Monthly Archives: December 2012

Kiran Stacey

We reported in this morning’s FT on the results of a poll carried out by Ipsos Mori of nearly 100 MPs from across all the Westminster parties on what they think of a range of economical questions.

The poll is done every year, but this is the first time a newspaper has got its hands on it. The results are revealing.

The most interesting finding is that the vast majority of MPs back separating investment and retail banks. Such a move, seen by many as an answer to preventing the high-risk activities of casino banks from posing a risk to ordinary borrowers, would go much further than the “ring-fence” being proposed by George Osborne. Read more >>

Jim Pickard

A major new extradition row has broken out between Britain’s Serious Fraud Office and the US Department of Justice over Libor manipulation at UBS.

The SFO is understood to be angry that the DoJ is seeking the extradition of Tom Hayes, a former UBS employee who was charged on Wednesday by the American DoJ as part of its probe into Libor manipulation. That came on the same day that the bank agreed to pay $1.5bn to US,UK and Swiss authorities.

The SFO had been aware of the plans by its American counterpart to charge Mr Hayes before the British agency arrested him a week ago. He was bailed without charge. That in turn annoyed the DoJ, which was not tipped off about the arrest.

Meanwhile pressure is growing from British MPs who believe that Mr Hayes, as a British citizen, should face justice in this country.

Sir Menzies Campbell, the senior Lib Dem MP, told me that the allegedly illegal acts had been committed in Tokyo– and therefore the choice should be between a trial in the UK or a trial in Japan.

“It would be stretching territorial jurisdiction to a remarkable extent if this man was to be put on trial in the United States,” he said.

John Hemming, another Lib Dem MP, claimed the US was behaving “arrogantly”.

“You have to ask, is it the job forAmericato police the whole world?” he said. “The Libor issue involved people around the world, America wants to do the whole job and seem to have no limit on what is outside their remit.”

Mr Hemming said that his concerns stemmed from the earlier case of the so-called NatWest Three – bankers extradited in 2006 to face Enron-related charges in the US. He argued that the US plea-bargain system incentivised people to plead guilty even when they were not.

“They have a very difficult decision,” Mr Hemming said. “If they plead ‘not guilty’ they could face 35 years and if they plead ‘guilty’ it may only be three. That is not a fair choice.”

The question now is whether the SFO believes it has enough evidence to charge the former Read more >>

Jim Pickard

Moves to give ministers more say over the appointment of senior civil servants would not “imperil” Whitehall’s independence, Francis Maude has insisted.

The Cabinet Office secretary spoke out over concerns that giving ministers a stronger role in appointments would undermine civil service impartiality. “This won’t imperil it being fair and open selection on the basis of merit,” he said.

Mr Maude added that no one argued that ministers should be entirely shut out of the process of picking senior officials.

Fears over the increased role of ministers in recruitment were raised last month when we revealed that David Cameron, prime minister, had intervened to stop the appointment of David Kennedy, chief executive of the climate change committee, as permanent secretary at the Department of Energy and Climate Change.

This was despite Mr Kennedy having gone through the selection process by the Civil Service Commission and being told he had the job.

Downing Street, which did not deny that Mr Kennedy had been blocked because of his “green” views, said Mr Cameron was more likely to increase such interventions and wished that he had been more forceful in the past.

Under Mr Maude’s plan, ministers’ roles will be strengthened in the appointment process “to reflect their accountability to parliament for their department’s performance”.

At present, candidates are put forward by the Civil Service Commission, with ministers having a power of veto. But in future the minister would be offered a range of candidates to Read more >>

Jim Pickard

In a Commons packed with more than 600 MPs it was not hard to spot the man of the hour: the former chief whip Andrew Mitchell.

His honour and dignity intact –at least on a relative basis – the Tory MP was stood at the front of the chamber, the overspill area for those unable to find a seat on the green benches.

Hair immaculate, in a blue shirt and pink tie, his arms uncomfortably crossed: there he was, smouldering – the very image of the wronged man.

Rob Wilson, a Tory backbencher, put in the awaited question: would the prime minister make sure no stone would be “left unturned” in finding out whether a police officer had fabricated allegations against a member of cabinet?

The prime minister began, as is the convention, by praising in broadbrush terms the work of the police on the beat.

But David Cameron went on to say that a police officer appeared to have posed as a member of public and sent an email “to blacken the name of a cabinet minister” and so a thorough investigation needed to occur. The independent Police Complaints Commission would supervise the inquiry, and politicians should “allow them to get to the truth,” he said.

This was not a prime minister’s questions overshadowed by the Mitchell affair, otherwise known as “plebgate”, or “gate-gate”.

Instead the half-hour was dominated by Labour attempts to paint the UK 2012 as a grim, Victorian state dominated by food banks, the poor and even “the workhouse”.

It was Ed Miliband, leader of the opposition, who set the tone – after a couple of technical questions about Britain’s withdrawal from Afghanistan (where there are no political points to be scored.)

Was the prime minister concerned, he asked, about a “six-fold increase” in the last few years in people relying on food banks? (This may or may not be a rock-solid statistic.)

Bizarrely, Cameron turned this question around, praising the volunteers providing free grub to the needy as the embodiment of his once-cherished philosophy – “The Big Society”. Read more >>

Jim Pickard

The BBC reported last week that Camden was set to become the first London council to get rid of council tax discounts on second homes.

The plans were agreed by the borough’s cabinet at a meeting on Wed 5 Dec and will be decided at the full council meeting on 21 January.

The changes include: Read more >>

Tom Burgis

George Osborne

Welcome to our rolling coverage of the Autumn Statement.

George Osborne has missed his fiscal targets and cut corporation tax.

We’ll bring you all the day’s developments live. By Tom Burgis and Ben Fenton.

15.45: We’re winding up the blog now, but you can follow events as they unfold through constantly updating stories on the front page of FT.com

15.31: A representation of the “flamethrower of uncertainty” can be found in the documentation of the OBR. It is also known as a “fan chart”. I doubt George Osborne is a fan of it, though.

15.24: Chote speaks of the “flamethrower of uncertainty”- a favourite phrase, unsettlingly enough, of the OBR, which is a chart showing forecasts in a wide range that makes the chart lines look like a firebreathing dragon.

15.18: Chote says that the variation in the possible range in the forecast of net debt figures for the UK is a large number, but is “dwarfed by the scale of uncertainties” on the issuance of debt. I think that’s the second time he has said that in his address.

15.12: The Spectator is running a rather scary chart showing the lost output of the current “seven-year slump” in the UK.

15.07: Robert Chote, director of the Office for Budget Responsibility, is live now, going through his department’s figures that underpinned the bad news Mr Osborne has just had to deliver.

15.05: Gavyn Davies has blogged for the FT with his view on the autumn statement while the FT’s Lucy Warwick-Ching has collated some very interesting instant reaction from personal finance experts.

14.49: Hannah Kuchler on the FT’s UK desk has been keeping an eye on business reaction to the autumn statement.

She says:

The CBI, the employer’s organisation, urged the government to stick to its guns on deficit reduction to retain international credibility, saying it was no surprise that austerity would last longer than expected.

John Cridland, director-general, welcomed investment in infrastructure and support for exports, but said the proof was in the delivery. He said:

“Businesses need to see the Chancellor’s words translated into building sites on the ground.”

But the British Chambers of Commerce was less positive, declaring the statement not good enough for a country meant to be in a state of “economic war”.
The government is just “tinkering around the edges”, John Longworth, the BCC’s director general said, adding: “The Budget next March must make truly radical and large-scale choices that support long-term growth and wealth creation. That means reconsidering the ‘sacred cows’ of the political class, including overseas aid and the gargantuan scale of the welfare state. Only a wholesale re-prioritisation of resources, to unlock private sector finance, investment and jobs, will be enough to win the ‘economic war’ we are facing. The danger is that our political class is sleepwalking with its eyes open.”

14.40: Lionel Barber, the FT’s editor, just passed by the live news desk so we asked him what he thought of the autumn statement.

The Chancellor is in a hole, but the good news is that he’s stopped digging. The FT supports the government’s fiscal stance, but is there more to be done on monetary policy to boost growth? That’s the question.

14.26 Who says the British don’t like doing things the French way? Might we surmise from this tweet from the BBC’s Robert Peston’s interview with Danny Alexander, Osborne’s Lib Dem No2, that the UK’s crediworthiness might be going to way of its Gallic cousins’?

[blackbirdpie url="https://twitter.com/Peston/statuses/276330461142327296"]

Others are more chipper:

[blackbirdpie url="https://twitter.com/MJJHunter/statuses/276330252601524225"]

 Read more >>

Jim Pickard

One area where George Osborne is under pressure to act tomorrow is the thorny issue of capital allowances.

The chancellor cut these allowances back in 2010 in his first Budget, at the same time cutting corporation tax.

The problem is that many small companies complain they do not benefit from the lower corporation tax rate – and have less incentive to invest because of the allowance cuts.

The Treasury has been under heavy lobbying pressure from groups such as the Engineering Employers Federation and British Chambers of Commerce to conduct a volte face.

Interestingly, the Lib Dems (including Vince Cable) have been persuaded of the merits of this case – although there would be issues around how to pay for a reversal.

In 2010, the annual investment allowance was cut from £100,000 to £25,000 per year (from April 2012) with a cut in the rate from 20 to 18 per cent, or 10 per cent to 8 per cent.

Mr Osborne’s options include raising the annual investment allowance above the current Read more >>

Being prepared for big economic statements, such as tomorrow’s Autumn Statement, is a must, given the quantity of information released in such a short time. Even though this will be the 41st Budget, Autumn Statement or pre-Budget report I have covered, I try not to be complacent.

Here’s what I think is important (sorry about the length), what type of analysis is relevant to understanding Britain’s economy and public finances, and at the bottom is a moan about the way in which George Osborne has decided to follow Gordon Brown down the road of playing games with numbers.

 Read more >>

Jim Pickard

When Whitehall wants to put out new information without mass coverage the technique is quite simple: ministries publish the data without any press release or calls to journalists.

And so it was a few weeks ago when Decc, the energy department, published figures predicting where Britain’s future energy supplies would come from.

At a stroke of a pen, officials quadrupled their predictions for unabated gas from 8GW to 28GW; in layman’s terms, about 8 new power stations to around 28.

As such, tomorrow’s announcement by George Osborne about a new dash for gas will not come as a surprise to the industry. Ministers have been open about the need for a vast increase in gas, in part to replace the ageing nuclear reactors and coal-fired power stations coming to the end of their life.

Here are the Decc statistics: Firstly, Annex I of this spreadsheet shows you the 2012 forecasts for new energy capacity in its different forms. You can see the much lower estimate for new gas in the same spreadsheet for 2011, also in Annex I.

The stats show how Decc still does not believe that new nuclear will be truly transformative – in size terms – by 2030. The department expects nuclear to provide only a relatively modest amount of new capacity (at 9.9 GW). (Interesting to note cost problems at EDF’s site in northern France, announced yesterday.)

Tomorrow’s gas strategy statement is politically important and was insisted on by the Treasury as a way to reassure potentially nervous investors in the industry. But it does not Read more >>

Kiran Stacey

George Osborne and Nick CleggBack in September, Nick Clegg said he would block any attempt by George Osborne to freeze benefits in this week’s autumn statement. This put the chancellor in something of a quandary. He had been hoping to save several billions with the move, as well as winning the support of a public that is increasingly hostile to people who are claimants.

Another option remains on the table, however, is to allow benefits to rise, but not by as much as they would normally do if the link with inflation is kept. New analysis from the Institute of Public Policy Research suggests there could still be a fair amount of savings to be gained, for example, by increasing them by just 1 per cent.

The IPPR has produced a table of savings from possible options open to the chancellor: Read more >>

Jim Pickard

All will become clearer on Wednesday, but FT Westminster has collated some of our recent coverage of recent days for a handy guide to what to expect from the chancellor.

1] FISCAL OVERVIEW Osborne’s plan to cut the deficit is off track – meaning that Britain’s debt mountain is still rising faster than expected. Labour will make this the centrepiece of its attack on the government – as Ed Balls told us last week in an interview: “The Autumn Statement will be the point where the misjudgements of the last two years will be on full display.”

There are growing expectations that the coalition will miss its target of cutting debt as a share of national income by 2015/16 and that spending cuts could extend until 2018. The five-year target for eliminating the structural deficit – originally set for the end of this parliament in 2015 – is likely to be rolled over for a further year, with austerity measures extending deep into the next parliament. Read more >>