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Posts Tagged ‘Alistair Darling’

It’s the economy…

March 30th, 2010 | No Comments

British voters are unsure whom to trust

GEORGE OSBORNE, the Conservative shadow chancellor, should be cheerful ahead of a general election that is due within weeks. The British economy has barely emerged from a painful recession, unemployment is high and public finances are in a terrible state. Neither Gordon Brown, the prime minister, nor Alistair Darling, the chancellor (finance minister, pictured) are popular figures and the economy is the main concern for voters. Yet opinion polls suggest that, after a long period of Conservative advantage, voters are now unsure whom to trust to bring about recovery. Mr Osborne’s party had long focused on the urgent need to reduce the public deficit, but this week pledged to reverse a planned increase in National Insurance contributions (a tax designed to fund certain public services) for many voters. Some voters will welcome the prospect of avoiding a higher tax, but others may see a muddled message from Mr Osborne.

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Sparing the knife

March 24th, 2010 | No Comments

An intensely political budget merely tinkered around the edges of Britain’s fiscal problems

DISHED up by a chancellor of the exchequer whose party might well lose power in an election six weeks away, Alistair Darling’s budget was as much a political manifesto as a 12-month business plan. The chancellor had been buttressed by some welcome news: in the days leading up to the budget it emerged that the borrowing requirement might be less than feared, thanks to lower than expected unemployment figures.

But the big picture is still a grim one. The budget deficit is 11.8% of GDP, around four times the target for good housekeeping set by European Union members back in 1992. The government’s declared aim is to halve that deficit within four years, posited on the hope that GDP growth will rise to over 3% a year, from 2011. …

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Tax and mend

December 9th, 2009 | No Comments

Taxes rise in Britain, as the government struggles to get public finances in order

SINCE Alistair Darling took over as Britain’s chancellor of the exchequer (finance minister) in June 2007, he has presented three big end-of-year fiscal statements. They go by the snappy name of a “pre-budget report” and are in effect mini-budgets. The previous two were showstoppers. The one he presented on Wednesday December 9th mattered for what it revealed about Labour’s priorities in dealing with Britain’s huge budget deficit.

The first statement, delivered shortly after Mr Brown had abandoned a plan to hold a snap general election, was notable for some flagrant clothes-pinching from the Conservative opposition, with an effective doubling in the tax-free limit on inheritance tax and a levy on people living in Britain but claiming “non-domiciled” tax status. The second, in 2008, was more momentous, for it owned up to the startling deterioration in the public finances, even though its forecasts were soon overtaken by even worse ones in the full budget in April this year. …

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Lim Yin Foong: UK awaits new banks, new era of regulation

November 21st, 2009 | No Comments

MENTION BANKS AT a dinner party, and it’s not just the government bailouts and excessive bonuses that people are talking about. Abysmal levels of customer service, opaque pricing structures, and archaic, inefficient systems are just some of the gripes that dinner party guests often bring to the table.
 
It’s hardly surprising, then, that many British bank consumers are looking forward to the prospect of a radical shake-up of the retail banking industry. Earlier this month, chancellor Alistair Darling announced plans to sell off parts of three government- rescued banks to new entrants to the industry in an effort to recoup some of British taxpayers’ funds used in the banks’ bailouts last year.

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Loans still too dear, says Darling

July 27th, 2009 | No Comments

Chancellor says small and medium-sized businesses are still paying too much for bank loans that remain in short supply

British bank chiefs will come under renewed pressure today to make more credit available to small and medium-sized businesses in a crunch meeting with the chancellor, Alistair Darling.

Some of the country’s most powerful banking executives are said to be squaring up for a new battle after yesterday rejecting Darling’s complaint that struggling businesses were still paying too much for bank loans that remain in short supply.

Stung by the chancellor’s renewed criticism ahead of today’s meetings with the Treasury, the British Bankers’ Association took to the airwaves yesterday to insist it is doing its best in hard times for recession-hit customers.

Lending to small businesses rose by £391m in June as almost 50,000 new small business relationships were established with banks, the industry group said. Deposits from small businesses also grew by £577m, perhaps reflecting “improved business confidence”, the BBA said.

But John McFall, the chairman of the Treasury select committee, today warned that MPs would expect banks to make their lending agreements more transparent.

He told BBC Radio 4′s Today programme: “There is a tension between what the banks are doing and what the governor of the Bank of England wants to do. The banks want to sustain the level of profitability, so build up the capital.

“There is the government’s and the governor’s fear that the recovery will be jeopardised by an inadequate provision of credit and increased cost of borrowing, and the anecdotal evidence that’s been coming to the select committee for the past number of months has been … that it’s small and medium sized businesses that are losing out.

“The Bank of England report that came out last week said quite clearly that there is less credit available for businesses and it’s more expensive. In May, lending was negative – it went down 5.4%. These are the facts. The banks and the government need to get round the table today to ensure that we have this increased lending.”

McFall said he wanted to see a plan put in place to ensure “that lending agreements are transparent, so we can see it in black and white”.

Angela Knight of the British Banking Association told the programme: “Overall lending to British businesses has continued to increase. Equally, it is a very difficult market out there, the recession is a big one and some sectors are hit more than others.”

But she added: “Demand [for credit] has dropped off and we need to address this as well.”

With the economy’s second quarter growth figures worse than predicted – a 0.8% contraction in the three months up to June – Darling had used the platform provided by BBC1′s The Andrew Marr Show yesterday to protest that “what companies are being charged does seem to have gone up relative to what banks are actually having to pay because of the fact we’ve got very low interest rates”, which are currently 0.5%. “They’ve got to live up to their promises,” he emphasised.

Public hostility towards the banks has focused on the return of high-flying bonuses in the investment banking sector, despite the multi-billion pound rescues by the taxpayer which – Darling and David Cameron both admitted yesterday – will mean cuts in public spending.

In Belfast, a Northern Ireland MP said he would name and shame some of the province’s banks over their failure to help out small businesses. Alasdair McDonnell, the SDLP’s deputy leader and the MP for South Belfast, is to hand over a dossier on the local banks to the prime minister later this week. He complained that their failure had “pushed a number of viable local businesses over the edge – with many more on the precipice. Banks could – and should – be providing a better service to the public.”

The chancellor receives similar complaints whenever he meets small business leaders. He acknowledged on TV that he is also asking the banks to rebuild their balance sheets to make them stronger than before the financial crisis.

But he added: “People have got to understand in the banks: we did not stabilise the banking system, rescue some banks, out of some sort of charitable act or because we felt sorry for them. Far from it. We did it because if you don’t have a banking system that provides credit for businesses, then you will make recovery and prosperity after that much, much more difficult.”

Opposition politicians complained that ministers had dithered on banking reform. Vincent Cable, the Liberal Democrats’ Treasury spokesman, said: “It is amazing that the chancellor has only just woken up to the fact that this is a problem.” Mark Hoban, a shadow Treasury minister, said: “We have been warning about the lending crisis, including in government-owned banks, for months.”

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Tories can’t wait to make cuts, says Darling

July 26th, 2009 | No Comments

Alistair Darling accused the Conservatives today of “almost wallowing” in the prospect of making deep cuts in public expenditure if they win the next general election and promised he would set out Labour’s own spending priorities before polling day, so that voters would have a clear choice.

The chancellor spoke as David Cameron, the Conservative leader, confirmed the Guardian’s weekend report that the Tories are preparing for a decade of retrenchment. He admitted his party could no longer afford to reverse either Labour’s 50p income tax rate on top earners immediately or to fulfil its pledge to abolish family inheritance tax.

“It’s incredibly daunting, the scale of the challenge and the mess that is being left in terms of the economy and, particularly, the budget balance. I mean it really is a daunting prospect,” Cameron said on BBC1′s Andrew Marr Show. “And that’s why I’ve said, you know, I can’t remember an opposition leader who in opposition has looked the British public in the eye and said ‘you know we are going to cut public spending, we have to do that’.”

In line with his strategy of highlighting his party’s openness – evident in shadow Treasury chief secretary Philip Hammond’s “pain and brickbats” admission in Saturday’s Guardian, Cameron said voters were “crying out actually for someone who’s going to lead them and who’s going to say ‘right, we’re all in this together’.”

The chancellor adopted a different approach to the “hard choices” ahead on tax-and-spending. With the Hammond interview in mind, he said that over the past few days some senior Tories had been “almost wallowing in the prospect of making cuts here, there and everywhere”.

All the parties should now set out their spending priorities “underpinned by values and principles” so that voters could decide whose mandate they should endorse to govern them until 2015, Darling said. “I think there is a distinction between people, if you like the slash and burn mentality, and those who believe that public spending actually can make a difference to the fabric of this country.”

Gordon Brown was still the man with “the values (and) commitment” to win the election despite Thursday’s drubbing at the Norwich North byelection, he said.

A handful of Labour MPs have called for a change of leader since the Conservative Chloe Smith, 27, took the Labour seat on a 16% swing. Brown told the Sunday Mirror: “We’ve got to show that we are a disciplined party getting on with the work of government. I think people are very clear that we’ve got a task ahead. We’ve got work to do to prepare for the autumn.”

Darling claimed international support for Labour’s response to the recession and said the VAT cut from 17.5% to 15% had been right, despite costing the Treasury £1bn a month. It would also be right to restore it next year as conditions eased, he said, a crucial distinction for Labour which claims the backing of leading economists in saying that cuts designed to balance the budget would repeat the mistakes of the 1930s if imposed before the economy was growing steadily again.

For his part Cameron stressed the need to cut deeply and soon, not least to persuade the City that it is safe to finance huge government borrowing, a Tory priority.

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MPs consider mortgage guarantees

July 26th, 2009 | No Comments

Treasury could underwrite ‘risky’ home loans
Proposed scheme pushed by US insurer Genworth

First time home buyers could be thrown a lifeline under plans being considered by the Treasury to underwrite ‘risky’ mortgages, allowing people with only small deposits to buy homes.

Since the credit crunch took hold, banks have demanded far tougher criteria for lending, asking buyers to provide between 25% and 30% of the price of a home as a deposit.

There were 30,000 loans to first time buyers in the first three months of 2009 against an average of more than 100,000 a quarter in the previous decade.

But the government is now studying a scheme used in Canada in the hope of encouraging banks and building societies to step up their lending. The Canadian programme requires all mortgages secured with a deposit of 20% or less to be insured by the government or private insurers, giving the banks more confidence to lend. The Treasury has taken soundings from specialist insurance companies such as Genworth Financial, which suggest that the Canadian housing market has withstood the pressures of the global financial crisis better than most.

If the Treasury copied the scheme it might have to act as the insurer in the first instance before stepping back to underwrite insurance from private sector companies – opening the government to considerable criticism as it would put further taxpayer money at risk at a time when public finances are already stretched.

The amount of money flowing in the financial system still remains a concern for the government despite attempts to encourage lending through bank bailouts. Chancellor Alistair Darling is tomorrow scheduled to call in the major lenders to urge them to step up their lending to homeowners and small businesses to help stimulate the economy which has now contracted for five quarters in a row.

The possibility of the insurance scheme is outlined in the white paper on banking reform published this month and the Treasury promises an up-date in the autumn’s prebudget report. “Some countries have adopted alternative models for mortgage insurance such as Canada where mortgage insurance is compulsory for all mortgages above a lower limit and below a maximum proportion of a home’s value,” the paper said.

“Some UK stakeholders have proposed that the government considers the benefits of international models like Canada. The government is interested in the lessons that may be learnt from the experiences of other countries and will update at the pre-budget report,” the paper said.

The Treasury has made no decision on whether it would work here. The paper explains why it is being considered. “It is sometimes argued that this model helps provide borrowers with continued access to mortgage finance by encouraging risk sharing between insurers and lenders, and helping ensure that lenders do not take excessive risks when the economy is growing and do not withdraw from higher LTV lending during periods of economic disruption,” the paper said. But Treasury officials are also mindful of the pitfalls of the scheme which can push up the price of loans to first time buyers and others with small deposits. It might also be accused of trying to promote risky lending again or breath life into mortgage indemnity guarantees which lenders have charged customers for high loan to value loans but were largely scrapped in the mid 1990s.

The idea is being pushed by specialist insurers who might sell the necessary insurance to the banks. Genworth Financial, a US-based company, is among those to have submitted proposals. It is suggesting that the state would act as direct guarantor initially and that private sector players would step in to allow the government to “reduce its role from being a direct insurer to a guarantor of the private mortgage insurance providers”. “We urge the government to consider developing a partnership with mortgage insurance providers in order to prudently and efficiently provide a lasting and sustainable solution to prudently and efficiently provide a lasting and sustainable solution for the wholesale mortgage market,” Genworth said.

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Darling presses banks on lending

July 26th, 2009 | No Comments

Chancellor says he is ‘extremely concerned’ about cost of borrowing remaining high while interest rates are low

Alistair Darling today called on banks to improve lending to businesses, saying he was “extremely concerned” about the cost of borrowing.

Bank bosses are to be summoned to explain why they are charging more for credit when interest rates are at historically low levels. The chancellor suggested they had failed to keep promises to improve lending facilities in return for taxpayer support.

He said banks had not been rescued as “some sort of charitable act … We did it because if you don’t have a banking system that creates credit for businesses then you will make recovery and prosperity after that much more difficult.”

Speaking on BBC1′s Andrew Marr Show, Darling acknowledged that banks needed to rebuild their balance sheets in the aftermath of the financial crisis. But he said: “At the same time, because of the particular circumstances we are in now, because of the fact we’ve got this recession, we also need them to lend money and that’s why we recapitalised them to do that.

“That means they’ve got to live up to the promises they’ve made. That’s why we will be going through with each individual bank asking them why is it, at a time when the cost of borrowing is coming down, it would appear that the cost to small business appears to have gone up? We’re playing our part; the banks have got to understand that the public will not understand it if they do not play their part to the full.”

Angela Knight, chief executive of the British Bankers’ Association, said banks were improving lending. “As far as the major banks are concerned they are lending, and increasing their lending,” she told BBC Radio 4′s The World This Weekend.

On interest rates, she said the base rate did not represent the real cost of money. “People say, ‘look, base rate is down to 0.5%, so why do you charge what you do for lending?’ The answer to that is that you can’t get the money at that rate. Base rate is not the money which a bank pays.”

Knight said the wholesale price of money was about twice that of the Bank of England rate. “But also, what there isn’t is capacity in the wholesale market because it’s credit crunch worldwide, so in fact the cost to the banks has gone up.”

Vince Cable, the Liberal Democrats’ spokesman on Treasury affairs, said: “It is amazing that the chancellor of the exchequer has only just woken up to the fact that this is a problem. We have been warning about the lending crisis, including in government-owned banks, for months.

“The problem isn’t just about the cost of borrowing, but the difficulties which many companies who are solvent, with a good credit history, have in obtaining bank credit without unreasonable demands for personal security and charges. It’s time the government stopped being a passive investor in the nationalised and semi-nationalised banks and ensured that they maintain lending to good British companies for the wider interest of the national economy.”

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Malloch-Brown makes Afghan helicopter U-turn

July 22nd, 2009 | No Comments

Minister who claimed machines were scarce now says British troops have ‘without doubt sufficient resources’

A senior government minister was forced to make a humiliating public climbdown today after saying in an interview that British troops lacked enough helicopters in Afghanistan.

The Foreign Office minister Lord Malloch-Brown, who is leaving the government at the end of this week, also admitted the public had been inadequately prepared for the US and British offensive in Helmand before the recent rise in casualties.

He told the Daily Telegraph: “We definitely don’t have enough helicopters. When you have these modern operations and insurgent strikes what you need, above all else, is mobility.”

But this morning the peer was forced to issue a embarrassing clarification in which he said that there were “without doubt” sufficient resources in place in Afghanistan.

“On the issue of helicopters in Afghanistan, I was making the point – as the prime minister and commanders on the ground have also done – that while there are without doubt sufficient resources in place for current operations, we should always do what we can to make more available on the frontline.

“I know from my role as FCO minister for Afghanistan that this is a high priority for the prime minister and that there is a huge procurement effort ongoing in the Ministry of Defence to deliver just this.”

In the statement, he said helicopter capability had already increased by 84% over the past two years, and would increase further when the additional Merlin helicopters were deployed into Afghanistan later this year.

Malloch-Brown’s intervention in the row over the lack of helicopters is particularly damaging for the government because his role as Foreign Office minister includes responsibility for Afghanistan.

His comments came as it was confirmed that the 18th British soldier this month had been killed in Afghanistan. Captain Daniel Shepherd, 28, a bomb disposal expert from Lincoln, was killed as he defused a device while on patrol in central Helmand on Monday. A second soldier was injured in the blast.

Defence chiefs asked weeks ago for more troops, and have expressed concern about the lack of helicopters for some time. General Sir Richard Dannatt, the retiring head of the army, said he had “no regrets” at speaking out publicly about soldiers’ needs.

“There is a line which generals speaking publicly should not cross … I don’t believe I crossed it. We may have got quite close, but I will look back over my shoulder with no regrets at three years as chief of the general staff.”

In the Telegraph interview, the peer admitted that the public had not been prepared for the intense fighting in Helmand, a stronghold of the Taliban in southern Afghanistan.

“We didn’t do a good job a month ago of warning the British public that we and the Americans were going on the offensive in Helmand,” the peer said. “This is a new operation; the whole purpose is to win control. These deaths have happened … after we chose to go on the offensive.”

Adding to Gordon Brown’s discomfort, Malloch-Brown conceded that the prime minister’s future looked “bleak”, while also casting doubt on the future of Britain’s Trident nuclear deterrent.

Malloch-Brown controversially suggested that the Taliban may have to contribute to a future Afghan government for there to be peace in the region.

Elements of the insurgents’ “support group” may have to be invited back into “the political settlement” as a price of victory, he said.

Professor Michael Clarke, director of the defence thinktank the Royal United Services Institute, said Malloch-Brown’s original comments were an “astonishing” challenge to the government to rethink its Afghanistan strategy.

He told BBC Radio 4′s Today programme the row over helicopters had assumed a “totemic” significance.

“Everyone agrees it would be better if there were more lift helicopters … in Afghanistan because they give you the flexibility to move people around,” he said.

“But on their own, helicopters are no silver bullet for winning wars.”

Clarke added: “It is astonishing to me that Malloch-Brown has said this before he steps down from the government because he seems to be throwing down a challenge, which is to say: ‘We have to rethink our strategic priorities over Afghanistan and what we are trying to achieve there.’

“That is something a number of people have said, but for a government minister to say this at this time is very interesting.”

The chancellor, Alistair Darling, also stepped into the debate over armed forces equipment levels, saying in an interview with Tribune magazine that he had funded all requests from the military.

“The army has said this is what we want in terms of troops and equipment, and we have provided that and financed it … In the face of acute danger in somewhere like Afghanistan, you have to make sure there are sufficient troops and that those troops are sufficiently equipped to do what is asked of them.”

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UK minister admits Afghan shortage

July 22nd, 2009 | No Comments

Helicopter in Afghanistan

A senior minister who is leaving office has admitted that UK forces in Afghanistan are short of helicopters.

The government also failed to warn the public about the effects of the current offensive, Foreign Office Minister Lord Malloch Brown told the Daily Telegraph.

Eighteen servicemen have died this month, leading to claims that a lack of helicopters has put troops at risk.

However, Chancellor Alistair Darling said the Treasury has never refused requests for more equipment or troops.

His was the latest in a string of government statements insisting the Army has the necessary equipment for its role in the campaign, as part of a Nato-led coalition.

However, Lord Malloch Brown – who steps down at the end of the month – told the Telegraph: "We definitely don’t have enough helicopters."

Parting comments

Most of the British army’s casualties during the Helmand offensive – aimed at shoring up security ahead of elections scheduled for next month – have been caused by roadside bombs.

Critics believe troops are more vulnerable to these makeshift explosives because they are being forced to travel over ground and not by air.

Lord Malloch Brown said: "When you have these modern operations and insurgent strikes what you need, above all else, is mobility."

He added: "We didn’t do a good job of warning the British public that we and the Americans were going on the offensive in Helmand."

BBC political correspondent Ross Hawkins said the peer’s government colleagues were "unlikely to thank him for these parting comments".

Lord Malloch Brown

Political pressure has been mounting over the suggested helicopter shortage.

The chief of the defence staff, Sir Jock Stirrup, said last week that deploying more of the craft would prevent casualties.

The Lib Dems have also accused ministers of vetoing a request for 2,000 extra troops earlier this year.

Mr Darling denied this.

"The Army has said this is what we want in terms of troops and equipment and we have provided that and financed it," he told the Tribune newspaper on Tuesday.

‘Shopping list’

He spoke out after the Head of the Army, Gen Sir Richard Dannatt, revealed he had drawn up a "shopping list" for ministers of resources he says are required for the Afghan mission.

His earlier call for more "boots on the ground" in Afghanistan had been interpreted as a veiled criticism of ministers.

Lord Malloch Brown’s comments add weight to Conservative arguments that the failure to supply troops with enough helicopters has accentuated casualty levels.

Tensions had been heightened when ex-Labour minister Lord Foulkes said military commanders’ comments about resources "threaten to undermine our effort in Afghanistan and give succour to the enemy".

He suggested to peers that the two should be reminded of the "importance of loyalty particularly when we are engaged in a very difficult war where victory is essential for the future safety of this country".

Gen Dannatt has said some of his comments about extra resources needed in Afghanistan had been misrepresented and he was involved in "an ongoing dialogue" with No 10 over the issue.

Gordon Brown has said troop levels in Afghanistan will be reviewed after the elections while stressing there are enough troops there to do the job.

He has insisted the armed forces are better equipped than ever.</p

This article is from the BBC News website. © British Broadcasting Corporation, The BBC is not responsible for the content of external internet sites.

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Britain ‘will take until 2014 to recover’

July 22nd, 2009 | No Comments

• NIESR forecasts a further fall in house prices
• Cost of servicing national debt set to double

The UK economy will not fully recover from the recession until 2014, according to a top thinktank which also warned today that house prices will keep falling for another three years.

The National Institute of Economic and Social Research (NIESR) predicted that it will take another five years until income per head has returned to the level seen before the recession started in the second quarter of 2008. In a gloomy assessment of Britain’s economic prospects, it also warned that the cost of servicing the country’s soaring national debt will almost double within four years.

NIESR’s latest forecast is that the UK economy shrank by 0.4% between April and June, which would mean the recession would have lasted for five quarters. It believes the recovery will not begin until the last three months of 2009, and then only with anaemic growth of 0.5%.

“The recovery will be weak,” warned NIESR economist Simon Kirby yesterday. “We see continued contraction in consumer spending and business investment [in 2010].”

On house prices, NIESR does not share the recent optimism that the market might be bottoming out.

“There has been talk of stabilization and some recovery in the housing market, but we don’t think this is the case,” said Kirby. “We only see growth in the housing market returning in 2012.”

Faced with the worst economic downturn since the Great Depression, the UK government is planning to spend its way back to recovery. NIESR warned that the resulting public borrowing will put a heavy burden on the public finances, and called for aggressive cuts to public spending.

“The introduction of a more credible plan to return the public finances to a path of fiscal sustainability remains a necessity,” it said, in a clear warning to chancellor Alistair Darling – and his possible successor, George Osborne.

Even after assuming that public spending will indeed be slashed, NIESR has calculated that annual borrowing will still be over £120bn in 2014 – some £23bn more than Darling’s own estimate.

The government is expected to borrow £165.7bn this year to balance the books, with further massive borrowing already inked in for future years. Last month alone it borrowed £13bn to cope with a sharp fall in tax receipts.

According to NIESR’s forecasts, the cost of servicing this debt will swell from £25.6bn this fiscal year to £50.7bn in 2013/14.

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Minister admits need for helicopters

July 22nd, 2009 | No Comments

Foreign Office minister Lord Malloch-Brown weighs into debate, admitting Britain has a shortage of helicopters in Afghanistan

Gordon Brown is likely to face fresh questions over British military resources in Afghanistan today after a senior government minister admitted that troops lacked enough helicopters as it was disclosed that another British soldier had been killed.

The Foreign Office minister Lord Malloch-Brown, who is leaving the government at the end of this week, also admitted the public had been inadequately prepared for the US and British offensive in Helmand before the recent rise in casualties.

Adding to Brown’s discomfort, Malloch-Brown conceded that the prime minister’s future looked “bleak”, while also casting doubt on the future of Britain’s Trident nuclear deterrent.

The prime minister will come under pressure over the minister’s remarks when he holds his final press conference before the summer recess in Downing Street today.

Lord Malloch-Brown’s intervention in the row over the lack of helicopters is particularly damaging for the government because his role as Foreign Office minister includes responsibility for Afghanistan.

His comments came as it was confirmed that the 18th British soldier this month had been killed in Afghanistan. Captain Daniel Shepherd, 28, a bomb disposal expert from Lincoln, was killed as he defused a device while on patrol in central Helmand on Monday. A second soldier was injured in the blast.

Defence chiefs asked weeks ago for more troops and have expressed concern about the lack of helicopters for some time. General Sir Richard Dannatt, the retiring head of the army, said he had “no regrets” at speaking out publicly about soldiers’ needs.

“There is a line which generals speaking publicly should not cross … I don’t believe I crossed it. We may have got quite close, but I will look back over my shoulder with no regrets at three years as chief of the general staff.”

Malloch-Brown also spoke frankly today about the shortage of equipment, providing political cover for Dannatt.

“We definitely don’t have enough helicopters. When you have these modern operations and insurgent strikes what you need, above all else, is mobility,” he told the Daily Telegraph.

The minister went on to admit that the public had not been prepared for the intense fighting in Helmand, a stronghold of the Taliban in southern Afghanistan.

“We didn’t do a good job a month ago of warning the British public that we and the Americans were going on the offensive in Helmand,” the peer said. “This is a new operation; the whole purpose is to win control. These deaths have happened … after we chose to go on the offensive.”

Lord Malloch-Brown also controversially suggested that the Taliban may have to contribute to a future Afghan government for there to be peace in the region.

Elements of the insurgents’ “support group” may have to be invited back into “the political settlement” as a price of victory, he said.

Professor Michael Clarke, director of the defence thinktank the Royal United Services Institute, said Lord Malloch-Brown’s comments were an “astonishing” challenge to the government to rethink its Afghanistan strategy.

He told BBC Radio 4′s Today programme the row over helicopters had assumed a “totemic” significance.

He said: “Everyone agrees it would be better if there were more lift helicopters … in Afghanistan because they give you the flexibility to move people around.

“But on their own, helicopters are no silver bullet for winning wars.”

Clarke added: “It is astonishing to me that Malloch-Brown has said this before he steps down from the government because he seems to be throwing down a challenge, which is to say ‘we have to rethink our strategic priorities over Afghanistan and what we are trying to achieve there’.

“That is something a number of people have said, but for a government minister to say this at this time is very interesting.”

The chancellor, Alistair Darling, also stepped into the debate over armed forces equipment levels, saying in an interview with Tribune magazine that he had funded all requests from the military.

“The army has said this is what we want in terms of troops and equipment, and we have provided that and financed it … In the face of acute danger in somewhere like Afghanistan, you have to make sure there are sufficient troops and that those troops are sufficiently equipped to do what is asked of them.”

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Budget deficit hits record June high

July 22nd, 2009 | No Comments

Total government spending in June hit £49bn, up from £44.2bn a year earlier

Opposition parties were last night piling pressure on the government over Britain’s deteriorating public finances after falling tax revenues from recession-hit companies and consumers pushed the budget deficit to its highest for any June on record.

With tax and spending at the heart of the political fight between now and the general election, the Liberal Democrats and the Conservatives called on Alistair Darling to come clean about the options facing the country in the next parliament.

The Office for National Statistics (ONS) said public sector net borrowing – the gap between the exchequer’s tax take and its spending – stood at £13bn in June, slightly lower than City forecasts of £15.5bn, but the highest June deficit since records began in 1993. The £41.2bn borrowing in the three months to June was higher than for the entire year before the credit crunch started, and brought the total deficit over the last year up to £107bn.

The ONS said the corporation tax take from UK companies was down 14.1% in June from the same month last year, while VAT receipts fell 15.9% and income tax dropped 3.9%. While tax receipts have fallen, more and more people are claiming unemployment benefits. Government spending on social benefits has shot up 9.7% in the year to June.

The Lib Dem Treasury spokesman, Vince Cable, said the figures suggested that “even the chancellor’s eye-watering prediction of £175bn borrowing this year could be an understatement”.

He added: “With such a mismatch between government spending and receipts it is clear that in the longer term these levels of borrowing are not sustainable. If the chancellor expects to have any credibility, both with the markets and the public, he must be brutally honest about how he intends to deal with levels of borrowing. However, such a commitment to deal with the deficit cannot come from salami slicing key public services, but through an honest debate about what the state can and cannot afford to do.”

Philip Hammond, shadow chief secretary to the Treasury, said: “Gordon Brown’s debt crisis is getting worse by the month. With borrowing at record levels, why can’t he finally be straight with people and admit there will have to be public spending cuts?

“In just the last month alone, Gordon Brown has increased every person’s share of the national debt by £213 each.”

A Treasury spokesperson said: “Our plans to halve the deficit within five years are based on cautious assumptions about share prices, unemployment and the loss of output from the shock to the economy built into the budget forecasts. The latest monthly figures for public sector borrowing are in line with our forecast.”

Public sector net debt as a proportion of GDP now stands at 56.6% – the highest since records began in 1974.

David Kern, chief economist at the British Chambers of Commerce, said: “It would be wrong to tighten policy while the recession continues, but maintaining Britain’s international credibility requires a robust plan for restoring our public finances over the medium-term. This must focus on curtailing public spending across the board, while avoiding damaging measures that would harm wealthcreating businesses.”

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Lord Mandelson attends 80% of committees

July 21st, 2009 | No Comments

Peter Mandelson’s influence in government was underscored today with the release of a breakdown of government committees which shows that he attended 80% of them.

Mandelson, the first secretary of state, attends 35 of the 43 committees and subcommittees, in contrast to the 23 attended by foreign secretary David Miliband.

Mandelson’s total is also in contrast to the 27 attended by chancellor Alistair Darling and sees the business secretary asked to cast an eye over policies as varied as immigration, climate change, “life chances”; Africa; food and energy and children.

The official deputy prime minister to Tony Blair, John Prescott, sat on just 17 committees.

Mandelson’s reach was revealed during a rush of announcements as parliament rose for its summer recess. This summer recess is longer than last year’s at 82 days.

In contrast to previous years when the prime minister has only managed a few days’ break, Downing Street said Gordon Brown would be going on a longer holiday than usual, taking all of August off.

Under a deadline effectively imposed by the recess, MPs passed emergency legislation tonight which would see the emergency creation of a new watchdog to regulate their expenses.

In legislation rushed through within a month, MPs finally voted to create the new body, the Independent Parliamentary Standards Authority, after the government was forced to make a number of concessions during its passage through parliament, including suffering one defeat when MPs rejected attempts by the government to end the historic right of parliamentary privilege.

Speaking about the attempt to get the measures through parliament, the minister responsible for the legislation, justice secretary Jack Straw, described it as “the most difficult piece of legislation” he has ever dealt with.

Though the expenses legislation began life enjoying cross-party consensus, Tory and Lib Dem support crumbled when the opposition parties believed the government was trying to shoehorn into the legislation additional measures they thought were superfluous to the clean-up of MPs’ expenses. MPs expressed dismay today about the lack of time to scrutinise the legislation, with the Tory grandee Sir Patrick Cormack complaining that MPs only had an hour to vote on a bill he argued had been “completely rewritten”.

MPs were debating the parliamentary standards bill after it had returned to the commons chamber from the Lords where they had removed from the legislation parts that would have made it an offence should a parliamentarian fail to comply with the register of financial interests that will be maintained by IPSA.

Though the government had tried to create three criminal offences, the final legislation sees only one. It is now a criminal offence for an MP to make a false expense claim with that MP punished by up to 12 months if found guilty.

In an attempt to allay backbench fears of rushed legislation, ministers said there would be the opportunity in the next two years through a “sunset clause” to review the IPSA in formal post-legislative scrutiny.

Another body, the members estimate committee, also announced it would be placing more stringent demands on MPs, requiring them to publish a greater amount of detail on the amount they claimed in second home allowances over the last year.

Commons authorities are expected to publish their details of MPs’ expense claims in the autumn. Though the home addresses will be blacked out, the MEC now wants MPs to state directly whether they have switched the address they have designated as their second homes.

The latest, more onerous move, has been spearheaded by the new speaker, John Bercow, who chairs the members estimate committee.

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Bankers could be forced to reveal pay

July 16th, 2009 | No Comments

Hundreds of City high-flyers could have their remuneration details published – but opposition MPs are critical

Plans to reveal the pay and bonuses of City high flyers in a new voluntary code came under attack from opposition MPs, who said the guidelines would be ignored unless they were enshrined in regulation and policed by the main financial watchdog.

A government-backed review recommended that some of the best-paid bank staff, who are currently shielded from scrutiny, should be included in annual reports as part of a wide range of measures designed to discourage risky behaviour.

The review by former investment bank boss Sir David Walker argued that exposing pay structures for highly paid staff in the City and putting an end to short-term bonuses would help prevent a repeat of the financial crisis.

Bonuses would be delayed for between three and five years and put under scrutiny by a beefed-up remuneration committee. Non-executive directors of finance companies would be required to spend more time assessing deals put forward by executive directors, Walker said.

But the report’s reliance on non-executive directors and shareholders to monitor a voluntary code was branded “inadequate” by Liberal Democrat treasury spokesman Vince Cable, who said banks should be instructed to observe the new rules by the Financial Services Authority.

Cable said: “It is clear that in banks like RBS the demigod status granted to Fred Goodwin prevented any form of credible scrutiny. So the news that bank boards may be forced to show that they can challenge a chief executive is a belated but welcome step in the right direction. But if the Walker approach is to have any value then it has to be obligatory through the FSA and not just on a voluntary basis.”

Sources close to several banks said there was a general acceptance that the Walker rules would be endorsed by the government in time for details of staff pay to appear in next year’s annual reports. According to City sources, one high street bank paid more than 200 staff more than its chief executive. Walker said he wanted the rules to apply to all banks operating in the City, including the largest US banks.

The review will reach chancellor Alistair Darling at a time when several banks have begun setting aside massive bonuses. Goldman Sachs and JP Morgan have reported record profits for the first half of the year.

Several MPs, already concerned at the massive taxpayer funds used to bail out Royal Bank of Scotland and Lloyds Banking Group, have signed an early day motion signalling their concern at the return of huge bonuses at City institutions.

Independent MP Dai Davies sponsored the motion, which urged a rethink at Goldman Sachs. The Wall Street bank could be in a position to offer total pay and bonuses of more than $22bn (£13.3bn), equating to an average payout of $770,000 to each of its 29,400 employees. The motion said it believes “such obscene profits are made by encouraging the very reckless risk-taking that brought down or severely damaged several major banks, and run counter to the restraint urged by the chancellor.”

Goldman, RBS and other banks operating in the UK argue they have overhauled their bonus structures with a greater emphasis on long-term rewards, but continue to face criticism that both the size and structure of their bonuses encourages risky behaviour.

Walker said the pay of individual staff below board level who earn large sums would be revealed in the form of pay bands in the annual report, though names would be kept secret. The remuneration committee would have the power to overrule the board if it believed the level of pay or bonuses encouraged risky behaviour.

He also said the role of non-executive directors should be strengthened to make up for the failures of banks prior to the credit crisis. A risk committee at board level would also oversee the policies of the bank and assess whether they could undermine its strength.

Walker said: “These proposals are designed to improve the professionalism and diligence of bank boards, increasing the importance of challenge in the board environment. If this means that boards operate in a somewhat less collegial way than in the past, that will be a small price to pay for better governance.”

His proposals include:

• Board-level risk committees chaired by a non-executive director.

• Risk committees to have power to scrutinise, and if necessary block, big transactions.

• More power for remuneration committees to scrutinise company-wide pay.

• Remuneration committees to oversee pay of highly paid executives not on the board.

• Significant deferred element in bonus schemes for all highly paid executives.

• Increased public disclosure about the pay of such executives.

• Chair of remuneration committee to face re-election if his or her report gets less than 75% approval.

Walker said that while shareholders largely encouraged risk-taking by banks, they would need to take in the future a more active role in restraining banks such activity.

“Failures in governance in banks and other financial institutions made the financial crisis much worse. Many boards inadequately understood the type and scale of risks they were running and failed to hold the executive to high standards of sustainable performance. Bonus schemes contributed to excessive risk-taking by rewarding short-term performance. And shareholders failed to exercise proper stewardship,” he said.

“Taken alongside the arrangements being proposed by the FSA, the recommendations on remuneration are as tough or tougher than anything to be found elsewhere in the world. An important and urgent challenge is to promote adoption of similar approaches internationally.

“These recommendations should bring substantial improvement in the governance of banks. They will not guarantee that failure will be avoided in future but will greatly mitigate the risk.”

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Brucie and Motty on PM’s guest list

July 16th, 2009 | No Comments

Statement shows which politicians, celebrities and journalists were entertained at the prime minister’s country residence

The entertainer Bruce Forsyth and the football commentator John Motson were among those who received official hospitality at Chequers over the last year, Gordon Brown revealed today.

Their names are included on a list of all those entertained at the prime minister’s country residence in 2008-2009, a ministerial statement showed.

The list – which includes a large number of politicians and journalists – always attracts considerable interest at Westminster, where it is seen as a guide to who belongs to the Brown social circle.

Embarrassingly for the prime minister, Sir Fred Goodwin, the bank boss blamed for the demise of RBS, was one of the City figures to enjoy the prime minister’s hospitality.

Downing Street did not say when guests were entertained at Downing Street, or whether they attended functions at Chequers, in Buckinghamshire, more than once.

Celebrities on the list include the showbiz stars Matt Lucas, David Walliams and Davina McCall, the author John O’Farrell, the singer Lesley Garrett, the actors Alan Rickman, Emma Thompson and Greg Wise and the runner Dame Kelly Holmes.

The former poet laureate Sir Andrew Motion and the former children’s laureate Michael Rosen were also guests.

Senior ministers invited to join Brown included Ed Balls and his wife, Yvette Cooper, Nick Brown, Liam Byrne, Alistair Darling, Lord Drayson, Harriet Harman, Tessa Jowell, Ed Miliband, Lord Myners, Lord West and Shaun Woodward

Sir Menzies Campbell, the former Liberal Democrat leader and a long-time friend of Brown from Scotland, was invited there, as was his wife, Lady Elspeth.

Journalists on the list include ITN’s Tom Bradby, Sky’s Kay Burley, GMTV’s Gloria de Piero, the Spectator’s Matthew d’Ancona, Will Lewis, Patrick Hennessy, Andrew Porter and Benedict Brogan, of Telegraph newspapers, Katharine Viner and Jonathan Freedland from the Guardian, Philip Webster from the Times, the Mirror’s Kevin Maguire, the Sun’s George Pascoe Watson and the Observer editor John Mulholland.

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UK economy ‘faces long slog’

July 16th, 2009 | No Comments

• Bounceback slowest since the 70s
• GDP to decline 4.2% in 2009
• Banks ‘still need stronger capital positions’

Britain’s recession-hit economy faces a long slog back to growth as the credit squeeze holds back recovery and will bounce back more slowly than from any downturn since the 1970s, the International Monetary Fund has warned.

In its annual health check of the UK published today, the Washington-based lender predicted a 4.2% decline in GDP for 2009, and anaemic growth of just 0.2% next year – markedly weaker than the 1.3% predicted by the chancellor in his April budget. Growth would not return to its long-term average rate before 2011, it warned.

Recovery from recession will be “gradual”, it added, and while growth may pick up quite sharply over the coming months as firms resume production, the UK could face a, “‘double dip’ growth path, with stronger rebound in mid-2009, followed by some weakness later in the year”.

The IMF’s experts said that with parts of the financial sector still vulnerable, the chancellor, Alistair Darling, may be forced to inject yet more capital into fragile banks. The Financial Services Authority recently carried out ‘stress tests’ of the UK’s banks and concluded they had sufficient resources to withstand a recession but IMF staff warned that a “particularly slow or weak recovery” could still blow a hole in their balance sheets.

“There is a case for erring on the side of caution and seeking a further strengthening of banks’ capital positions,” the report said. “Larger capital cushions will also afford greater lending capacity to underpin the economy recovery.”

The IMF calculated that the government’s total exposure to the banking system is already £904bn, or 63% of GDP, as a result of the nationalisation of Northern Rock, the recapitalisation of RBS and Lloyds, and a slew of other support schemes.

Nevertheless, it said the government must “stand ready to provide public support where needed”.

Pointing to the rapid growth in household and government debts in the boom years, the report sketched a sickly recovery from the current downturn.

“The UK economy entered the recession with sizeable imbalances, which will take time to be reduced. Moreover, research suggests that recessions linked to financial crises are deeper and last longer than other recessions.”

The IMF praised the adoption of quantitative easing – the radical policy of buying back government bonds – by the Bank of England but warned that investors might begin to regard it as a “slippery slope,” towards printing money to pay off public debts.

“To remove residual doubts and preserve full confidence in the UK’s policy frameworks, sound communication and implementation of monetary policy ultimately needs to be underpinned by a sustainable path of fiscal policy,” said the report.

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Bank airs double-dip recession fears

July 14th, 2009 | No Comments

• Deputy governor Charles Bean says base rate must not rise too soon
• US treasury secretary Tim Geithner warns of challenges ahead on road to recovery

The deputy governor of the Bank of England pledged tonight to remove Britain’s emergency economic policy boost slowly after a warning from the US treasury secretary, Tim Geithner, that the global economy was still at risk of a double-dip downturn.

Charles Bean, one of two deputies at Threadneedle Street, said a time would come when the Bank’s monetary policy committee would need to push up interest rates from 0.5% and reverse the programme of quantitative easing, which boosts the cash available for lenders.

“But we don’t want to do it too early and nip the recovery in the bud,” Bean said, speaking in Yorkshire as part of a nationwide tour to explain the Bank’s approach to monetary policy.

The deputy governor expressed optimism that the economy would be on the mend by early next year – sentiments echoed by the chancellor, Alistair Darling, and Geithner, after a meeting in London today today to discuss the next steps in fighting the two-year global crisis.

Geithner expressed confidence that President Obama’s $800bn (£500bn) stimulus package would boost recovery prospects in the second half of this year.

“We have a very powerful set of policies in place, coming on stream,” he said. “I think there is a very good chance we will see the US economy and the world economy get back to recovery, get growing again, over the next few quarters.”

Darling said: “In this country we are coming through the severest downturn in 60 years. The measures we have taken are having an effect. I am confident growth will return at the turn of the year.”

Geithner said measures adopted so far had helped provide a base for recovery: “Policy has been effective in arresting and mitigating the force of the storm.”

The US treasury secretary was speaking after meetings with Gordon Brown, Darling, Mervyn King, the governor of the Bank of England, and Lord Turner, the chairman of the Financial Services Authority, to discuss the agenda for the G20 summit in Pittsburgh in September.

Asked whether there was a possibility of a double-dip recession, Geithner added: “In my view there are still significant risks and challenges ahead.”

He said that reform of the financial sector had to ensure that institutions took a more conservative approach to risk-taking; that the regulatory framework was broadened to include sectors currently unregulated; and that consumers and investors were protected against “manipulation and fraud”.

Despite what Geithner called a “remarkably strong consensus” on elements of a reform package, the Pittsburgh summit is likely to outline broad principles rather than introduce specific new measures to tighten up regulation and supervision.

A report published by the British Retail Consortium (BRC), showing that spending in shops rose 1.4% on a like-for-like basis in the year to June, will come as welcome news to the chancellor.

“June’s sunshine gave overall sales a much-needed boost,” said Stephen Robertson, director general of the BRC. “The heatwave helped food retailers and got customers buying outdoor goods, such as garden furniture, pools and picnic ware.

“Clothing clearance sales coincided nicely with the upsurge in demand for summer wear. But the sun knocked sales of furniture and homewares, as people focused on the outdoors. Given the uncertainty about jobs, customers are still nervous about spending on non-essentials.”

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BA pilots vote for 2.6% salary cut

July 13th, 2009 | No Comments

• Pilots agree to take salary cut and work longer hours
• Chief executive expected to be barracked at AGM

Willie Walsh, the embattled chief executive of British Airways, faces a mauling from shareholders and his own staff at the airline’s annual meeting, tomorrow despite securing a crucial pay deal with the fleet’s pilots, which will see them accept a pay cut and longer hours as management tries to slash costs.

Unions representing baggage handlers, cabin staff and ground crew will mount a protest outside the AGM in London over management plans to lay off thousands of workers. Shareholders are also expected to barrack Walsh during the meeting over the dramatic downturn in the flag carrier’s fortunes, which has already seen the company stop paying dividends and looks set to result in an emergency cash call.

Walsh, who has agreed to forgo his £61,000 wage for the month of July to show he means it when he says BA is battling for its survival, is looking to stem the airline’s losses, which are running at nearly £3m a day. In May, BA revealed that the recession has turned record profits of £992m two years ago into a record pretax loss of £401m last year.

A deal with BA’s 3,200 pilots is a small victory for Walsh, but his battle to reduce the company’s overheads as it suffers a plunge in lucrative business travel is by no means over. Management is still locked in talks at the conciliation service Acas after a self-imposed deadline of 30 June passed without any deal with cabin staff and ground crews.

BA’s bosses want unions to agree to a deal that would freeze pay for two years and result in the loss of 3,700 jobs – or almost 10% of the workforce – including 2,000 voluntary redundancies from its 14,000 flight attendants. They also want staff to agree to wide-ranging changes to their terms and conditions.

Management this year asked staff to consider working for free or taking unpaid leave, and nearly 7,000 employees applied for voluntary pay cuts, including 800 who said they would work for nothing for up to a month. The move, which will save the carrier up to £10m, was attacked by some union leaders who feared staff were being bullied into signing up.

Unions will hand out letters to shareholders outside today’s meeting pointing out that staff are proud to work for BA and it is bosses who are out of step, making doom-laden pronouncements about its future just a year after it produced record-breaking profits.

“All BA employees are ready and willing to pull together to secure a vibrant future for the company, but they desperately need to see that BA senior management want to work with them towards this objective, not blame them for a situation which is not of their making,” the letter reads. “The staff are willing to listen and respond, but feel under pressure to agree to measures – like working for free – that they simply can’t afford. There is also no merit whatsoever in management adopting unrealistic and intransigent positions during discussions with staff representatives.”

Protesters will have a dozen live lemmings with them outside the meeting and placards bearing slogans including “British Airways deserves better than to be led by lemmings” and “Willie, time to head to the departure gate?”.

Walsh, however, is likely to take heart from his success in persuading BA’s pilots to accept a pay cut. The British Airline Pilots Association (Balpa) said that 94% of its members who voted were in favour of accepting a 2.6% salary cut to help the cash-strapped airline save £26m. As part of the deal, BA’s pilots have agreed to an increase in annual duty hours, a cut in turn-around times on short-haul flights and reductions in the flight-crew arrangements on certain long-haul routes. There will also be 78 redundancies. In return, pilots will be able to pick up BA shares in two years’ time worth about £13m.

Balpa’s general secretary, Jim McAuslan, admitted that it was “an unaccustomed position” for a union to be calling on members to support a drop in pay but said: “We are satisfied that this step is necessary to help BA recover its position as one of the world’s most successful airlines.”

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Bank rescues could cost state £11bn

July 13th, 2009 | No Comments

• UK Financial Investments says recovering taxpayers’ investment will be a challenge
• Fall in government stake is £6.2bn for Lloyds and £4.7bn for RBS

Bank share price performance (pdf)

The government admitted this morning that it was sitting on a loss of almost £11bn following the partial nationalisation of Royal Bank of Scotland and Lloyds Banking Group.

UK Financial Investments (UKFI), the body that manages the taxpayers’ stakes in the two banks, said this morning that recovering the taxpayers’ investment would be “challenging”.

“Every UK household will have more than £3,000 invested in shares in RBS and Lloyds,” said John Kingman, the UKFI chief executive.

The paper losses have been incurred because RBS and Lloyds shares are trading well below the value at which the government bought into the banks. The details emerged as UKFI set out its strategy to maximise the value of its investments for the taxpayer and to eventually return the banks as strengthened institutions to full private ownership.

UKFI said it would not set any fixed timetable for disposing of the shares and expected to undertake a number of capital markets transactions over a sustained period.

“Our investee banks face significant legacy losses and the inevitable effects of the recession. Nevertheless, we believe they now have the capital resources to weather these difficulties and to emerge from the current environment with their strong franchises and profitability intact,” UKFI said.

According to the report, the Lloyds stake is worth £6.2bn less than the taxpayer paid for it, while the RBS stake is worth £4.7bn less.

The taxpayer bought into Lloyds at an average of 121p a share and RBS at 51p, but shares are trading below those levels – Lloyds at 62p and RBS at 35p – making any sale before the next general election unlikely.

Today’s annual report is a rare opportunity to hear from UKFI and the City will be examining its report closely to look for any guidance on whether any shares will be sold soon.

The body is still being run by a temporary chairman, Glen Moreno, who stepped in six months ago after Sir Philip Hampton was poached to chair RBS.

In February, the chancellor, Alistair Darling, said he expected to make a decision on a permanent replacement “in the very near future”, but City sources believe the government is struggling to find a permanent replacement for Hampton.

Moreno ran into controversy because of his links to Liechtenstein Global Trust (LGT), a private bank accused of aiding tax evasion, and is not thought to have applied for the full-time position. Kingman is a civil servant, elevated from the Treasury to take on the role of UKFI chief executive.

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