanese and European investors, struggling to finance their own government obligations, may simply not have the funds.

Given its magnitude and the lack of political will to deal with the problem of debt and public finances, the US is now deploying its FMDs – "financial extortion", "monetisation" and "devaluation" – to finance its requirements.

In a form of extortion, existing investors like China must continue to purchase US dollars and bonds to avoid a precipitous drop in the value of existing investments.

Debt monetisation – printing money – is another strategy. The US Federal Reserve is already the in-house pawnbroker to the US government, purchasing government bonds in return for supplying reserves to the banking system. Expedient in the short term, monetisation risks setting off inflation. The absence of demand in the economy, industrial over-capacity and the unwillingness of banks to lend have meant successive "quantitative easing" has not resulted in higher inflation to date. But the risks remain.

Monetisation is inexorably linked to devaluation of the US dollar. The zero interest rates policy and debt monetisation is designed to weaken the dollar. As John Connally, the US Treasury Secretary under President Richard Nixon, belligerently observed: "Our dollar, but your problem."

Despite bouts of dollar buying on its safe haven status, the US dollar has significantly weakened over the last two years, losing around 20 per cent against major currencies since 2009. As the dollar weakens US foreign investments and overseas income gain in value. But the major benefit is in relation to debt owned by foreigners. As almost all its government debt is denominated in US dollars, devaluation reduces its value.

This forces existing investors to keep rolling over debt to avoid realising losses. It encourages them to increase investment, to "double down" to lower their average cost of US dollars and debt. It also allows the US to enhance its competitive export position.

Major investors in US government bonds now find themselves in the position John Maynard Keynes identified: "Owe your banker £1,000 and you are at his mercy; owe him £1m and the position is reversed."

Valery Giscard d'Estaing, the French finance minister under Charles de Gaulle, famously used the term "exorbitant privilege" to describe the advantages to America of the dollar's role as a reserve currency and its central role in global trade.

That privilege now is not only "exorbitant" but "extortionate". How long the world will let the US exercise it is uncertain.

Satyajit Das is a former banker and author of "Extreme Money" and "Traders, Guns & Money"

Navratri and the lessons of fasting for atheists

Spiritual disciplines can teach us much about food discipline – I found my 10-day fast extremely rewarding



Julian Baggini

guardian.co.uk, Monday 22 October 2012 15.34 BST



It might seem odd but I, a convinced atheist, have recently completed a 10-day fast based on the Hindu festival of Navratri, which is being celebrated this week. Fasting is refraining from eating at all, or more usually certain proscribed foods.





These days, if we limit what we eat, it is almost certainly because we are trying to lose weight, detox or realise some kind of health benefit. The idea that we might seek to forgo certain foods for moral improvement seems bizarrely anachronistic. The penance of Catholic Lent and Friday fasting make as little sense to most of us as the once common idea that food should be avoided after a death for fear that food around the deceased would be impure.





But there are some real lessons we can learn from spiritual disciplines around food. For the Benedictine former abbot Christopher Jamison, only eating certain things at certain times is a way of countering our tendency to slavishly follow our desires. "It's a way of exercising choice very knowingly," he told me, "and at the same time a way of exercising discipline around food." Similarly, the Buddhist abbot Ajahn Sucitto says that too often eating becomes just one of those "compulsive activities which on a functional level are not necessary. We do it just because of a psychological habit."





For reasons like this, I thought fasting was worth a try and Navratri – literally meaning nine nights in Sanskrit – looked like a good model. It heralds the start of autumn, and is dedicated to Shakti, the deity responsible for creation. My rules were that I would eat three meals a day, with no snacking in between of any kind. I would forgo meat, seafood and dairy products and would not drink alcohol or eat sweets or cakes. I would strive to eat each meal mindfully and thankfully and on the last evening would have some kind of feast, a celebration of the pleasure and variety of good food rather than an excessive gorging. The idea can be summed up as countering the bad A of automaticity with the three good As of right appreciation, right autonomy and right action.





I found the 10 days extremely rewarding. It wasn't meant to be a trial, and when I did feel hungry I reminded myself that such feelings pass, and unless we're really starving, we can always choose to wait until our next meal.





I'm not the only atheist learning from religious fasting. The philosopher James Garvey, my successor as editor of the Philosophers' Magazine, has also followed a version of the Ramadan fast several times. "There is some sort of discovery of a part of yourself involved, or maybe a discovery associated with the human experience," he told me, "a feeling of being in control of your appetites for once. I can see why so many religions do it."





I've become quietly evangelical about it. Some people have no trouble controlling their appetites or just don't care much for food. But I suspect most of us eat too thoughtlessly too often. I plan to repeat my fast twice a year, around the spring and autumnal equinoxes. The next one starts on 14 March. I'd be happy for you to join me.

Be Your Own Dick Tracy

                 

Just walk into the nearest spyware shop, and grab the gizmo of your choice.

Arpita Basu 

In a basement office-cum-showroom off Green Park in south Delhi, a demo is in progress. “Recording time is 12 hours, the images and sounds will be so clear you can see and hear everything,” offers the sales assistant. The customer, a man in his 40s with dark-circled eyes, is convinced; the deal is sealed. In an hour or so, the digital table clock he just bought should be sitting on his bedside table; hopefully, worth every penny of the 12,000-odd rupees he spent on it.

The innocuous clock is in fact a spycam, bought to combat “domestic abuse” in his bedroom, he confesses, even as he advises us on the best cam for our job. There are, after all, plenty of options: caps, wristwatches, sunglasses, buttons, pens, belts, pendants, photo-frames, iPhone lookalikes, cola cans, even chewing gum packs, each fitted with pinhole cameras and tiny recording devices to be your eyes and ears when you need it to be.

For anything from Rs 1,500-Rs 30,000 or more, you can play detective with a lifetime’s supply of spy devices available off the internet, in discreet shops, or through smses peddling the snare ware. A request to an online directory for details of shops selling spyware like pen cameras throws up nine addresses in south Delhi alone. No wonder Bhavna Paliwal, director of Tejas Detective Agency, has had to reluctantly ditch the pen camera as a work tool because it is “so common now”. Clearly, spyware has stealthily attached itself to the underbelly of urban relationships, with spouses, partners, friends and colleagues relying increasingly on guileful gizmos to catch their kith and kin in the act.
Mueen Pasha, founder of the Bangalore-based Spy Zone, has been selling spy gadgets for eight years, but it’s only now that his business is truly thriving—he sells at least a hundred gadgets a month, in the price range of Rs 4,000-Rs 15,000. “Sales have gone up, and in the last two years, family problems have come to the fore. These days working hours are so long that one doesn’t know what is going on at home and some people will go to any lengths to find out.”

In Mumbai, Mahmood, a salesperson in a spyware shop he didn’t want named, says, “Most often people buy these gadgets when they suspect their partners of infidelity. Many discuss their problems in detail, so that we can suggest the best gadget. Others claim they want to fix cameras in their shops or homes after a theft, or to keep an eye on their domestic helps, but we can tell they are lying.”
He has seen enough customers to know that the real reasons may be very different. Sanjay Singh, director of Indian Detective Agency, doesn’t hesitate to call the use of spycams a ‘trend’. “People going for business meetings try to sneak in devices to record conversations. Many who come to us have already tried these DIY spykits,” he says. One woman, he recalls, approached him to help her bring her husband to book. The gentleman in question, she alleged, was enjoying the company of other women behind her back. “I was surprised by the knowledge she had about spy devices!” Singh says.
Paliwal too has had clients trying to cut costs by doing the digging themselves instead of hiring a private eye. “Very often they fail,” she laughs, recounting how a newly-married man tried hiding a tiny camera in the air cooler. Only, he hadn’t factored in his wife’s keen eyesight. “As it turned out, he had no reason to suspect her,” she says. Another client, a professional working in a multinational company, made a mess of “investigations” trying to record his wife entering her office. “Their divorce case was under way, and if he could prove she had got herself a job, he wouldn’t have to shell out maintenance money,” she explains.

So common are these devices, and so diverse their customers, that Devendra, from Anand India’s sales team, finds it difficult to sketch up a client profile. “Aajkal to bahut chal raha hai,” he concedes, counting journalists, lawyers, doctors, wives and husbands among his customers. One popular product, he says, is the spy bug—a matchbox-sized device fitted with a SIM, which can be yours for Rs 3,000. “Once you put the sim into the device, and call that number, you can hear whatever is going on around that device.” If that sounds difficult to pull off, it isn’t. Arun (name changed) vouches for it. His “friend”, he claims, had once hidden this spybug in his girlfriend’s handbag when she went to meet a former classmate. “He suspected the two of them were more than friends and figured that listening in on their conversation would clear things up.” Obviously, the girl’s word that there was no funny business going on wasn’t enough.

Paliwal feels shows like Emotional Atyachaar, where cheating partners are spied upon and confronted, sparked the dubious inclination to peep into our own bedrooms. This inclination has been fuelled by easy access and low prices. Singh says, “Five or six years ago, we would buy pen cameras for Rs 15,000-Rs 20,000. Now Chinese versions of it can be bought for Rs 1,500 or less.”
That cannot be good news for unsuspecting subjects at the receiving end. As Singh cautions, misuse is an obvious danger. “I know of teenagers using these gadgets, they are so tech-savvy anyway. People know all about these gizmos; even leading dailies run advertisements for them. Girls often bear the brunt, being filmed without their knowledge and viewed by hundreds once the video is posted online.”
Even if the footage is for the eyes of the “spy” alone, the act itself is an invasion of privacy, a breach of trust. As Paliwal asks, “Will a wife who knows that her husband tried to record her activities on the sly ever trust him again?” Whatever the answer to that, it is a risk not a few are clearly willing to take.

---

Spy Camera

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Silk Necktie Rs 11,000 Pinhole camera in pattern. 4 GB internal memory.		Photo Rs 35,000 Can record for 2 months. Has an HD camera.
Canvas Cap Rs 7,500 4 GB memory, 1 hr back-up, 3 m microphone range		Chewing gum Rs 5,000 Can record 90-min video and take photos with 5 MP camera

Glasses Rs 12,500 Can record audio-video with 2-hr battery back-up.

Ugly is the new Beautiful

 VIEW GALLERY

At the launch tonight of Design Museum co-founder Stephen Bayley's new book, Ugly: the Aesthetics of Everything, guests will be served ugly canapés and ugly cocktails.

In attendance will be Mugly, an eight-year-old hairless Chinese Crested dog from Peterborough, who is the recent winner of the Ugliest Dog in the World contest, held annually in California, as well as models from the Ugly Model agency, including one woman credited with "looking like a fish".

At what is billed as London's first "ugly party", a grand café will be decked out with "ghoulish objects" and "revolting curios", including a stuffed pug giving birth to a flying pig and blown-up images from Bayley's book, including one of Myra Hindley. "My barman is working on a grey- coloured cocktail and Martinis with gherkins in them," says Bayley. "Talking about beauty is boring – when you get talking about ugliness it gets interesting."

His book Ugly explores the complexities of ugliness and makes the point that without ugliness, there would be no beauty. He has cherry-picked items for his book, including kitsch flying ducks, hideous pink-haired troll dolls – even the postmodernist architecture of the Sainsbury Wing of the National Gallery gets singled out. Ugliness is fascinating, he claims – take the repugnant The Ugly Duchess by Quentin Massys – "It's one of the most popular postcards sold in London's National Gallery shop and rivals the sales of Monet's tranquil Water-Lilies," he says.

There are also images of the Eiffel Tower and the Albert Memorial: "In 1887 leading Paris intellectuals ganged up and said the Eiffel Tower, which was being built, was a 'hateful column of bolted tin… useless and monstrous'", he says. "Now the Eiffel Tower is regarded as one of the most touching, romantic French monuments. The Albert Memorial was loathed and detested – now it is charming, delightful and evocative."

There are no chapters in Ugly, which is Bayley's sequel to Taste, published 1991; instead it's full of long paragraphs of ideas exploring ugliness – a subject not many people have written about.

"I'm not being prescriptive about what is ugly – I'm just provoking ideas about our assumptions of ugliness," says Bayley.

"I'm not looking for agreement. When we talk about design, it is this attempt to introduce beauty by the Modern movement. They told us that if things were functional they would be beautiful – but as soon as you investigate what is beauty – I would say the evidence is mixed. A bomb-dropping Boeing B-52 is extraordinarily functional, but is it beautiful even though it is morally repugnant? What about a gun?

"Our view of what is and what isn't beautiful changes over time. Maybe there are no permanent values in the world of art. It is certainly a question that needs to be asked. If the whole world was beautiful it would in fact be extremely boring. We need a measure of ugliness to understand beauty. You can only understand heaven if you have a concept of hell. "

Bayley focuses on Ernö Goldfinger's Trellick Tower in west London: "If there ever was a test for taste, it's this," he says. The tall housing block built in 1972 was listed by English Heritage in 1998. "It was deplored by many as a brutalist horror. Now half the world regards it as an eyesore – the other half regards it as heroic and uplifting. Maybe they are both are right. Any minute now Prince Charles will come to admire it. "

Gebrüder Thonet's mass-produced Model No. 14 chair (1859), the original café chair, was revered by Le Corbusier as "the ultimate in elegant design".

"I like the chair – I like clean, unfussy, undecorated things – but I don't think it's inevitably, timelessly perfect," says Bayley, who also includes an image of an Amorphophallus titanum, known as the corpse flower, which "smells of death" and looks phallic. "Can nature be ugly? Personally, I think it can," he says.

There is no end to the fascination of ugliness for Bayley, whose book opens with a photograph of a pig and then Frankenstein. He adds: "If you are talking to architecture students and you ask them to deliberately design something ugly, it is very difficult. It is very difficult to create ugliness – what we call ugly seems to be accidental."

But whether you would want Matthias Grunewald's oil painting The Isenheim Altarpiece (1516) of a man with skin disease on your wall is quite another matter. Or indeed Hieronymus Bosch's triptych The Garden of Earthly Delights (c.1490-1510) depicting Hell, and full of disfigurements and mutations.

There is an image, too, of John Constable's Windmill among Houses and Rainbow – not because it is ugly. "I want to make the point that while we are all worried about the industrialisation of the countryside, this is what Constable's idyllic scenes of the countryside were often about."

Bayley also includes gargoyles from Notre-Dame de Paris, and anti-Jewish Nazi propaganda posters, in which Jews are depicted as ugly caricatures.

One section of the book, "The problem with hair", has images of the monster in I was a Teenage Werewolf (1957), which shows, he says, "how abnormal hair retains a disturbing power".

"Firstly if you take a long view of the history of art, ideas about beauty are not permanent – and secondly, things that are ugly can be fascinating and perversely attractive" says Bayley. "No matter what your views, you couldn't read this book and not either come out lacerated, stimulated, annoyed or in total agreement with my genius. 

It's not a historical narrative but it's a collection of consistent and interesting and stimulating ideas."

'Ugly: the Aesthetics of Everything', by Stephen Bayley, is published by Goodman Fiell (£25
)

IMF's epic plan to conjure away debt and dethrone bankers

So there is a magic wand after all. A revolutionary paper by the International Monetary Fund claims that one could eliminate the net public debt of the US at a stroke, and by implication do the same for Britain, Germany, Italy, or Japan.

The IMF reports says the conjuring trick is to replace our system of private bank-created money. Photo: Reuters

By Ambrose Evans-Pritchard

2:31PM BST 21 Oct 2012

210 Comments

One could slash private debt by 100pc of GDP, boost growth, stabilize prices, and dethrone bankers all at the same time. It could be done cleanly and painlessly, by legislative command, far more quickly than anybody imagined.

The conjuring trick is to replace our system of private bank-created money -- roughly 97pc of the money supply -- with state-created money. We return to the historical norm, before Charles II placed control of the money supply in private hands with the English Free Coinage Act of 1666.

Specifically, it means an assault on "fractional reserve banking". If lenders are forced to put up 100pc reserve backing for deposits, they lose the exorbitant privilege of creating money out of thin air.

The nation regains sovereign control over the money supply. There are no more banks runs, and fewer boom-bust credit cycles. Accounting legerdemain will do the rest. That at least is the argument.

Some readers may already have seen the IMF study, by Jaromir Benes and Michael Kumhof, which came out in August and has begun to acquire a cult following around the world. 

Entitled "The Chicago Plan Revisited", it revives the scheme first put forward by professors Henry Simons and Irving Fisher in 1936 during the ferment of creative thinking in the late Depression.

Irving Fisher thought credit cycles led to an unhealthy concentration of wealth. He saw it with his own eyes in the early 1930s as creditors foreclosed on destitute farmers, seizing their land or buying it for a pittance at the bottom of the cycle.

The farmers found a way of defending themselves in the end. They muscled together at "one dollar auctions", buying each other's property back for almost nothing. Any carpet-bagger who tried to bid higher was beaten to a pulp.

Benes and Kumhof argue that credit-cycle trauma - caused by private money creation - dates deep into history and lies at the root of debt jubilees in the ancient religions of Mesopotamian and the Middle East.

Harvest cycles led to systemic defaults thousands of years ago, with forfeiture of collateral, and concentration of wealth in the hands of lenders. These episodes were not just caused by weather, as long thought. They were amplified by the effects of credit.

The Athenian leader Solon implemented the first known Chicago Plan/New Deal in 599 BC to relieve farmers in hock to oligarchs enjoying private coinage. He cancelled debts, restituted lands seized by creditors, set floor-prices for commodities (much like Franklin Roosevelt), and consciously flooded the money supply with state-issued "debt-free" coinage.

The Romans sent a delegation to study Solon's reforms 150 years later and copied the ideas, setting up their own fiat money system under Lex Aternia in 454 BC.

It is a myth - innocently propagated by the great Adam Smith - that money developed as a commodity-based or gold-linked means of exchange. Gold was always highly valued, but that is another story. Metal-lovers often conflate the two issues.

Anthropological studies show that social fiat currencies began with the dawn of time. The Spartans banned gold coins, replacing them with iron disks of little intrinsic value. The early Romans used bronze tablets. Their worth was entirely determined by law - a doctrine made explicit by Aristotle in his Ethics - like the dollar, the euro, or sterling today.

Some argue that Rome began to lose its solidarity spirit when it allowed an oligarchy to develop a private silver-based coinage during the Punic Wars. Money slipped control of the Senate. You could call it Rome's shadow banking system. Evidence suggests that it became a machine for elite wealth accumulation.

Unchallenged sovereign or Papal control over currencies persisted through the Middle Ages until England broke the mould in 1666. Benes and Kumhof say this was the start of the boom-bust era.

One might equally say that this opened the way to England's agricultural revolution in the early 18th Century, the industrial revolution soon after, and the greatest economic and technological leap ever seen. But let us not quibble.

The original authors of the Chicago Plan were responding to the Great Depression. They believed it was possible to prevent the social havoc caused by wild swings from boom to bust, and to do so without crimping economic dynamism.

The benign side-effect of their proposals would be a switch from national debt to national surplus, as if by magic. "Because under the Chicago Plan banks have to borrow reserves from the treasury to fully back liabilities, the government acquires a very large asset vis-à-vis banks. Our analysis finds that the government is left with a much lower, in fact negative, net debt burden."

The IMF paper says total liabilities of the US financial system - including shadow banking - are about 200pc of GDP. The new reserve rule would create a windfall. This would be used for a "potentially a very large, buy-back of private debt", perhaps 100pc of GDP.

While Washington would issue much more fiat money, this would not be redeemable. It would be an equity of the commonwealth, not debt.

The key of the Chicago Plan was to separate the "monetary and credit functions" of the banking system. "The quantity of money and the quantity of credit would become completely independent of each other."

Private lenders would no longer be able to create new deposits "ex nihilo". New bank credit would have to be financed by retained earnings.

"The control of credit growth would become much more straightforward because banks would no longer be able, as they are today, to generate their own funding, deposits, in the act of lending, an extraordinary privilege that is not enjoyed by any other type of business," says the IMF paper.

"Rather, banks would become what many erroneously believe them to be today, pure intermediaries that depend on obtaining outside funding before being able to lend."

The US Federal Reserve would take real control over the money supply for the first time, making it easier to manage inflation. It was precisely for this reason that Milton Friedman called for 100pc reserve backing in 1967. Even the great free marketeer implicitly favoured a clamp-down on private money.

The switch would engender a 10pc boost to long-arm economic output. "None of these benefits come at the expense of diminishing the core useful functions of a private financial system."

Simons and Fisher were flying blind in the 1930s. They lacked the modern instruments needed to crunch the numbers, so the IMF team has now done it for them -- using the `DSGE' stochastic model now de rigueur in high economics, loved and hated in equal measure.

The finding is startling. Simons and Fisher understated their claims. It is perhaps possible to confront the banking plutocracy head without endangering the economy.

Benes and Kumhof make large claims. They leave me baffled, to be honest. Readers who want the technical details can make their own judgement by studying the text here.

The IMF duo have supporters. Professor Richard Werner from Southampton University - who coined the term quantitative easing (QE) in the 1990s -- testified to Britain's Vickers Commission that a switch to state-money would have major welfare gains. He was backed by the campaign group Positive Money and the New Economics Foundation.

The theory also has strong critics. Tim Congdon from International Monetary Research says banks are in a sense already being forced to increase reserves by EU rules, Basel III rules, and gold-plated variants in the UK. The effect has been to choke lending to the private sector.

He argues that is the chief reason why the world economy remains stuck in near-slump, and why central banks are having to cushion the shock with QE.

"If you enacted this plan, it would devastate bank profits and cause a massive deflationary disaster. There would have to do `QE squared' to offset it," he said.

The result would be a huge shift in bank balance sheets from private lending to government securities. This happened during World War Two, but that was the anomalous cost of defeating Fascism.

To do this on a permanent basis in peace-time would be to change in the nature of western capitalism. "People wouldn't be able to get money from banks. There would be huge damage to the efficiency of the economy," he said.

Arguably, it would smother freedom and enthrone a Leviathan state. It might be even more irksome in the long run than rule by bankers.

Personally, I am a long way from reaching an conclusion in this extraordinary debate. Let it run, and let us all fight until we flush out the arguments.

One thing is sure. The City of London will have great trouble earning its keep if any variant of the Chicago Plan ever gains wide support.

What happens to a Lottery winner?

Lottery millionaires each fund six jobs a year, study shows

3,000 £1m-plus winners have created another 3,780 millionaires among family and friends and contributed £750m to GDP

• Caroline Davies
• guardian.co.uk, Monday 22 October 2012 00.05 BST

Some of the National Lottery's 3,000 millionaire winners. Photograph: David Parry/PA

The balls have dropped and all six numbers match, so it's time to buy that Audi, book the holiday in the US and phone the estate agent. At least, that's what most lottery millionaires do, according to an analysis of spending and investment by jackpot winners.

Since its launch in 1994, the lottery has created 3,000 millionaires who have won more than £8.5bn in total, at an average of £2.8m each. The trickle-down effect means that between them they have created a further 3,780 millionaires among their children, family and friends, according to the forecasting consultancy Oxford Economics.

Most winners (59%) give up work straight away, but 19% carry on doing the day job and 31% do unpaid voluntary work. The good news for the economy is that 98% of winners' spending remained in the UK. Through their spending on property, vehicles and holidays, it is estimated that each winner keeps six people in a full-time job for a year.

Winners have contributed almost £750m to GDP, and generated more than £500m in tax receipts for the Exchequer. The bulk of the money went on property, with £2.72bn spent on winners' main properties, and £170m in paying off existing debt and mortgages.

Maintaining income was a priority, with £2.125bn spent on investments. Gifts to family and friends accounted for £1.17bn, and £680m was spent on cars and holidays.

The study, commissioned by Camelot to mark the 3,000 winners milestone, was based on research from 100 £1m-plus winners. It found that in total the 3,000 winners have purchased 7,958 houses or flats in the UK, or 2.7 each, spending £3.3bn. Most winners (82%) changed their main residence, spending an average £900,000.

The new home is likely to come with a hot tub, with almost a third (29%) putting that on their shopping list. A walk-in wardrobe was a must for 28%, almost a quarter (24%) opted for a property behind electric gates, and 22% had a games room, with 7% installing a snooker table.

Larger properties need maintaining, and 30% of winners employed a cleaner and 24% a gardener. A small proportion (5%) employed a beautician.

Audis were the favourite cars of 16% of winners, with Range Rovers and BMWs also popular purchases (11% each), as well as Mercedes (10%) and Land Rovers (5%). Winners spent £463m on 17,190 cars, with the average price of their favourite being £46,116.

Holidays were also a priority. The majority (68%) choose five-star hotels overseas. The US was the favoured destination for 27%, followed by the Caribbean (9%). Closer to home, however, UK caravan sales have benefited. Over the past 18 years, 10% of millionaires have bought a caravan, generating sales worth about £7.4m.

Some winners (15%) have started their own businesses, 9% have helped others to do so, and 6% have invested in or bought other people's businesses. Businesses started or supported by lottery winners employ 3,195 people, according to the study.

Andy Logan, co-analyst and author of the report, said: "The effect of a win spreads much further and wider than we anticipated. Not only does it transform the lives of friends and family, but each win has a measurable effect on the UK economy, especially with so much of it being spent in the UK. The use of each win creates a ripple effect across this generation and very often the next."

Three decades after privatisation, monopoly power is still king

IoS investigation: The great British energy rip-off 

The "big six" energy firms were last night accused of maintaining a "stranglehold" over millions of consumers, after new figures showed that they each control more than two-thirds of the market in different regions across the UK.

An average of 70 per cent of households across all regions use the same electricity supplier, with the proportion rising to 85 per cent in some areas, undermining claims by the Government and Ofgem, the regulator, that the energy market is operating competitively.

The figures, uncovered by Labour, are published in the wake of the confusion over the future of energy bills after David Cameron pledged in the Commons to force companies to offer householders the "lowest tariff" – a promise that within hours was exposed as unworkable. The Prime Minister clashed with the Liberal Democrat Energy Secretary, Ed Davey, who backed Ofgem's proposals, published on Friday, for a simplified tariff system that encouraged consumers to switch between firms.

The official figures show that companies supplying electricity to homes where they inherited the network from the former utility boards are operating a near monopoly, making a mockery of the idea that customers routinely switch firms to get better deals.

Separate data from the Department for Energy and Climate Change (DECC) reveals that customers who have stayed with their old electricity supplier are paying more than those who have switched. DECC analysis shows that these "home suppliers" charge an average of £31 a year more than non-home suppliers for electricity – in effect placing a premium on loyalty.

The research emerged on the eve of British Energy Saving Week amid an outcry that energy firms are pushing up fuel bills beyond the rate of inflation, adding between £80 and £112 to the average annual household bill.

Although deregulation of the energy market in the 1980s supposedly led to more competition, the reality is more similar to a monopoly within each region of the UK.

The largest five electricity suppliers dominate the regions they inherited from utility boards more than two decades ago, while British Gas still retains the largest share of the retail gas market nationwide. This is despite consumers being encouraged by price comparison websites to shop around for the cheapest supplier. When the gas and electricity networks were first privatised, price caps were in operation, but a decade ago Ofgem removed controls because competition had, in theory, been established.

Yet figures published in Parliament in a written answer to the shadow Energy Secretary, Caroline Flint, show that there is little real competition. Firms last night claimed the figures show the loyalty of customers they inherited from the boards, but Ms Flint said the companies appear to be exploiting consumers' unwillingness to shop around. With a baffling array of more than 500 tariffs on offer, consumers are often loath to switch.

In Northern Scotland, SSE, the firm that inherited the network from the North of Scotland Hydro Board, has retained an 85 per cent share of the retail electricity market, while in south Wales, SSE has an 82 per cent share and in the Southern region it has an 80 per cent share.

Scottish Power has an 82 per cent share in southern Scotland, and a 73 per cent share in north Wales. EDF has remained dominant in London with a 74 per cent share; in the South-east, it supplies electricity to 73 per cent of homes; and in the South-west, it has 71 per cent.

Npower remains the dominant supplier in the West Midlands, with 65 per cent of the retail market; in Yorkshire, it has a 65 per cent share; and in the North-east, 64 per cent. E.ON has a 69 per cent share in the East Midlands; 68 per cent in the Eastern region; and 67 per cent in the North-west.
The sixth major energy firm, British Gas, has held on to 76 per cent of gas-only accounts across the UK. The figures do not apply to dual fuel accounts, but nearly 10 million households are on electricity only, and 4.6 million have gas only.

Ms Flint said: "It's no wonder the energy giants are shame-faced about hiking up energy bills when they have a stranglehold over the energy market. People talk about the 'big six', but in most parts of the country there's only one big supplier in town. The fact that 70 per cent of people in any region all use the same electricity supplier suggests that the energy market is not functioning properly. It cannot be right that customers who have stuck with their old electricity supplier pay a premium for their loyalty.
"The time has come to create a tough new regulator to police the energy market properly, and force the energy companies to pass on price cuts to the public."

A spokesman for Npower said: "We have a larger than expected share in the West Midlands because our history is in the Midlands. A lot of people were Midlands Electricity Board customers and many of them remained so [under the new name]. The rate of turnover has been quite significant, people have left and people come back. It is about loyalty – many people still refer to us as 'the Midlands Electricity Board' as they refer to British Gas as 'the Gas Board'. They are with us because we are incredibly good value. It is the same in the North-east. We feel very much part of the community in these areas."

A spokesman for E.ON said: "Many of our customers, while staying with us, will have regularly changed products. As such it would be wrong to say they are not engaged in the energy market – they are, and have chosen to stay with us. Some 69 per cent of our customers overall have switched supplier or tariff in the past three years.

"It is important that we treat every customer as an individual and as such being on the right tariff for your own individual circumstances is vital. In recent weeks we have made checking you're on the right tariff easier than ever, and it is this simplicity and comparability that our customers are responding to. By making things simpler and more comparable, as well as continuing to provide help and advice that will make homes more energy efficient, we can really help our customers and ensure they are on the best deal for them."

A Scottish Power spokesman said: "The British energy market is one of the most competitive in Europe, and Scottish Power welcomes anything that encourages or supports this competition."
SSE said in a statement: "We would fully expect our customer retention rates to be higher than those of our competitors because of our exceptional standards of service, for which we are consistently recognised as the best in the business by the likes of Consumer Focus and uSwitch.

"There's no doubt that greater levels of consumer engagement in the market would be a positive thing. However, switching rates in the UK compare very favourably with those in other European energy markets, and with other retail service markets such as fixed and mobile telecommunication, insurance, mortgages and personal current accounts."

How easy is it to reduce your energy bill?

If a seasoned investigator has trouble, what hope for the average consumer? Here’s what I discovered after many frustrating minutes on hold:

Npower

My current provider, Npower, predicts my spend for the next 12 months will be £208.37 for 1,620 kWh of electricity and £531.78 for 11,260 kWh of gas – all helpfully displayed in my latest bill, but irrelevant because it was generated two days before they announced an 8.8 per cent price hike. Sneaky.

British Gas

After an automated apology for any delay due to “a high volume of customer calls” came some advice: “If you’re calling for our fix and fall tarif,f go online to sign up and register your details. If you have received a coupon about this offer, please complete it and return the pre-paid envelope. If you are calling about a fixed contract that ends in either 2013, 2014 or 2015, your prices are not affected by our recent price increase.”

I simply want to find out if you can beat my existing deal.

“Press 1 to change your account name or address or if you are moving house. Press 2 to give us your meter reading or find out your balance, pay your bill or to let us know you are going to pay your bill or you have paid your bill. Press 3 if you have any questions about your central heating or home care or press 4 to talk to one of our team.”

Hooray. Well, nearly. I sit through more suggestions to “go online for further information”. A pause, then a human voice. “You probably were sent that estimate prior to their price rise announcement.” True. “Our best deal is the online variable until November 2013, which includes the price increases taken into effect. We can do a 6 per cent discount from your total bill for direct debit.”

“That will cost you around £229 for electricity and £532 for gas. A little bit more than your estimate, but your prices will go up remember”.

So your prices are fixed, then?

“No, we have another “fix and fall” tariff which is not discounted but is fixed until March 2014. That might make more sense to you.

“If our prices go up, yours won’t do, but if prices go down, yours go down – and you get a fixed premium of 3 per cent.”

“That comes to £253.34 for electricity and £583 for gas.”

£100 more! “Ah, but your charges…”

Yes, yes, they will be going up.

To be fair, she did recommend I call npower to check how much my bill would apparently be going up by. That was easier but it still took 17 minutes.

E.ON (no freephone)

It took less than a minute to speak with someone and we were straight down to business: full address and phone number (“in case you get cut off”) before we were on to the tariffs. Four on offer: standard, E.ON energy discount (“3 per cent cheaper than standard for 12 months but you’re not protected against price rises”), fixed one year or fixed two years. It was like remortgaging a house.,

Standard came to £787.93 and the energy discount was £752.69. Fixed one came to £776.48 – “no premium, mind” – and fixed two £816.39 – “a bit of a gamble as it is 5 per cent above standard unit rate but you’re protected against price rises.”

The good news: E.ON was not among the four of the “big six” energy companies which had recently announced price rises for 2012. The bad: “but it’s more than likely we will put them up for 2013”. Hmmm.

That took four minutes.

EDF

Oh dear. I gave up trying after being on hold for 15 minutes listening to what sounded like Morcheeba. Rubbish.

SSE

After seven minutes on hold, I was mercifully told there were only two tariffs the company provides – standard and capped. My quote was £28 more expensive than npower, but SSE credits your account with £100 when you switch and their rate is capped for two years meaning, like British Gas, it won’t go up, but could come down. And SSE “was the only energy company that reduced their prices last year”. In addition, my gas and electricity standard charge of 16.44 pence per day would come down to 14.8p with paperless billing. “I’m here until 2pm if you want to switch,” a very helpful Eddie told me.

Scottish Power

I had tapped in my numbers to their online quote generator which gave me an estimated bill of £816.57. But on the phone, a quote using the same figures was better: £755. This for a deal fixed until March 2014 without a cancellation fee. Did I want to know the unit price? I certainly did. “Scottish Power’s first quarter electricity unit price is 21.74p for the first 225 units going down to 10.99, compared with Npower’s current unit price of 16.93 reducing to 13.39. Our primary gas units are 8.10 going down to 3.01 with Npower’s at 7.89 reducing to 3.51.” I regretted the request for more detail.

So much to choose from. Do I ditch and switch, fix or stick? I have no idea. I tried calling Npower to see what their updated estimate would be for next year, but their systems were down. I’ll have to call back on Monday.

Paul Gallagher