In May 2010, Greece turned to the EU and IMF for help. But the nation has paid a heavy price in lost output and soaring unemployment.
Read more: Greece: Three years after the bailout
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In May 2010, Greece turned to the EU and IMF for help. But the nation has paid a heavy price in lost output and soaring unemployment.
Read more: Greece: Three years after the bailout
Chuka Umunna, shadow business secretary warns the £3bn sale of the postal service could lead to sub-standard services
Labour has accused the government of desperately pushing ahead with the £3bn “fire sale” of Royal Mail in order to “raise funds to cover the gaping hole in George Osborne’s failed economic plan”.
Chuka Umunna, the shadow business secretary, said there was a “distinct whiff of desperation” surrounding the privatisation of the world’s oldest postal service. He accused the government of rushing into a saleout of a desire to quickly reduce a £245bn overshoot in government borrowing. He warned that a rushed sell-off could lead to “sub-standard services and people being ripped-off”.
“This timing of this privatisation has the distinct whiff of desperation from a government that has borrowed £245bn more than it planned and is eager to dig itself out of that hole at any price,” he said. “Ultimately it is the taxpayer who will lose out.”
A spokesman for the Department for Business, Innovation and Skills (BIS) said: “As business minister Michael Fallon said last week, the decision will not be based on ideology. It will be a practical, logical and commercial decision. Royal Mail will only be sold if it gets maximum value for the taxpayer.”Fallon has said that unless Royal Mail passed into private hands, it would not be able to access equity markets, without which “every £1 it borrows is another £1 on the national debt”. He said at least 10% of the shares would be allocated to Royal Mail employees, but refused to say whether staff would get free shares or have to buy them at a discount.
The flotation, which the government hopes to get away before April 2014, will be the largest employee share scheme since the privatisation of British Gas 26 years ago. About 140,000 staff are expected to each collect shares worth about £1,500 on average.
However, Labour questioned why “just 10%” of the shares in the initial public offering are earmarked for Royal Mail employees.
The Communication Workers Union (CWU) said postal workers would not “sell their soul” for a 10% stake in the company. Billy Hayes, general secretary of the CWU, said: “We don’t want our prize assets to be flogged at bargain basement prices just to cover up George Osborne’s mess.
“Privatisation is an old-fashioned idea from Thatcher’s era. We’d like to see a little more imagination and positivity when it comes to our postal service. We firmly believe it can and should continue to flourish in full public ownership.”
Umunna also warned that privatisation risks undermining the universal service obligation ensuring mail delivery six days a week to villages as well as cities at the same prices.
Fallon has already promised that “Royal Mail will remain the UK’s designated universal postal service provider and must continue to provide a six-day-a-week service throughout the UK”.
There was also renewed speculation over the weekend that the government is preparing to sell off the student loan book. It is to test the water with the sale of a £900m tranche of loans announced in March and is considering a wholesale privatisation, said the Sunday Times.
The Student Loans Company, which administers about £5.5bn of state loans a year, is part of the BIS. The department’s 2011 annual report showed £28bn of loans are outstanding, but it is suggested the total is likely to rise to near £40bn because of the increase in tuition fees.
A sale might be difficult due the sensitivities of a new owner cracking down on graduates to repay loans. The department declined to comment.
The supermarket boss insists that he only wants to overtake Asda – but the Grand Prix rumours won’t go away
As the horsemeat scandal reached its peak in February, the bosses of Britain’s biggest supermarkets and suppliers were summoned to Whitehall to explain themselves.
Packed into a Defra meeting room on a Saturday morning, the shopkeepers were given an almighty dressing down and ordered to take responsibility for one of the biggest food adulteration revelations of recent years.
Among them was Justin King, at 51, and after nearly a decade at the helm of Sainsbury’s, regarded as the elder statesman of the grocery business. He was, he says, determined not to take the criticism lying down. He accused government officials of failing to understand the industry, and even threatened to call on the prime minister to demand a ceasefire.
Three months on, with horsemeat found in beefburgers, bolognese sauces, lasagnes and corned beef – but not in any Sainsbury’s products – King still recalls the behaviour of those running the country with exasperation.
He said: “That moment was when politics and business were at their most tense, because politicians felt they had to be saying something. The reason no one was saying anything was because we were doing the responsible, trustworthy thing, which is understanding the issue before we shouted about it, while the dynamic of politics is the opposite.
“In business, we understand it and then we talk about it, while in politics they talk about it and at some later date work out whether their understanding fits with what they said about it some weeks before.”
It was perhaps surprising that King wanted to take such an active role in tackling the scandal on behalf of the industry, given that his own supermarket group had come through unscathed while bitter rivals Tesco and Asda were caught out.
But the new old man of retail, having worked for PepsiCo, Marks & Spencer and Asda before his nine years at Sainsbury’s, says he has seen far worse and that the public is not quite as worried about horsemeat as might be expected.
“We’ve had foot and mouth, bird flu and BSE, all of which were examples where the supply chain was challenged, so this is nothing new. It’s all about trust and acting in a trustworthy way.
“People are pretty realistic. If you Google horsemeat, [a lot of the hits] are horsemeat jokes. So there was an immediate juxtaposition in the consumers’ minds that it was serious but they got a lot of enjoyment from it, too.”
However, King is keen to stress that businesses must stop feeling sorry for themselves and realise that the customers are victims too.
“I don’t think it is fair enough for retailers affected to say they were victims. I had a very simple view – which is that I’m on the same side of the table as the customer.
“The second you say you’re a victim in this situation, even when you are, you put yourself on the wrong side of the table. The real victims are the consumers, who have paid their hard-earned cash.”
This week, the City will see that Sainsbury’s has been largely unaffected by the scandal. Full-year results released on Wednesday will show sales up 4.6% to around £25.6bn, with underlying pre-tax profits expected to be up 5% to £748m.
The focus may now have moved away from horsemeat, but City investors will be keen to learn more about King’s future. He has been touted as the next boss of Formula One, when Bernie Ecclestone hands over the keys to the world’s most glamorous sporting franchise.
Last weekend that speculation reached a new pitch after the supermarket confirmed that headhunters Egon Zehnder had been retained to advise on King’s successor. Sources inside the company suggest the process could take a year and that the process is merely a matter of good management.
King refuses to quash rumours that he is interested in the F1 job – he only ever says that he is “not aware of a vacancy”. He is a huge racing fan and has helped his son Jordan to become one of the most promising drivers of his generation.
But if the call from Ecclestone, F1′s diminutive owner, fails to come, a career in politics might appeal.
King is a former board member of the London Organising Committee of the Olympic and Paralympic Games, and was a member of David Cameron’s business advisory group – before they fell out over King’s objections to government plans to allow new staff to surrender employment rights in exchange for shares.
However, poor pay in the public sector could prove a sticking point for the businessman, who earned £3m last year – 20 times more than the PM.
On the subject of King’s future, analysts at Barclays wrote: “No CEO remains forever, and at some point Justin King will prove the press predictions correct and move on. However, he may be keen to be in charge when Sainsbury’s regains its number two market-share position from Asda – his former employer.”
That could happen later this year, after a remarkable 33 consecutive quarters of growth.
According to industry data from Kantar Worldpanel, Sainsbury’s is outperforming its rivals as the only big four supermarket to be increasing its market share. The grocer now accounts for nearly 17% of all the money spent on groceries in the UK, a slight rise on last year, at a time when Morrisons, Asda and Tesco all lost customers.
Sainbury’s successful Paralympics sponsorship, leading position in convenience stores and growing online presence have also helped, while Tesco’s decision to open no more megastores, and write off £800m on land it had bought for new developments but will now never use, may also give King cause to crow.
He was always angry about Tesco’s land-grab. “If you’re acquiring a site just a mile from an existing site, are you doing it because you think it’s valuable to trade, or because it stops a competitor?”
And his vitriol for the number one supermarket doesn’t stop there. He is equally scathing about Tesco’s new price promotion, which promises shoppers that Tesco’s prices for own-label and branded goods are cheapest. Having complained directly to Tesco and failed to reach a compromise, Sainsbury’s has now appealed to the Advertising Standards Authority. “We have exhausted everything we could with them [Tesco], so were left with no choice but to go to the ASA,” he says.
“You can’t have advertising saying that where your chicken comes from is important, while at the same time still sourcing your chicken from Thailand and Brazil, and then doing a price comparison with Sainsbury’s chicken, which is sourced from the UK. That is inherently unfair.”
Tesco said: “We use an independent agency to check prices of branded and own-label products at other retailers – online daily for Asda and Sainsbury’s, and, since they don’t have an online grocery service, twice a week at Morrisons stores. The basis for our comparisons is made clear on the price promise website.”
This may not be enough to soothe King’s feelings, but perhaps he will soon be directing his passions elsewhere. Less horsemeat, more horsepower?
Nationwide figures reveal 0.1% drop in house prices in April but figures still higher than 12 months before
House prices fell by 0.1% in April, the first fall in seven months, but they remained higher than they were 12 months previously, according to the UK’s biggest building society.
The figures from the Nationwide put the annual price of a UK home at £165,586. This is higher than the £164,630 recorded in March, but the seasonally adjusted figures, designed to smooth out changes driven by seasonal differences in activity in the market, showed a 0.1% fall over the month.
This was the first drop since September, and smallest of four during the last 12 months.
The annual rate of change, which is not seasonally adjusted, showed prices were up by 0.9% on April 2012, while a quarterly comparison showed a 0.5% increase on the previous three months’ averagRobert Gardnere.
April’s fall followed a flat-lining in prices in March, and reports of a slowdown in the mortgage market at the start of the year.
However, the society’s chief economist, Robert Gardner, said there were signs that activity and pricing had gained momentum.
“The three month on three month measure of house prices, which is a smoother measure of the underlying trend, has been in positive territory since October last year,” said Gardner.
“Similarly, the number of mortgage approvals has edged up from the levels prevailing last year, and there are reasons for optimism that activity levels will continue to strengthen in the months ahead.”
The society, which bases its figures on mortgage valuations it has carried out over the month, pointed to the return of first-time buyers to the market in recent months and government schemes to increase the cost and availability of credit as positive signs for the housing market.
It added that there were “tentative signs that wider economic conditions are starting to improve”, but noted that “progress is likely to be gradual”.
The most recent figures from the Land Registry showed a 0.1% rise in prices in England and Wales in March. However the data, based on completed purchases, showed vast differences between different regions, ranging from double-digit price falls in some cities to double-digit growth in some part of London.
In his ‘emergency’ budget in 2010, George Osborne pledged to create a less debt-fuelled economy. Where is that promise now?
The late Eddie George, in 2002, brought the phrase “two-speed economy” into common parlance, telling an audience in Scotland: “We have taken the view that unbalanced growth in our present situation is better than no growth – or, as some commentators have put it, a two-speed economy is better than a no-speed economy.”
But his words could just as well have been applied to last week’s GDP figures. While it was undoubtedly great news that the UK has skirted around a “triple dip”, the breakdown of the numbers suggested that, far from achieving the rebalancing George Osborne hoped for, away from consumers and towards industry, the mix of growth looks much as it did a decade ago. Manufacturing output declined; services expanded; government spending made a positive contribution. Industrial output is still 10% below its pre-crisis peak.
Yet far from acting to redress the balance, the coalition’s latest policies read like a desperate attempt to return to the unstable, unsustainable norms of the early noughties.
Help to Buy, announced in the budget, will offer taxpayer backing for up to £130bn worth of mortgage lending, while last week’s extension of the Funding for Lending scheme will allow banks to receive £10 of cheap funding for every pound they lend to small businesses in 2013 – and lend it back out again in any way they like, including to buy-to-let investors.
Back in 2002, George wanted to reassure consumers they would not face a runup in interest rates – because with other sources of growth, such as industry and exports, struggling, the Bank was willing to allow Britain’s shoppers to continue propping up demand with their buy now, pay later spending habits rather than risk economic stagnation.
When he spoke, the cost of the average home was less than £96,000, though prices were already rising at double-digit rates; by the peak of the boom, little more than five years later, it had all but doubled, to £183,959.
Alongside that extraordinary growth in house prices came an unprecedented explosion in household debt. But constantly rising prices bred a warm feeling of confidence among homeowners and fuelled a sense of entitlement to the unearned benefits of rampant housing-market inflation, creating a ready-made lobby group opposing changes to inheritance tax, council tax or any other method of sharing the windfall more widely.
In Osborne’s first, “emergency”, budget in 2010, he carefully laid out his intention of building a safer, more stable economy, less reliant on debt-fuelled spending. Yet three years on, scarred by the failure of the pound’s 20% depreciation to spark an industrial renaissance, he appears to be banking on the two-speed doctrine to lift him clear of trouble.
Osborne has insisted that Help to Buy is not aimed at pushing up prices. But encouraging first-time buyers to take out mortgages with high loan-to-value ratios – on properties whose value may be unsustainable even at current levels, let alone after another market bounce – is hardly a recipe for a fairer or more stable economy.
The Treasury claims to hope the policy will stimulate housebuilding, helping to ease the chronic shortage of homes that has driven up prices; but as the Treasury select committee rightly pointed out in its report on the budget, if the government really wanted to kickstart building, it should act to do so directly. That might mean taking advantage of record low gilt yields to invest in council housing, for example. But as Pete Jefferys of Shelter put it in a blog last week, Help to Buy is a “Thatcher-style home ownership revolution, not a Macmillan-style housebuilding boom”.
Neither does pumping out a new generation of cut-price loans – which, remember, will be available to anyone buying a house worth up to £600,000 – tackle the problem of banks still saddled with shaky-looking mortgages from the boom years. It just postpones the reckoning – and risks making it worse when it comes.
There is agreement across the political spectrum that Britain faces a housing crisis: a generation of young people have little or no prospect of affording a place to live, and find themselves trapped in insecure, poor-quality rental housing owned by landlords out to make a quick buck.
But first-time buyers need cheaper homes, not bigger loans, and the chancellor’s argument is reminiscent of those who used to claim vehemently in the mid-noughties that allowing low-paid workers to borrow six times their income was socially necessary, because otherwise young people wouldn’t be able to afford a home.
A mass programme of publicly funded housebuilding, along the lines stirringly recreated in Ken Loach’s documentary The Spirit of ’45, could boost supply dramatically and help to rebuild the shattered construction sector, while tougher regulation of the rental market could ease the pain for those unable to afford their own home.
And taxing housing more heavily – whether through a more progressive council tax system, heftier inheritance levies or a land value tax, under which homeowners would pay a small percentage of the value of their property each year – could help to prevent the next bubble inflating. Instead, the government appears intent on subsidising it.
While the shares fall and the smartphone wars rage, Apple’s music store keeps growing – and tying users into its platform
Steve Jobs put a new slide up on the huge screen. “We started about a year and a half ago to create a music store,” the Apple chief executive told the audience. “That meant we have to go and negotiate with the big five music companies. Now, before we did this I was reminded of a quote from Hunter S Thompson about the music industry.”
He looked up at the screen. In giant letters it read: “The music business is a cruel and shallow money trench, a long plastic hallway where thieves and pimps run free, and good men die like
A gold bar has no easily appraisable value – it’s simply worth whatever a buyer and seller agree it is worth
The “barbarous relic” is how Keynes referred to gold, and recent buyers of the stuff might not be too well disposed to it either. Over Friday and Monday, gold suffered its biggest plunge in value in 30 years. At one point on Monday, the market price of a troy ounce dropped by over $30 in just a few minutes. Even after a mild recovery yesterday, at $1,363 an ounce, the not so precious metal remains more than $200 below where it began on Friday.
Why the plunge? Very few of the explanations are especially persuasive. A slowdown in China (which is a major buyer of commodities)? Hardly news. Ditto the signs of a (very) mild pickup in the US. As for the reports that the central bank of Cyprus will cash in 10 tonnes of its gold holdings to pay for its economic and fiscal crisis, that sale – while noteworthy by recent European standards – would be of only 0.2% of the world’s reserves. The more accurate explanation may be the most prosaic: that after hitting an all-time peak of $1,920 an ounce in September 2011, gold has simply gone up far enough in price for holders to start selling it. Even before the turbulence of the past few days, it had already been heading south. Much the same could be said of many other commodities that have been falling over the past few days. Which leads us to an intriguing irony.
Ever since the crisis broke out, a vocal minority of investors have used gold as a critique of western economic-rescue policies. All those billions pumped into moribund economies in Britain and the US and Japan; all those many-phased quantitative-easing programmes by central banks; the general debauchment of currencies, so that the pound is now worth around 20% less than it was when RBS and Lloyds-HBOS fell over – an argument wheeled out over and over is that all this semi-Keynesian loucheness is bound to produce the mother of all inflationary booms, and the best insurance against that is gold. Or that newer virtual means of exchange, Bitcoin. Or anything, really, as long as it’s not fiat currency. It’s a strain of argument used by shrink-the-staters; and it has long seemed more grounded in ideology than empirical reality.
Take that old saw about gold being an ideal protection against rising inflation. Over the very long term, true. Over any other timeframe, equities are just as effective a hedge. But in any case, after nearly £400bn of Bank of England cash, this Weimar-style hyperinflation has yet to turn up. Which leaves us with the irony: that those who spurn sterling as being too easily debased in value have themselves invested in an asset that has no easily appraisable value. How much a gold bar is worth is really down to whatever a buyer and seller agree it’s worth. It’s an asset, not an inviolable store of wealth – whatever the goldbugs say.
Supermarkets announce petrol price cuts following a fall in the wholesale cost and a more favourable exchange rate.
View original post here: Petrol prices down at supermarkets
UK consumer price inflation stays at 2.8% in March for the second month in a row, the Office for National Statistics says.
See original here: UK inflation steady at 2.8% in March
Norwegian gas company says British pricing is open to manipulation and calls for more transparent methods
One of the biggest suppliers of gas to Britain, Statoil of Norway, has said the UK’s system of power market price reporting is open to manipulation and “gaming” and needs to be shaken up.
The damning assessment of the UK system from one of the world’s biggest energy companies comes six months after the Guardian triggered an investigation by City and energy watchdogs with a report detailing concerns about wholesale gas market rigging raised by an ICIS Heren price reporter, Seth Freedman.
The inquiries into the £300bn market, started by the then Financial Services Authority and Ofgem, are still looking at the way the price reporting agencies such as ICIS cover the markets as well as how energy companies go about their wholesale trading activities.
Huge gyrations in reported prices on 28 September last year raised fears that it could represent market manipulation similar to Libor interest-rate rigging, a scandal that has undermined financial markets and led to fines of £290m for Barclays and £390m for Royal Bank of Scotland.
The prices reported by agencies such as ICIS form the basis for long-term contracts and one explanation for the 28 September price movements is that traders stood to benefit by manipulating the benchmark price.
In a letter in response to a consultation exercise launched by ICIS and published on its website, Statoil UK’s regulatory affairs adviser, Shelley Rouse, said the current price reporting methodology should be amended to improve the transparency and reliability of the calculations and the pricing indices. “We are concerned that the current methodology allows for the potential use of incorrectly reported trades to be factored into the index calculations, which can result in inaccurate prices being published,” she wrote. “Statoil would support the use of a daily weighted average of reported physical trades. This will enable the published pricing indices to fully reflect the traded market and would reduce the opportunity for gaming or market manipulation.”
As part of the same exercise, another of the world’s most powerful energy companies, RWE of Germany, said it too “may not always have full confidence in the accuracy of their [reporter-led] price assessments.”
Centrica, the owner of British Gas, also expressed positive views about basing prices on deals done through exchanges rather than on the over-the-counter (OTC) market.
ICIS, owned by Reed Business Systems, has now promised to set up an alternative system of price reporting based only on actual executed trades, which will run alongside its current system. In a statement signed by Louise Boddy, head of gas and power at ICIS Heren, she admitted her company needed to address these concerns. “Responses to this consultation do show consensus that a deals-based closing index methodology would provide a reliable measure of closing market value. ICIS will therefore develop a new pricing methodology to provide this,” she said .
“ICIS proposes to run a new closing index alongside certain closing assessments in a first phase lasting at least six months. After six months of publication, ICIS will analyse the reliability of this index. It will also go back to market participants for feedback on the reliability of the index and potential replacement of the existing assessments.”
Freedman was critical of the methodology used by ICIS, alleging among other things that his fellow reporters were not trained properly. He was subsequently sacked and has launched an unfair dismissal case.
Concerns about how all price reporting agencies conduct their business have also led to calls for changes from the International Organisation of Securities Commissions. This comes amid a trend for longterm wholesale contract prices to be linked to OTC gas prices established by companies such as ICIS and Platts rather than oil prices as usually happened in the past.
But the OTC market, estimated to be worth around £300bn annually, is largely unregulated and prices are hard to establish because the price reporters often have to rely on talking to only one party in any deal.
In February, three major brokers launched their own set of indices covering the UK and Europe based on confirmed transactions. The “Tankard” benchmarks have been created by ICAP, Marex Spectron and Tullet Prebon.