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Chase Bank Limits Cash Withdrawals, Bans International... Before you read this report, remember to sign up to http://pennystockpaycheck.com for 100% free stock alerts Chase Bank has moved to limit cash withdrawals while banning business customers from sending...

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Richemont chairman Johann Rupert to take 'grey gap... Billionaire 62-year-old to take 12 months off from Cartier and Montblanc luxury goods groupRichemont's chairman and founder Johann Rupert is to take a year off from September, leaving management of the...

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Cambodia: aftermath of fatal shoe factory collapse... Workers clear rubble following the collapse of a shoe factory in Kampong Speu, Cambodia, on Thursday

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Spate of recent shock departures by 50-something CEOs While the rising financial rewards of running a modern multinational have been well publicised, executive recruiters say the pressures of the job have also been ratcheted upOn approaching his 60th birthday...

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UK Uncut loses legal challenge over Goldman Sachs tax... While judge agreed the deal was 'not a glorious episode in the history of the Revenue', he ruled it was not unlawfulCampaign group UK Uncut Legal Action has lost its high court challenge over the legality...

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Financial crisis far from over, says outgoing Bank of England chief

Category : Business

Mervyn King and senior German banker warn of ‘unexpected twists and turns’ before worldwide economy stabilises again

Sir Mervyn King warned last night that the global financial crisis is “far from over” and that fundamental changes are needed to the international system before confidence can be regained.

King, the governor of the Bank of England, said there would be many twists and turns before the worldwide economy stabilises. Speaking at an event at the London School of Economics, he said: “Whichever crisis we are talking about, it is far from over … there will surely be many unexpected twists and turns before we can truly say that the crisis is indeed over.”

On the day after the Cypriot government put forward a rescue package to stabilise its economy, King’s comments will reinforce concerns that the eurozone has failed to put its house in order. The event was also attended by Ben Bernanke, chair of the US Federal Reserve, who voiced concerns about fundamental imbalances exposed by the financial crisis. He said that while the eurozone works for some countries, it was obvious that others were unable to keep up. “There is a basic question: what is the right size for a single monetary policy?” In a clear reference to Greece, Portugal and Cyprus, he said the crisis had exposed countries with weaker productivity and higher labour costs.

The former head of the German central bank, Axel Weber, also speaking at the event, added to the warnings that the crisis had yet to play out in full. “We are not out of the woods yet,” said Weber, now chairman of investment bank UBS. Weber emphasised that the colossal debts run up by western countries in the aftermath of the banking crisis remained a huge drag on economy growth and stability. “While there be more signs of stability, this may in fact be a period when problems that are still with us resurface. The underlying situation remains difficult and is not improving,” he said.

He said the soaring stock market had provided a false hope that the eurozone crisis has eased. Weber joined former US treasury secretary Larry Summers and IMF chief economist Olivier Blanchard on stage at the London School of Economics to mark the end of King’s 10-year term as Bank of England governor.

King will retire in the summer and will be succeeded by the head of Canada’s central bank, Mark Carney, who was in the audience along with many of the world’s top economists and central bank staff.

Weber said he was also concerned that governments had responded to the crisis by giving more powers to central banks. He recalled how he refused an offer from the German finance ministry to take on regulatory powers, fearing it would undermine the bank’s monetary policy role. “As central banks play a larger role, we need to see the potential downsides,” he said. “I’m concerned they are taking roles that distract them from their main task.”

Blanchard said the powers acquired by central banks created a “democratic deficit” that could eventually lead to social unrest. The situation in Europe was a cause for concern, especially when central banks were put in a position of making crucial decisions that affected millions of people’s lives, he said.

His comments echoed those of many politicians across Europe after the crisis in Cyprus was exacerbated by demands from the European Central Bank for a resolution. The ECB warned last week that it would refuse to lend to banks in Cyprus unless a deal was struck, pushing the government on the island, which is only four weeks old, to accept demands from Brussels for an initial €5.8bn (£5bn) cash payment to secure loans worth €10bn. Bernanke defended the policy shift that has seen central banks assume regulatory powers, arguing that it provided a unique view of the way that international money markets operated. “It is important for central banks to be regulators to understand the financial system and how it is developing,” he said.

Mervyn King says recovery is in sight as housing market bounces back to life

Category : Business

Recovery has momentum, says King, as mortgage lending figures show an 11% increase

The recovery “is in sight” and demand for UK exports is strong, according to the governor of the Bank of England Sir Mervyn King, in a boost to the chancellor ahead of next week’s budget.

King blamed the crisis in the eurozone, which accounts for almost 50% of exports, for the weakness of the UK’s return to economic health, but said growth was now gaining momentum.

Speaking in Birmingham as mortgage figures showed the housing market bounced back into life in January, King said: “There is momentum behind the recovery that’s coming, and I think that during the course of 2013 we will see the recovery come into sight.”

The upbeat tone of his comments will lift some of the gloom surrounding the debate over the economy in parliament, where both sides of the house have grown restless after four years of stagnant growth.

George Osborne is braced for heavy criticism from his own backbenchers and opposition MPs concerned that his policies are allowing the economy to flatline.

King said: “If you just take away for the moment what happened in North Sea Oil production and in construction, the UK economy even last year grew by 1.5%.”

“Two things are holding us back at the present. One is the extraordinary degree of weakness in the euro area. It’s in recession, it’s our single biggest trading partner. The economies in or close to the area really affect about half of our economy.”

The second factor is “the enormous uncertainty generated by what is happening in the euro area is encouraging firms to hold back on investment”, he added.

Mortgage lending to home-buyers registered its best start to the year since 2008, after lending in January was more than 10% higher than the same month a year ago.

The rise, driven by a steady rise in buy-to-let activity and the return of first-time buyers, follows predictions earlier in the year from several of the big estate agency chains that activity was likely to pick up, though price growth would remain weak outside London and the south-east.

New housebuilders have also signalled a steady rise in demand, which they credit in part to the government’s £80bn funding for lending scheme (FLS), which gives lenders access to cheap finance in order to help borrowers.

Richard Sexton, director of e.surv chartered surveyors, said: “Life is becoming easier for first-time buyers. Although deposit requirements are still high, rates are lower and banks are more willing to lend to lower-income borrowers.”

Last year the £80bn failed to lift mortgage lending after two of the UK biggest banks – the state-owned Royal Bank of Scotland and Lloyds – withdrew more funds than they lent.

But figures rushed out by the Bank of England appeared to show a turnaround in the scheme’s fortunes in January following a steep rise in loans supplied by the main banks and building societies.

The Council of Mortgage Lenders (CML) said 38,300 loans were advanced to home buyers in January worth £5.7bn, marking an 11% year-on-year increase.

The CML figures showed that despite a seasonal dip compared with December, These figures marked the strongest start to a year since 2008, when 47,800 loans were taken out.

For the third month in a row, first-time buyers accounted for 42% of all house purchase loans, suggesting that recent improvements to the mortgage market are having an impact in helping people to get on the property ladder, the report said.

A total of 15,900 loans worth £2bn were advanced to first-time buyers, which is almost a quarter (24%) higher than a year ago and and also the largest January total since 2008.

Experts said that the housing market has reached a “crucial stage” in its tentative recovery, which the government must encourage further in next week’s Budget.

Home buyers taking their first step on the property ladder still typically need to raise a 20% deposit, which is unchanged from a year ago.

Most first time buyers benefit from a distribution of wealth from their parents who in many instances supply all or most of their deposit. CML director general Paul Smee said: “Seasonal factors clearly had an impact on lending figures in January, but it still remains the best start to a year since 2008.”

Savills allows staff to defer bonuses to avoid 50% tax

Category : Business

Executives at the Mayfair estate agency could delay taking bonuses until lower 45p rate is in place

Savills, the Mayfair estate agency behind some of London’s most expensive property sales, has given its top staff the opportunity to defer bonuses until the start of the next tax year to avoid the soon-to-be-abolished 50% top rate of tax.

Executives at the firm, some of whom earn more than £1m a year, could delay taking bonuses until the lower 45p rate is in place.

The chancellor, George Osborne, announced in December that the top rate of income tax would be cut from 50% to 45% from 6 April. He said: “We’re going to have a top rate of tax that supports enterprise,” and promised that it would “raise more money from the rich”. The top rate is levied on incomes of more than £150,000.

The estate agency is not the first firm to allow high earners to defer bonuses for tax reasons. The Guardian reported in January that London-based insurer Aon was helping 250 of its best-paid staff avoid the 50% rate by deferring bonus payouts.

These are thought likely to be just two examples of a popular remuneration strategy among Britain’s biggest bonus-paying firms. Many large businesses are expected to be quietly pursuing a similar strategy in the hope of avoiding the ire that Goldman Sachs attracted from Bank of England governor Sir Mervyn King at the start of the year.

The US investment bank abandoned its plan to defer London bonuses after it was attacked by King. He told parliament’s Treasury select committee: “I find it a bit depressing that people who earn so much seem to think that it’s even more exciting to adjust the timing of it to get the benefit of the lower tax rate … which they will benefit from in the long run to a very great extent knowing this must have an impact on the rest of society, when even now it is the rest of society which is suffering most from the consequences of the financial crisis.”

Savills, which is listed on the London Stock Exchange, declined to answer questions from the Guardian on the timing of bonus payouts to directors and other top earners. However, one source close to the company denied that in previous years bonuses and profit-share rewards had been routinely paid in March. Savills offers flexible arrangements every year, with staff able to take payouts at any time between the company’s year-end in December and its annual shareholder meeting in May, the source said.

Among the senior staff at Savills who could benefit from receiving their cash bonus after 6 April include chief executive Jeremy Helsby and finance director Simon Shaw, who received £1.27m and £891,390 respectively in salary, bonuses and perks for 2011. Savills’ head of residential property, Rupert Sebag-Montefiore, is also thought to be among the top earners, though his earnings are not disclosed by the company as he is not a board director. Savills declined to say whether any of these three intended to delay taking their 2012 bonuses.

While widespread attempts to exploit the timing of the tax changes have “depressed” King, the expected clustering of bonus payouts within the 2013/14 tax year may eventually be seized upon by Osborne as evidence of the apparent success of his controversial top-earner tax cut.

The chancellor has already suggested that Labour’s decision to raise the rate to 50% was “a con” because it had raised “almost no money”. A large part of the explanation for the seemingly disappointing tax take from the 50% was that many top earners timed their take-home income to minimise their tax bills.

Savills allows staff to defer bonuses to avoid 50% tax

Category : Business

Executives at the Mayfair estate agency could delay taking bonuses until lower 45p rate is in place

Savills, the Mayfair estate agency behind some of London’s most expensive property sales, has given its top staff the opportunity to defer bonuses until the start of the next tax year to avoid the soon-to-be-abolished 50% top rate of tax.

Executives at the firm, some of whom earn more than £1m a year, could delay taking bonuses until the lower 45p rate is in place.

The chancellor, George Osborne, announced in December that the top rate of income tax would be cut from 50% to 45% from 6 April. He said: “We’re going to have a top rate of tax that supports enterprise,” and promised that it would “raise more money from the rich”. The top rate is levied on incomes of more than £150,000.

The estate agency is not the first firm to allow high earners to defer bonuses for tax reasons. The Guardian reported in January that London-based insurer Aon was helping 250 of its best-paid staff avoid the 50% rate by deferring bonus payouts.

These are thought likely to be just two examples of a popular remuneration strategy among Britain’s biggest bonus-paying firms. Many large businesses are expected to be quietly pursuing a similar strategy in the hope of avoiding the ire that Goldman Sachs attracted from Bank of England governor Sir Mervyn King at the start of the year.

The US investment bank abandoned its plan to defer London bonuses after it was attacked by King. He told parliament’s Treasury select committee: “I find it a bit depressing that people who earn so much seem to think that it’s even more exciting to adjust the timing of it to get the benefit of the lower tax rate … which they will benefit from in the long run to a very great extent knowing this must have an impact on the rest of society, when even now it is the rest of society which is suffering most from the consequences of the financial crisis.”

Savills, which is listed on the London Stock Exchange, declined to answer questions from the Guardian on the timing of bonus payouts to directors and other top earners. However, one source close to the company denied that in previous years bonuses and profit-share rewards had been routinely paid in March. Savills offers flexible arrangements every year, with staff able to take payouts at any time between the company’s year-end in December and its annual shareholder meeting in May, the source said.

Among the senior staff at Savills who could benefit from receiving their cash bonus after 6 April include chief executive Jeremy Helsby and finance director Simon Shaw, who received £1.27m and £891,390 respectively in salary, bonuses and perks for 2011. Savills’ head of residential property, Rupert Sebag-Montefiore, is also thought to be among the top earners, though his earnings are not disclosed by the company as he is not a board director. Savills declined to say whether any of these three intended to delay taking their 2012 bonuses.

While widespread attempts to exploit the timing of the tax changes have “depressed” King, the expected clustering of bonus payouts within the 2013/14 tax year may eventually be seized upon by Osborne as evidence of the apparent success of his controversial top-earner tax cut.

The chancellor has already suggested that Labour’s decision to raise the rate to 50% was “a con” because it had raised “almost no money”. A large part of the explanation for the seemingly disappointing tax take from the 50% was that many top earners timed their take-home income to minimise their tax bills.

Credit to Jenkins the Transformer, but isn’t this the old Barclays in disguise?

Category : Business

Antony Jenkins talks and acts sincerely about changing his bank – but there are some very familiar faces still on the board

When Andrew Bailey, the new banking regulator-in-chief, described Barclays as having a “culture of gaming, and gaming us“, his words rang too true. He was speaking during those frenetic days after Barclays had been hit with a £290m fine for rigging Libor – a record at the time, but since surpassed by UBS and RBS – when regulators, politicians and the public were in no mood to hold back on their views.

This was, after all, the bank that only months earlier had been revealed as the target of a move by the government to close down tax avoidance loopholes. This was the bank that had concocted a wheeze to take its most troublesome loans off its balance sheet and spin them into Protium, a Caymans-based venture that is now being closed down.

And then there was the infamous tax avoidance unit, known formally as Structured Capital Markets, rumoured to make a £1bn a year and hand out multimillion-pound deals to its smart but secretive players.

On top of this is the issue that hit consumers in their pockets – the mis-selling of payment protection insurance. And of course, there were the bonuses for Bob Diamond, the chief executive who was ousted in the wake of the Libor scandal, and his close lieutenants, which gave the impression that the bank was being run for its staff and not its shareholders.

So when Antony Jenkins, the upright Brit who replaced Diamond, announced to the world last week that SCM was to be disbanded, and the bank’s trading of food products with hedge funds brought to a halt, there was applause. “My overall message today is simple. Barclays is changing,” he promised. “There will be no going back to the old way of doing things. We get it. We are changing the way we do business, we are changing the type of business we do, and we are setting a new course for the future of Barclays.”

Rousing stuff. And to be fair, Jenkins sounds sincere, despite the management jargon he spouts. His strategy to reform Barclays has a name – Transform – which, painfully, means Turnaround, Return Acceptable Numbers and Sustain Forward Momentum. He has values, all laudable: respect, integrity, service, excellence and stewardship. Take a deep breath and try to overlook that many of those values could have been ripped out of any corporate manual – including one in particular: Barclays helped construct three companies for Enron, and was described in the official report into the energy company’s dramatic collapse as having “aided and abetted” in misleading auditors.

Jenkins sounds committed – and says that he is – but the problem he faces is that it’s easy to make his words sound hollow. The promise to eradicate “industrial-scale” tax avoidance – as Lord Lawson, the former chancellor, has so eloquently put it – grates when it’s quickly followed by the caveat that some of the tax services Barclays offers “are not controversial”. Indeed, Graham Wade, one of the key figures from the old SCM, is remaining at the bank. Jenkins will not say how many of the tax experts will leave and refuses to give any clues as to how much money the bank has made from tax avoidance schemes. Estimates of £1bn a year will therefore linger.

And then there is the issue of how long the legacy SCM schemes will keep generating profits – possibly for 10

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Aon defers bonus payments to avoid 50% income tax

Category : Business

Insurance broker will pay bonuses to 250 highly paid employees after 6 April when top rate of income tax falls to 45%

The London-based insurance broker Aon is helping 250 of its highly paid staff avoid 50% income tax by deferring bonus payments until the new tax year.

Other top brokers, including Willis, are also considering whether to allow their staff to postpone payments until after 6 April when the top rate of income tax falls to 45%.

Just days after the investment bank Goldman Sachs was forced to back down on its own plans to defer bonuses, it has emerged that Aon has put mechanisms in place to delay payments for its employees so they pay income tax at 45%. The move allows an executive expecting a £200,000 payout to save £10,000 in tax.

Goldman’s U-turn came after criticism from the Bank of England governor, Sir Mervyn King, and pressure from politicians. He told the Treasury select committee: “I find it a bit depressing that people who earn so much seem to think it’s even more exciting to kind of adjust the timing of it to get the benefit of a lower tax rate which they will benefit from in the long run to a very great extent.”

Goldman then announced it was no longer considering whether it should defer bonuses from 2009, 2010 and 2011, which were due to be handed to staff in the coming weeks, before the top rate fall.

Many City employers with staff who pay the top rate of tax are known to have considered whether to defer payments into the new tax year but experts believe some of them have decided against such a move following the row over the lack of tax paid by coffee chain Starbucks in the UK.

Aon is among a number of major insurers to press ahead with deferring bonus payments while Willis said it was still considering whether to do likewise. “Willis takes this matter very seriously and we are reviewing it,” said a spokesman for the insurer, which employs around 3,000 staff in the UK.

The Aon bonuses relate to the 2012 financial year and were due to be paid in March. They will now be paid in April after the beginning of the new tax year.

A spokesperson said: “Qualifying UK employees were given the option of deferring payment of their 2012 bonuses from March to April 2013. Approximately 250 employees, 4% of the UK employee base, elected this option.”

Aon, which sponsors the Manchester United football team shirts, owns several businesses in the UK including insurer Benfield and HR consultants Hewitt. It moved its headquarters from Chicago to London last year so it could be nearer to the Lloyd’s of London insurance market.

The relocation of Aon’s HQ triggered forecasts of millions of pounds of extra revenue for the exchequer so the latest move may prove to be an embarrassment for the chancellor, George Osborne, who had refused to publicly criticise Goldman over tax.

A treasury minister, Sajid Javid, though, spoke to top officials at the bank shortly after King’s comments to MPs.

The Bank of England governor told the committee: “It would be rather clumsy and rather lacking in care and attention to how other people might react … in the long run, financial institutions, like all large institutions, depend on good will from the rest of society, they can’t just exist on their own.”

David Cameron had criticised the tax affairs of the comedian Jimmy Carr publicly in June but the government had been slower to lambast companies in such a public way.

The coalition has warned for the past year that it would reduce the 50% top rate of tax imposed by Labour which came into effect in 2010.

Steve Bell on Goldman Sachs and the delayed bonus tax plan – cartoon

Category : Business

Bank scraps scheme which would have allowed top staff to avoid 50% rate after pressure from Mervyn King and government

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Bubbles, tulips, booms and busts: same story, different dates

Category : Business

Salutary lessons can be learned from past financial crises

Perhaps one of the most cheering moments of 2012 was when Sir Mervyn King summoned Barclays chairman Marcus Agius and told him that after the appalling revelations about Libor-fixing, the bank’s chief executive Bob Diamond would have to go – or, as the Sun headline had it: “Sign on, You Crazy Diamond.”

Both King’s high moral tone and the headline-writers’ cheek seemed refreshingly modern – but for anyone wandering the damp streets of London with half an hour or so to kill during this festive season, a corner of the British Museum offers a healthy dose of historical perspective on these and many other events over the past torrid five years.

Tucked away in Room 69a, just around the corner from a display of Roman pottery, is a small temporary exhibition dedicated to “Bubbles and Bankruptcy: Financial Crises in Britain Since 1700″.

One exhibit is a cartoon from Punch, published after the Bank of England bailed out Barings (yes, that Barings) in 1890. A stiff-looking woman with an apron made of banknotes – the Old Lady of Threadneedle Street – crossly hands out cash to a queue of cowed financiers, saying: “You’ve Got Yourself into a Nice Mess With Your ‘Speculation’!” It must be reassuring for King to regard himself as today’s incarnation of that starchy matron.

It’s also salutary – and somehow comforting – to see artefacts from the events of the recent crash boxed up in glass cases as historical exhibits: an empty champagne bottle from the flotation of the ill-fated Northern Rock; a Steve Bell cartoon of ravenous fat cats having their toenails gingerly clipped by George Osborne; and a handful of credit cards from the bailed-out banks.

These now-poignant objects sit alongside exhibits illustrating a bevy of other investment frenzies and financial crises: the South Sea bubble, tulip mania and the railway investment boom – and bust – of the mid-19th century.

Apart from the facile (but nonetheless true) insight that there’s nothing new under the sun, the exhibition holds one or two other lessons for today’s policymakers.

The first is that these boom-bust events tend to follow a classic arc: a tale with a grain of truth in it is seized on and peddled to credulous investors by an unholy alliance of greedy optimists and downright swindlers.

An engraving in one case shows a certain Gregor MacGregor, a dashing-looking Scottish general who went off to Latin America and came back claiming to have discovered a lush territory called Poyais. He raised an extraordinary £200,000 – detailed in minute letters on a loan document on display – from investors convinced by the tale of vast, untapped riches in a faraway colony.

Unfortunately for MacGregor and the hundreds of would-be settlers who believed his tale and boldly set out across the Atlantic from Leith, Poyais turned out to be largely uninhabitable, and his backers lost their money.

Anyone reading the wild predictions about the potential riches to be made from exploiting shale gas deposits in the US should recognise the ring of a story so compelling that, given enough time, it could easily become a vast investment bubble. Fortunes will be made, but also lost.

A share certificate from the Sheffield and Retford Bank is a reminder that when Britain’s railways arrived, they certainly transformed the economy and created millionaires; but many of the early firms set up to drive brand-new lines across great tracts of the country went bust. The Sheffield and Retford made many loans to these companies. When they defaulted, the bank failed.

Some of the items on display also highlight the way that Britain’s political and social elites have always been prone to being seduced by smooth-talking investors. An 18th-century ballad, the Bubblers Medley, printed at the time of the South Sea crash, talks of the “Stars and Garters” tempted into the scheme alongside “harlots” from Drury Lane.

However, Gordon Brown and Alistair Darling should note that while the then chancellor of the exchequer, John Aislabie, did buy shares in the South Sea company, he shrewdly sold them before the crash – as visitors can see from the bill with his signature – making them over to some more gullible citizen.

When veteran bank-watcher Sir Donald Cruickshank appeared before the parliamentary commission on banking standards recently, he also called for some historical perspective, urging its members to immerse themselves in a copy of Anthony Trollope’s The Way We Live Now.

Reading the rip-roaring adventures of shady financier Augustus Melmotte, who takes London by storm with his eye-watering wealth, drawing politicians and aristocrats into his net, it’s hard not to think of the charming chancers in charge of Britain’s banks, who convinced us (and themselves) they were financial geniuses before the crisis – and were revealed to be self-deluded at best.

True, Melmotte certainly wouldn’t resort to the vulgar “done … for you big boy” tone of the emails that surfaced in the Barclays Libor settlement, but the sentiment is similar. Or, as Cruickshank put it: “I don’t think bankers are any worse than they have been before: they always calibrate off society … We have been here before.”

Bank of England governor race suggests Paul Tucker’s luck is in

Category : Business

Despite being dragged into the Libor scandal, Mervyn King’s deputy Paul Tucker appears to be his most likely replacement

In terms of gender balance at the top, the Bank of England is as bad as UK plc. The nine members of the monetary policy committee (MPC) are all men, as are the 11 members of the financial policy committee (FPC). Threadneedle Street has three governors and 10 other executive directors, of whom only one – the HR boss, Catherine Brown – is a woman. Lady Rice is the only non-male among the dozen members of the Bank’s court of governors.

The Bank and the Treasury, jointly responsible for choosing candidates for key roles, say no bias is involved and that they are trying hard to find women who can set interest rates or keep the City in line. Try a bit harder, chaps. It is really not good enough that a body with such power, and which relies so heavily on public trust, should be so unrepresentative of the population it is serving.

The selection of Sharon Bowles as the next governor would help make the Bank look less like a gentlemen’s club, but she is unlikely to be the one named by George Osborne in the next few weeks. Bowles is a Liberal Democrat and chair of the European parliament’s economic and monetary affairs committee, both reasons for the chancellor to look elsewhere. The Old Lady will have to wait for her first chatelaine.

Several other candidates are in the running. Originally, Osborne – who is expected to announce his decision in his autumn statement on 5 December – wanted Mark Carney, the highly regarded governor of the Bank of Canada, but his overtures were rebuffed. Carney’s name is still mentioned in the list of runners and riders, as is that of Glenn Stevens, governor of the Reserve Bank of Australia. The financial systems of Canada and Australia stood up better than most during the crisis of 2007-09, and oversight of the City is now central to the expanded role given to the Bank of England by the coalition.

The fact that the names of Carney and Stevens refuse to go away despite protestations from both men that they are not interested suggests the Treasury is not entirely convinced about the credentials of the UK frontrunners. This impression has been reinforced by reports that a former permanent secretary to the Treasury, Lord Burns, was prepared to do the job on a temporary basis. Burns, 68, is said to be reluctant to commit himself to a full eight-year term, but offered to do four years instead.

As with Bowles, pro-European proclivities may also count against Lord Turner, the chairman of the Financial Services Authority, even though he has now recanted his former support for the euro. Turner would certainly be the most radical choice, and has made it clear that the Bank may need to rummage even deeper in its box of unconventional policy measures to prevent the economy sliding into deflation.

Although he has yet to spell out in public quite what he means, Turner would consider “helicopter drops” of money if things got bad enough. This would involve tax cuts from the Treasury paid for with cash provided by the Bank.

The current governor, Sir Mervyn King, used a recent speech in Cardiff to rain on this idea from a great height, which may be one reason why Turner has drifted out in the betting. The City is also lobbying hard against the FSA chairman following his wholly justified comment that much of what the financial sector does is “socially useless”.

Ultimately, though,But Osborne might still pick Turner if he thinks the Bank’s current policy tools – ultra-low interest rates and quantitative easing – are proving ineffective in lifting the economy out of its current rut.

The man the City would like for the job is Paul Tucker, one of King’s two deputies. There was a lot of tension between the Bank and the financial sector in the early days of the crisis, with Bob Diamond of Barclays accusing King of delivering sermons on moral hazard rather than support for struggling banks.

Tucker was seen as much more willing to help, which is why the City has been lobbying Osborne strongly on his behalf. Tucker was, however, dragged into the Libor rate-fixing scandal, and the chancellor will have to be sure that none of that mud will stick.

Sir John Vickers is the dark horse in the race. He is the candidate most like the current governor: a first-rate economist, although specialising in micro-economics rather than the big-picture stuff. He has been chief economist at the Bank, run the Office of Fair Trading and chaired the Independent Commission on Banking, set up by Osborne, which called for the high-street operations of banks to be ringfenced from their investment arms. There is a suspicion, though, that Vickers is not really hungry for the governorship in the way that Tucker and Turner are, and is happier running an Oxford college than he would be the Bank of England.

It is certainly a big job. The FPC must ensure that tougher prudential regulations to ensure the City does not blow up the economy again are not so draconian as to choke off lending altogether. There is a tension between long-term strategy and short-term tactics.

The task facing the MPC is trickier. Britain could easily slide into a triple-dip recession this winter despite interest rates of 0.5% and £375bn of quantitative easing (QE). Yet, despite the weakness of the recovery, inflation is 2.7% and has been above its 2% target for 69 of the past 78 months. Public confidence, according to the Bank’s regular surveys, is at its lowest ebb since it was granted operational independence 15 years ago.

King said last week that the MPC had not lost its faith in QE, a clear hint that there will be further asset purchases if growth is lower than expected. On past form it will be, as the Bank’s forecasting record is poor, consistently over-estimating growth and under-estimating inflation.

But is more QE really what the economy needs? At a global level, it seems as if money creation by central banks has pushed up commodity prices, adding to the price of food and reducing real incomes, stifling economic recovery. Yet, many households and businesses are in a zombie-like state where they are so heavily reliant on a fix of cheap money that they would go to the wall without it. Macro-economic policy is a mess: it is not working effectively, it is nurturing a dependency culture and there is no obvious exit strategy.

As to who will get the job, the Treasury is giving little away, but those who have bumped into Tucker recently say he is looking remarkably cheerful. He is also odds-on with the bookies, and they are usually right.

Steve Bell on Mervyn King’s warning that UK is at risk of triple-dip recession – cartoon

Category : Business

Persistently low growth will last until the next election, Bank of England governor warns as he cuts 2013 growth forecast to 1%

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