Tories call benefit rise 'pre-election con'

The Conser

vatives have branded Alistair Darling's plan to increase benefits a 'pre-election con.'

They say the increased benefits will rise before a vote next year only to fall afterwards.

The chancellor defended his pre-Budget report saying that the benefits will in fact rise again the following year.

Critics say the 1.5 per cent increase in some benefits including child support, incapacity benefit and disability allowance which will come into effect in April 2010, potentially weeks before a general election, are only a temporary measure and will be reversed the following year.

It is just one of many aspects of yesterday's pre-Budget report which the Conservatives say make it more political than economic.

Alistair Darling defended the increase and denied it was politically motivated.

He told the BBC: 'I wanted to increase them [the benefits in question] by 1.5 per cent otherwise they would have been frozen. They'll go up again next year.'

Another area of Wednesday's report which came under fire from shadow chancellor George Osborne was the one per cent rise in national insurance.

The hike announced for 2011 will affect anyone earning over £20,000. The government predicts it will raise £2.9 billion in 2011-12.

Mr Osborne though called the rise 'nonsense' on GMTV this morning and claimed it would 'impose a £446 million bill on the NHS, eating into the very resources which the chancellor claimed to be protecting'.

Mr Darling claimed the money generated would in fact protect key public services. He said: 'It's a difficult decision but I think it was right both in terms of what I want to do to cut my borrowing but also, in terms of something like the NHS or schools, it is important we preserve those frontline services.'

The Conservatives have branded Alistair Darling’s plan to increase benefits a 'pre-election con.'

They say the increased benefits will rise before a vote next year only to fall afterwards.

The chancellor defended his pre-Budget report saying that the benefits will in fact rise again the following year.

Critics say the 1.5 per cent increase in some benefits including child support, incapacity benefit and disability allowance which will come into effect in April 2010, potentially weeks before a general election, are only a temporary measure and will be reversed the following year.

It is just one of many aspects of yesterday's pre-Budget report which the Conservatives say make it more political than economic.

Darling announces boiler scrappage scheme

A new boiler scrappage scheme has been announced by Alistair Darling in his pre-Budget report.

The scheme will help 125,000 families replace their old boilers with newer, more efficient models.

The scheme, similar to the car trade-in scheme, was one of a series of green measures announced in the report and is hoped to reduce domestic heating and hot water bills and cut greenhouse gases.

In his speech the chancellor said: 'Each inefficient boiler adds over £200 to household bills and one tonne of carbon to the atmosphere. A quarter of all the country's emissions come from households.'

The scheme will see about £200 million added to help cut carbon emissions from homes from April 2010.

Mick Williams, of Williams and Co, a plumber's merchant in Hampshire, who started a petition for the scheme, told inthenews.co.uk: 'All in all it's very pleasing. It's much better than the car scrappage scheme for the environment, small businesses should benefit and house holders will save about £250 a year. So it's a win, win, win situation.'

He did though add that he was yet to see the details of the scheme and stressed the importance of the involvement of small business.

The scheme will be open to households with what are known as G-rated boilers, which are graded as 70 per cent efficient, so long as they replace them with A-rated boilers.

It is also expected to give a boost to British industry, as about 60 per cent of boilers used in the UK are manufactured here. About 120,000 boiler engineers also look set to benefit from increased business.

Some though feel that the pre-Budget report did not go far enough in terms of the environment.

John Sauven, Greenpeace executive director, said: 'Alistair Darling peppered his speech with references to a low carbon economy, but failed to announce the scale of change that would actually give us one. A bold chancellor would have scrapped Trident, saved £100 billion and used the cash to create a green investment bank.

Royal Mail reports 4% rise in profits

Royal Mail has today announced an operating profit rise of four per cent for the six months to September, compared to the same period last year.

The postal service said profits for the period stood at £184 million, while last year's total stood at £177 million.

Royal Mail said overall group revenues were down due to the 'continuing decline in mail volumes and economic recession which, along with intensifying competition, had an impact on all of the group's businesses'.

The company also said it had paid more than £300 million into its pension fund over the period, saying 'despite the resilient profit performance, group cashflow continues to be negative with an outflow of £434 million during the six months, largely driven by continuing investment and the cost of voluntary redundancies'.

The postal service added: 'During the period we also made a cash payment of more than £300m into the pension fund. The pension fund deficit is currently being revalued with the historic deficit widely expected to be at least £10 billion compared with £3.4 billion at the last valuation three years ago.'

Adam Crozier, chief executive of Royal Mail Group said: 'Traditional volumes continue to fall in the UK and around the world as electronic communications continues its inexorable growth: for example the Dutch postal operator TNT has said that volumes in the Netherlands will fall by seven to nine per cent in 2010 while in some countries such as the US the decline is as steep as 13 per cent.

'It is too early to assess the impact of the Communication Workers Union's (CWU) recent strike action but we are grateful to all those postmen and women who chose to continue working through the strikes and for the huge efforts made by our managers to help keep the mail moving.'

Osborne: Untrustworthy Labour bungled PBR

George Osborne has claimed Labour lost its moral authority and any chance of being trusted by the electorate ever again with today's pre-Budget report.

Alistair Darling unveiled plans in the Commons to raise national insurance contributions and tax bankers' bonuses, as well as increasing public borrowing forecasts for the next two years.

Shadow chancellor Mr Osborne said Mr Darling's plan would actively 'choke off the recovery' and reduce Britain to the 'sick man of Europe'.

'This prime minister inflicted the deepest and longest recession upon us in modern history,' he said after referring to Gordon Brown as 'yet another failed master of the universe'.

'No one will believe a word they say on the economy ever again.'

Repeating his much-maligned 'we're all in this together' line from party conference season Mr Osborne accused Mr Darling of 'ring-fencing a black hole'.

'We were promised a pre-Budget report and what we got was a pre-election report,' he added.

Mr Darling hit back at Mr Osborne's allegation that people earning over £20,000 would pay more tax, saying the shadow chancellor was 'long on politics and short on ideas'.

For the Liberal Democrats, Vince Cable said Mr Darling could have done more with capital gains tax, which is staying unchanged at 18 per cent.

'There is a long hard slog ahead for the economy and the chancellor has not set out our path for it,' the party's Treasury spokesman said.

He added that it had been a 'good Budget for bingo and boilers', and that the economy was now being 'rebuilt on sand'.

Bank of England holds interest rates at 0.5%

The Bank of England has announced it will hold interest rates in the UK at 0.5 per cent.

The Monetary Policy Committee today voted to maintain the official bank rate paid on commercial bank reserves at a half of a per cent, and also voted to continue with its programme of asset purchases totalling £200 billion financed by the issuance of central bank reserves.

The last change in interest rates was in March.

Yesterday the chancellor of the exchequer Alistair Darling said in his pre-Budget report that the economy would shrink by 4.75 per cent in 2009 compared with his Budget estimate in April of 3.5 per cent.

The Bank last month added £25 billion to its quantitative easing programme, and it is expected to wait until this scheme runs out before talking any further action.

Ben Thompson, Legal & General's director of mortgages said following the decision: 'The remortgage market is actually showing early signs of warming up, but it won't really get going until the bank base rate is increased.

'When this happens, borrowers that are able to move around are going to start doing so quickly, creating havoc with lenders' back books. We think that 'locking the back door' is something that lenders should be thinking about far in advance and ought to be preparing their retention strategies already. We would encourage lenders to work with brokers to ensure a cost-effective solution for all parties.

'We would also encourage brokers to start reviewing their books, identifying people on standard variable rates without tie-ins and making lists of prospects to call when the time is right.'

Chancellor announces levy on bankers' bonuses

The chance

llor yesterday announced a 50 per cent levy on all bankers' bonuses over £25,000.

The super-tax announced in his pre-Budget report is hoped to curb the culture of excessive bonuses.

The 50 per cent levy is to be paid by companies rather than employees and is hoped to claw back an extra £500 million for the UK. This money is to be used to pay for new measures also announced in the report including help for the young and older unemployed to get back into work.

Alistair Darling said: 'If they [banks] insist on paying substantial rewards, I am determined to claw money back for the taxpayer. I have decided to introduce from today a special one-off levy of 50 per cent on any individual discretionary bonus above £25,000. This will be paid by the bank not the bank employee.'

It has though attracted criticism from some who say it makes London a less attractive proposition for international businesses.

Angela Knight, British Bankers' Association chief executive, said: 'Viewed from abroad, London may well look now like a significantly less attractive place to build a business. We must repeat that only concerted international agreements will succeed in reforming remuneration in the financial sector.'

She added: 'This new tax has to be set in the context of commitments already made. The UK's banks have already agreed to observe pay restraints where bonuses are mostly deferred and paid in shares. We are already well ahead of the other G20 countries in doing this.'

Others have criticised the move arguing that a levy should have been put on bank's profits rather than staff bonuses, and that it would be difficult to enforce.

Vince Cable, the Liberal Democrat deputy leader, speaking in parliament after the pre-Budget report, said: 'How will you stop the banks converting the bonuses into their basic salaries? You need not to try to tax bankers separately from high earners but to have to pay a levy on bank profits because they rely on the taxpayer guarantee.'

FTSE 100 remains positive in early trading

The FTSE 100 started brightly on Thursday morning as the market continues to show indifference to yesterday's pre-Budget report.

At 09:40 GMT the London index stood at 5,216.33, a rise of 12.44 points, 0.24 per cent.

Royal Bank of Scotland led the gains, up 2.77 per cent, to 31.17p, despite chancellor Alistair Darling's announcement on Wednesday of a new super-tax on bankers' bonuses.

The Bank of England's predicted announcement of a holding of interest rates later also appears not to be weighing on traders' minds, with Barclays, Lloyds Banking Group and HSBC all performing well in early trading.

The biggest loser of the day so far is Land Securities Group – down 1.24 per cent to 639p.

FTSE 100 shrugs off pre-Budget report

The FTSE 100 ended Wednesday down 19.24 points, mirroring falls in the European markets and Wall Street.

The London index finished on 5,203.93, a drop of 0.37 per cent, on the day chancellor Alistair Darling unveiled his pre-Budget report.

Leading the gains was Segro, up 3.67 per cent, to 333.30p.

Old Mutual was the biggest loser, down 5.63 per cent, to 104p, with Man Group also recording a fall of 12.4 points.

The much-anticipated PBR this afternoon, in which Mr Darling announced a levy on bankers' bonuses, however, had surprisingly little effect on the banking shares.

Shoppers' confidence 'fragile' as sales dip

'Disappointing' sales figures for November have shown shoppers' confidence is still fragile.

According to the British Retail Consortium (BRC) like-for-like retail sales rose 1.8 per cent from November 2008, when sales had dropped 2.6 per cent due to the global financial crisis.

Today's figures followed October's uplift, which had seen a 3.8 per cent gain. The BRC said much of the reason for the fall last month had been lower food price inflation, adding that clothing and footwear sales had also been weaker.

Stephen Robertson, director general of the BRC, said: 'We would have expected much stronger growth because the comparison is with very poor results in 2008 when November was the second worst performing month of the year.

'Growth was weaker than a strong October, but it's not as bad as it seems. A lot of this was down to the sharp fall in food inflation which continues to dampen food retailers' sales.

'Consumer confidence is fragile and has taken a turn for the worse. We're the only major economy still in recession. Uncertainty over jobs and future tax increases and government spending cuts is making customers more cautious. Retailers are hopeful of a better Christmas than last year's dire performance, but it's still all to play for.'

The BRC figures showed toys continued to sell well in November, while gaming was boosted by Call of Duty: Modern Warfare 2, and in music, Susan Boyle's debut album broke the record for first-week sales.

In clothing overall sales continued to be weak, with children's clothes driving sales. The year-on-year fall in menswear was the worst since May 2008 and, as for womenswear, any gains were often discount-driven, the BRC said.

Helen Dickinson, head of retail at KPMG, who put the retail sales figures together alongside the BRC, said: 'On the face of it, a disappointing result for November given that October showed the best like-for-like growth since 2002.

'Although regaining ground lost in the early run up to Christmas is difficult, if not impossible, many retailers will be quietly confident that their performance will not be anywhere near as bad as some may have expected six months ago.'

FTSE 100 steady in early trading

The FTSE 100 remained level at the start of play on Tuesday.

By 09:36 GMT the London index stood at 5,315.55, a rise of just 4.89 points – 0.09 per cent.

Royal Bank of Scotland was the biggest loser in early trading, down 3.09 per cent to 31.98p, with Man Group down over 1.5 per cent to 320.10p.

Tesco also recorded a slump of 1.32 per cent, to 429.90p, despite positive third quarter results published today.

Leading the gains were Pearson, up 20 points, and British Sky Broadcasting, up 9.5 points.

FTSE 100 dragged down at close of trading

The FTSE 100 shrunk again on Monday after losing 11.70 points, 0.22 per cent, at close of trading.

Continued speculation over a potential windfall tax in Wednesday's pre-Budget report led to uncertainty over banking stocks.

Royal Bank of Scotland and Lloyds Banking Group, both taxpayer-owned, saw their shares dip 5.05 and 4.48 per cent respectively.

Barclays was not immune from the worries as its shares dipped 2.39 per cent.

Leading the index in the opposite direction were copper mining group Antofagasta (2.17 per cent) and travel firms Thomas Cook Group and TUI Travel (2.07 and 1.66 per cent).

Electricity bills to rise to pay for upgrades

Electricity bills will rise to fund upgrades to regional distribution networks, the energy watchdog has said today.

Ofgem, the UK energy regulator, has also warned energy companies that household gas bills must benefit from a fall in wholesale prices.

The regulator said electricity bills would rise by an extra £4.30 a year on average, to ensure 'householders will get better customer service, improved reliability and a greener electricity supply'. The average bill paid per household on electricity is £445 a year.

Ofgem also said that investment in the UK's electricity infrastructure would rise by 40 per cent, to £7.2 billion, compared to the last five years, with £500 million set aside for the low carbon energy fund. The investment figure is eight per cent lower than companies had expected.

Ofgem chairman Lord Mogg said: 'This fund breaks new ground in regulation. Its objective is to encourage companies to be more innovative with new technologies and commercial arrangements. This will allow companies to play a full part in combating climate change.'

Ofgem also decided to 'set a 4.7 per cent actual weighted average cost of capital (using a pre-tax cost of debt and a post-tax cost of equity)', which has been criticised for being 'significantly below all comparators'. Southern and Scottish Energy said: 'Moreover, these were all set before the reassessment of risk and the cost and availability of finance that has characterised global financial markets in the last 18 months.

'It is also significantly below the level of return proposed by Ofwat for the water and sewerage industry last month. Unlike that review, Ofgem's final proposals represent the first time that electricity distribution companies have had any firm indication of the allowed cost of capital.'

The regulator's chief executive Alistair Buchanan said: 'Our proposals are tough on inefficiency and poor service but are fair in allowing the companies to invest to replace ageing network assets and in improving the environment. The controls provide great opportunities for companies which are more efficient and excel at providing what their customers want - but they will penalise poor performers.

'We have listened to consumers' expectations of top quality service, reliability, fair prices and environmental improvement for today and for the future.'

Windfall tax reports drag FTSE 100 down

The FTSE 100 was down in early trading, losing 35.48 points by 09:50 GMT, as banking shares suffered on reports of a windfall tax in this week's pre-Budget report.

Britain's top share index was down 0.67 per cent, after finishing up 0.18 per cent at market close on Friday in London.

British banks suffered on possible windfall tax concerns, with Barclays, HSBC, Lloyds Banking Group and RBS all losing out in early trading.

Metal prices falling impacted the mining sector, with Eurasian Natural Resources, Vedanta Resources and Xstrata down between 1.08 and 3.58 per cent respectively in early trading.

Royal Dutch Shell, Autonomy Corporation, Carnival, Imperial Tobacco Group and Admiral Group were all up between 0.32 per cent and 0.88 per cent on Monday morning.

'Public debt set to rise to dangerous levels'

Public debt is set to rise to dangerous levels in the next year, according to a leading business group.

The debt may exceed 90 per cent of Britain's GDP.

The British Chamber of Commerce (BCC) made the predictions in its latest economic forecast published today.

In advance of the chancellor's pre-Budget report on Wednesday the BCC suggests that this debt can only be reduced through fiscal tightening such as tax increases and cuts in public spending.

The report also states the pre-Budget report should not restrict the ability of the private sector to drive economic recovery. It warns that though the economy is in recovery there is still a serious risk of the UK suffering a double dip recession. For recovery to be sustained additional monetary stimulus and measures are needed to boost lending.

David Frost, director general of the BCC, said: 'We need a thriving business sector to drive the UK's recovery, so it's vital that the chancellor's pre budget report avoids new business taxes, higher National Insurance contributions, or any measures that might damage investment, growth, and job creation.

'Given the perilous state of the public finances, we cannot afford any sacred cows when it comes to making spending cuts, no matter how politically desirable it may be.'

David Kern, BCC chief economist, added: 'The UK economy is probably now growing again but a relapse in activity is a real danger. Preventing a double dip recession must be the main priority.

'In the next two or three quarters, the recovery will be driven by the stock cycle and by the cumulative impact of huge injections of monetary and fiscal stimulus.'

FTSE 100 dips slightly in early trading

The FTSE 100 opened down over half a per cent on Friday morning.

At 09:30 GMT the London index stood at 5,279.48, a drop of 33.52 points – 0.63 per cent.

Leading the falls was Hammerson, down 14.70 points to 403.40p. Continuing its unpredictable week, the Royal Bank of Scotland also saw its stock drop 3.07 per cent on opening, down to 34.05.

The drop by RBS follows gains of over four-and-a-half per cent yesterday. The bank has suffered a turbulent week with the row over banker's bonuses continuing to rumble on with the board still sticking to its threat to quit if payments are not made.

Leading the gains on Friday morning was British Airways, up 1.65 per cent, 3.40 points, to 209.60p.

Pre-Budget report 'must not hide tax rises'

The pre-Budget report must not hide tax rises and spending cuts, according to a leading thinkthank.

The public deserve realistic measures not vote winning policies, the Institute of Public Policy Research (IPPR) claims.

The thinktank said the government should be honest in the report, which comes out on December 9th, about cuts in public spending and rises in taxes aimed at reducing the public deficit.

In a report on how to deal with the UK's financial deficit the IPPR proposes that in the wake of the recession and the expenses scandal the public now expects honesty from politicians. The chancellor should take the initiative and use the pre budget report to set out long term but balanced tax rises and spending cuts.

The report, which contains contributions from leading experts on fiscal policy and public spending, outlines an agenda for the government to follow in next weeks report.

The five-point agenda proposes some bold decisions including reforming services such as the police and navy, increasing taxes, and the ending of ring fenced public spending.

Carey Oppenheim, co-director of IPPR said: 'The pre-Budget report is one of the last opportunities before the general election for the government to make an honest and bold statement about how it will tackle the public finances and to set out its vision for the economy over the next five years.

'Learning the lessons of the expenses crisis now is the time for the government to be honest with the public and engage them in a debate about priorities.'

He added: 'This will mean proposing measures that are likely to be unpopular, but necessary, if the government is serious about closing the UK's fiscal deficit.'

RBS directors threaten to quit over bonuses

The directors of Royal Bank of Scotland (RBS) are threatening to quit if the government blocks £1.5 billion of bonuses in its investment arm.

It has been reported the board members were legally advised to resign if plans from the government to have the right to veto bonuses went through.

The state-rescued lender, which is 70 per cent owned by the taxpayer, said it would struggle to hire and retain staff if the government took control of its payouts, adding that this would make it at a 'significant competitive disadvantage'.

In response to the news, business secretary Lord Mandelson said: 'I understand the point that RBS directors are expressing - they say they have to remain competitive in the market in recruiting senior executives, and this is why it's important that all the banks are equally restrained, and RBS is not singled out.'

The news of the walkout threat came as city minister Lord Myners estimated at least 5,000 bankers in the UK would earn more than £1m this year.

Lord Myners, speaking in the House of Lords on Wednesday, said: 'I would estimate that at least 5,000 people working in the banking industry in the UK will receive, if nothing is done, remuneration in excess of £1 million this year.

'I think the real responsibility here must lie with the shareholders.'

Last year, RBS paid £900m of bonuses in its investment arm and it wants to raise this amount to about £1.5bn. It is understood that its board of directors has sought legal advice about whether they can resign in protest at the Treasury taking control of its bonus pool.

Liberal Democrats treasury spokesperson, Vince Cable said: 'I would welcome their resignations, as the bank cannot hold the taxpayer to ransom.

'As a state run bank, the government must finally take control and ensure that both its pay and lending practices are in the public interest.'

FTSE 100 holds steady in early trading

The FTSE 100 opened steadily on Thursday morning, continuing to make gains following the uncertainty at the start of the week.

At 09:46 GMT the London index had risen 35.54 points, 0.67 per cent, to 5,362.93.

Leading the gains was Lloyds Banking Group – up almost five per cent, to 55.70p.

Barclays also saw its stock rise 3.63 per cent to 209p. And reversing the trend for much of this week, Royal Bank of Scotland rose 1.06 points, 3.16 per cent, to 34.61.

GlaxoSmithKline and Compass Group recorded the largest drops in early trading, both down almost one per cent.

FTSE closes up as Dubai worries fade

Britain's top share index the FTSE 100 closed up 0.29 per cent, 15.22 points, at 5,327.39 on Wednesday after record gains yesterday.

On Tuesday the index saw its largest one-day gain for more than four months as investors' worries over Dubai calmed.

Today miners gained as metal prices advanced and gold reached a record high, at 41,216.17 an ounce.

Drug-makers were also in demand, with AstraZeneca and GlaxoSmithKline up 0.4 and 0.2 percent respectively.

The banking sector felt the pressure, reversing Tuesday's gains, with RBS, HSBC, Lloyds and Standard Chartered losing between 0.5 and 2.1 per cent.

'Drink to stay beautiful' ad banned

An advert has been banned by the Advertising Standards Authority (ASA) after it was argued that the ad implied alcohol enhanced attractiveness.

The ad, part of the Stay Beautiful campaign by Martini, was used in conjunction with a promotion from Pitcher and Piano, and sent out in the form of an email to advertise an event at participating pubs.

It featured the Martini and Pitcher and Piano logos with the text 'Stay Beautiful' in the main body. Further details of the event were also included.

Both companies released a joint statement saying: 'Martini sponsored the event which invited P&P customers, via email, to join an evening of pampering while trying the new Martini Rosato drink.'

Pitcher and Piano added: 'We were not trying to enhance sexual or social success. The strapline 'Stay Beautiful' reinforced the message that the women were just as beautiful at the end of the evening as they were at the start.'

After branding the implications of the ad as 'irresponsible' and concluding that the claim 'Stay Beautiful with Martini' could be taken out of context, the ASA has ordered for it to not be used again in its current form and cautioned both companies on using similar claims in future ads.