Leicester African Caribbean Business Association

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Budget hits the poorest hardest, says IFS

The coalition government’s first Budget has hit the poorest families hardest, a leading economic think tank has said.

The Institute for Fiscal Studies (IFS) said the measures announced in the Budget in June were “regressive”.

Its analysis suggests that low income families with children are set to lose the most as a percentage of net income due to benefit cuts announced in the Budget.

The Treasury said it did not accept the “selective” findings of the IFS.

The IFS had already challenged the government’s claim that the Budget was “progressive”.

Its report concluded: “Once all of the benefit cuts are considered, the tax and benefit changes announced in the emergency Budget are clearly regressive as, on average, they hit the poorest households more than those in the upper middle of the income distribution in cash, let alone percentage, terms.”

James Brown from the IFS also told Radio 4′s Today programme: “However, when you also include the measures that were pre-announced by Alistair Darling in previous Budgets and pre-Budget reports, the overall package does seem somewhat regressive, particularly within the bottom nine-tenths of the income distribution.”

Housing costs

The IFS analysis suggests that cuts to areas such as housing benefit and disability allowance would hit the poorest families to the tune of £422 between the Budget and April 2014.

The idea that the poorest families with children should end up being hit hardest is appalling”

End Quote Yvette Cooper Shadow work and pensions secretary

This means that only the richest 10% of households lost more in cash terms from the Budget, than those in the bottom 60%.

The report also questioned the government’s decision to use the Consumer Prices Index (CPI) instead of the Retail Prices Index (RPI) when calculating certain benefits.

It said that more than three-quarters of benefit claimants were affected by increases in housing costs, which are included in the RPI.

The report said: “Low-income households of working age lose the most as a proportion of income from the tax and benefit reforms announced in the emergency Budget.

“Those who lose the least are households of working age without children in the upper half of the income distribution.

“They do not lose out from cuts in welfare spending, and they are the biggest beneficiaries from the increase in the income tax personal allowance.”

‘Selective analysis’

In George Osborne’s June Budget, the chancellor increased VAT from 17.5% to 20% and cut welfare spending.

Child benefit and public sector pay were frozen and 25% cut from public service spending.

The shadow work and pensions secretary Yvette Cooper accused the government of carrying out a “shocking and unfair attack on children and families”.

“The idea that the poorest families with children should end up being hit hardest is appalling and gives lie to George Osborne’s claim it was a progressive Budget,” she said.

A spokesman for the Treasury said: “The government does not accept the IFS analysis.

“It is selective, ignoring the pro-growth and employment effects of Budget measures – such as helping households move from benefits into work, and reductions in corporation tax.”
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Non-emergency 111 health number to be piloted

Trials of a three-digit telephone number for those needing non-emergency medical care in England have been launched in the North East.

NHS County Durham and Darlington Primary Care Trusts are to pilot the free 111 number, to act as an alternative to 999, followed by Nottingham, Lincolnshire and Luton.

The government service will not initially replace NHS Direct, but may do so in the longer term if successful.

If so, it will be available nationwide.

We are concerned this new number means the public have to make life or death decisions about whether their situation is a medical emergency”

End Quote Katherine Murphy Patients Association

People calling 111 will be able to get health advice and also information about local services such as out-of-hours GPs, walk-in centres, emergency dentists and 24-hour pharmacies.

It is hoped it will take the pressure off 999 calls, amid estimates suggesting that up to half of these calls do not need an emergency response.

But anyone calling the number with an emergency will be directed to 999 for an ambulance to be dispatched.

“It is essential that we improve access to, and understanding about, urgent care services, which includes out-of-hours care,” said Health Secretary Andrew Lansley. “At present, too many people are confused about who to contact and how to do so.

“By putting in place one, easily memorable 111 number for all urgent enquiries to run alongside the emergency 999 number we will simplify NHS services for patients.”

999 or 111?

Professor Stephen Singleton, medical director of NHS North East, said: “The introduction of the NHS 111 service in County Durham and Darlington is an important part of our regional vision to improve access to urgent healthcare for local people.

“By better understanding what people really need from different local services, 111 will enable the commissioning of more effective and productive health care.

“Most importantly it will help improve efficiency across the whole health care system by reducing unnecessary waste and making sure people get access to the right service, first time.”

Katherine Murphy, chief executive of the Patients Association, said: “We welcome initiatives that increase patients’ access to information and advice, and also increase NHS efficiency.

“However, we are concerned this new phone number means the public have to make life or death decisions about whether their situation is a medical emergency.

“We welcome the pilots and would like them to raise awareness and educate the public on when to call 111 or 999.”
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Drug addict benefit withdrawal considered

People dependent on drugs and alcohol who refuse treatment could have their welfare benefits withdrawn under plans being considered by the Home Office.

The idea is in a consultation paper on the government’s drug strategy for England, Wales and Scotland.

The proposals also suggest that addicts on benefits should not be required to seek work while receiving treatment.

Some experts have suggested that withdrawing benefits could lead addicts into crime and prostitution.

The Labour government intended to carry out pilot schemes this year to get drug users into work.

Under the plans, addicts who failed to attend a treatment awareness programme would lose welfare benefits.
Continue reading the main story
“Start Quote

The temporary ban allows us to act straight away to stop new substances gaining a foothold in the market”

End Quote James Brokenshire Minister for crime prevention

However, in May the Social Security Advisory Committee – an independent statutory body – said withdrawing benefits from drug users would lead them into crime and prostitution.

The coalition government scrapped the pilot programme – but the Home Office has now revived the idea.

It asks for views on whether there should be some form of “financial benefit sanction” for claimants who do not take action to address their drug or alcohol dependency.

Martin Barnes, chief executive of charity DrugScope, said he “seriously questioned” whether linking benefit sanctions to a requirement to undergo medical treatment was fair and effective.

He told the BBC’s Radio 4′s Today programme there was no evidence that such an approach would for work for a “particularly vulnerable and marginalised group”.

“Also, we have to bear in mind that under the principles that are enshrined in the NHS Constitution, medical intervention should be therapeutic, consensual, confidential – and I just don’t see that’s compatible with using the benefits system to require people to undergo a complex form of drug treatment intervention,” he added.
‘Mistake’

Simon Antrobus, chief executive of Addaction, said getting more people into drug treatment was “always a good thing, but attempting to force them into that process by taking away their benefits would be a mistake”.

“The people Addaction help will tell you how coming off drugs is extremely difficult, and how deciding to access treatment took them a very long time.

“Remove financial stability during that time, and you can severely damage someone’s chances of beating an addiction. More likely, you could increase their chances of turning to crime to find an alternative income,” he said.

A Home Office spokesperson said the government would “carefully consider” responses, but it was “determined to prevent drug use and strengthen enforcement against supply”.

“That’s why we are asking experts for their views on a range of issues including whether we should strengthen the link between benefits, and drug and alcohol use, so that users are strongly encouraged to address their dependency,” he said.

The Home Office has also confirmed plans to give ministers the power to ban new substance for a year until they have been properly assessed in a bid to combat so-called “legal highs”.

Minister for Crime Prevention James Brokenshire said: “The drugs market is changing and we need to adapt current laws to allow us to act more quickly.

“The temporary ban allows us to act straight away to stop new substances gaining a foothold in the market and help us tackle unscrupulous drug dealers trying to get round the law by peddling dangerous chemicals to young people.”

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bbc.co.uk

Benefits review ‘shocking betrayal’ says Labour

Labour has condemned government plans to review universal welfare payments such as child benefit and the winter fuel allowance, which could be frozen.

Labour leadership candidate David Miliband accused the Conservative-Lib Dem coalition government of misleading the public over fuel payments.

And shadow work and pensions secretary Yvette Cooper said it was a “shocking betrayal of pensioners”.

But Deputy PM Nick Clegg said no final decisions had been taken.

Apart from freezing some welfare payments, the government could also consider paying benefits to all, whatever their income, but “tapering” them so that the poorest in society get the most money.

But government sources have indicated that “means testing” or ending the universality of such benefits will not happen.

Ministers are already committed to raising the age at which the winter fuel allowance can be claimed from 60 to 65 by 2020.

However, the government has not ruled out bringing this change forward.
‘Unacceptable dishonesty’

Mr Miliband said: “David Cameron said that Labour was telling lies when we said their plans would mean they would have to hit winter fuel allowance.

Miliband: ‘This is not the new politics, it’s the old politics’

“It turns out we were right. And we’ve got to say very clearly this is not the new politics, it’s the old politics. And we’ve got to say very clearly, it’s wrong.

“Up and down Britain, pensioners rely on this benefit to get by.

“The payments Labour introduced mean many pensioners can heat their homes without worrying and fretting over the energy bill to come. The prime minister’s dishonesty is unacceptable.”

Dot Gibson, general secretary of the National Pensioners Convention, also warned against changing the winter fuel allowance system.

She said: “Last winter over 36,700 pensioners died of cold-related illnesses – a staggering 13 pensioners every hour.

“Yet the government is now considering taking the winter fuel allowance away from millions of households which will only make matters worse.”
‘Fairer system’

Newspaper reports suggest the government will cut back universal payments such as the fuel allowance and child benefit, as part of a £13bn reduction.
Continue reading the main story
Analysis
Norman Smith Chief political correspondent, BBC Radio 4

Given the cuts the coalition says are needed, it was perhaps unavoidable that in the end its attention would turn to “middle-class benefits”.

But, although the Treasury has targeted the welfare budget as ripe for big savings, this is easier said than done.

The difficulty ministers face is that clawing money back by getting people into work or tackling fraud takes time. To add to that, the government has already agreed to increase the overall level of benefits and to link pensions to earnings.

So where else can the Treasury start to trim the welfare budget? Answer: those middle-class benefits – like child benefit and the winter fuel allowance – which together cost £14bn.

The headache for the Treasury is that trimming these still doesn’t raise nearly enough money, so it is going to have to keep on searching the welfare budget for further significant savings.

But Deputy Prime Minister Nick Clegg, speaking as the coalition marked 100 days in power, dismissed the idea as “speculation” and refused to be drawn on the coalition’s plans.

He told the BBC: “We are engaged as a government in a collective effort to get this right to both make savings to the welfare bill and to create a simpler, fairer welfare system that, above all, gets people into work.”

The Times and The Daily Telegraph both report that the winter fuel payment could be reduced by as much as £100 in the government’s comprehensive spending review this October.

Currently anyone over 60 is eligible, with households getting £250. Pensioners aged over 80 can claim £400 per household.

The scheme costs taxpayers about £2.7bn.

Child benefit, paid at the rate of £20.30 a week for the first child and £13.40 for other children, costs about £4.3bn a year.

BBC chief economics correspondent Hugh Pym said total spending on welfare, excluding state pensions, will be about £115bn – more than health, which costs £106bn, or any other department.

This figure means welfare is a tempting target for the spending axe, our correspondent added.
‘Gradual process’

A Department for Work and Pensions spokeswoman said there would be no “running commentary” on the coalition’s benefits plans.

She said: “The qualifying age for winter fuel payments for men and women is rising in line with the increase in women’s state pension age.

“This is a gradual process. Under the current system women’s state pension age is rising from 60 to 65 between April 2010 and April 2020. We have launched a call for evidence on raising state pension age to 66 and will publish our response in the autumn.”

No decisions had yet been made ahead of the autumn’s spending review and subsequent white paper on welfare reform, she added.

The coalition agreement pledges to “protect key benefits for older people such as the winter fuel payment”, but does not rule out reform.

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strong>100 days of government in 100 seconds

uk-politics-11006394

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16 August 2010 Last updated at 12:25

Clegg: Coalition has ‘sense of purpose’

Nick Clegg: “I’m not acting prime minister”

The coalition government has confounded critics in its first 100 days with its strong “sense of purpose”, Deputy Prime Minister Nick Clegg has said.

Mr Clegg, who is covering for PM David Cameron, who is on holiday, said those who predicted the coalition would be “insipid” now accused it of being “too radical”.

But he vowed its reforms meant there would be “light at the end of tunnel”.

Mr Clegg was speaking at a public meeting in London.

The Liberal Democrat leader will be the public face of the coalition for the next two weeks, while Mr Cameron is on holiday in Cornwall.

The prime minister remains in overall control, but during his time in the spotlight, the deputy prime minister will argue for key elements of the Lib Dem agenda.
‘Spirit of partnership’

Speaking at an event organised by MSN in central London, Mr Clegg said: “I’m not acting prime minister… The prime minister is now taking a well-deserved break. It’s a quite straightforward situation.
Continue reading the main story
“Start Quote

I think a lot of people felt that a coalition government would be, by definition, some sort of insipid mush”

End Quote Nick Clegg Deputy Prime Minister

“The prime minister is the prime minister. He continues to stay in charge…

“Obviously I’m holding the fort for a couple of weeks and doing it in the spirit of partnership which is at the heart of the coalition government.”

Asked if he could have foreseen being in this position before the general election, he replied: “No.”

Mr Clegg insisted that the Conservative-Lib Dem coalition, which has been in power for almost 100 days, would last for a full five-year term.

He said: “I think we need five years to sort things out… to take a lot of difficult decisions so that we can move forward to rebuild the economy.”

Mr Clegg was quizzed about the government’s planned spending cuts, likely to be the biggest in the UK for decades, saying that they were necessary to cut the budget deficit, but adding: “I think there’s light at the end of the tunnel…

“We hope that when the five years are up, that people see we have taken the right decisions.

“I think a lot of people felt that a coalition government would be, by definition, some sort of insipid mush…

“Actually, what we are finding now, after 100 days, is that we are being accused of doing completely the opposite: being too radical, too reforming.”
‘More influence’

Since sealing the coalition deal in May, the Liberal Democrats have seen their poll ratings decline substantially, while the Conservatives and Labour have picked up support.

While acting as caretaker during Mr Cameron’s absence, Mr Clegg’s task is also to ensure the junior partner of the coalition can punch above its weight, said BBC political correspondent Iain Watson.

Later this week he will address criticism within his own ranks that the coalition is balanced too far towards Conservative interests and too focused on public spending cuts.

On Sunday, Liberal Democrat deputy leader Simon Hughes said his party was determined to fight the Tories for seats in the next general election.

He told the BBC the coalition was a business arrangement, not a marriage.

“You fight the election on your own and we will do it because we want to win more seats,” he said.

“We want to have more influence and we want to be in government ideally on our own because evidently if we have a majority we can implement more of our policies and not only a proportion.”

Over the next two weeks Mr Clegg will also travel extensively in England outlining plans for greater opportunities to the least well-off and to encourage job creation outside of the South East.
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bb.co.uk/news

Fears over £65bn ‘NHS mortgage’

By Nick Triggle Health reporter, BBC News
Medical money There are more than 100 PFI projects

The NHS in England faces a total bill of £65bn for new hospitals built under the private finance initiative (PFI), figures obtained by the BBC indicate.

The so-called “NHS mortgage” means that for some trusts annual repayments take up more than 10% of their turnover.

Economists said the fees, which rise each year, would make it harder to achieve savings while doctors said they would mean less money for patient care.

But the government said the 103 schemes were providing value for money.

Under the schemes, private firms pay for and build new hospitals and mental health units, leaving the NHS to pay off what is effectively its mortgage over a period of 30 or so years.

The data shows that the value of the projects when they were built was £11.3bn.

However, over the lifetime of the deals, the NHS is due to pay back £65.1bn, once extra costs such as maintenance, cleaning and catering are taken into account.

The figures also reveal the levels of repayments are rising. In total, the NHS currently pays back £1.25bn each year – a figure which rises year-on-year until 2030 when it will top £2.3bn. The final payment will not be made until 2048.

The situation has prompted calls for the NHS to try to renegotiate the deals to help it cope during the squeeze on public spending and with the emphasis now on moving care out of hospitals and into the community.

While the NHS budget is being protected, the health service has still been told to find up to £20bn of savings by 2014 to help it cope with pressures from the ageing population, the rising price of drugs and lifestyle changes such as obesity.

Squeezed

Professor John Appleby, chief economist at the King’s Fund health think-tank, said: “It is a bit like taking out a pretty big mortgage in the expectation your income is going to rise, but the NHS is facing a period where that is not going to happen.

* Coventry and Warwickshire NHS Trust – Currently spending almost 15% of its income on its PFI project. Chief executive Andrew Hardy says the trust is already looking to reduce its payments.
* South London Healthcare NHS Trust – Has major PFI projects in Bromley and Woolwich. Spending 13% of income on repaying debt. Trust says there are “undoubtedly some constraints from having these fixed costs”.
* Dudley NHS Trust – Bosses say they are looking for “innovative” ways to reduce the PFI bill, which now accounts for 13% of turnover.
* Buckinghamshire NHS Trust – Three hospitals developed under PFI. Trust admits repayments “impact on the ease at which we can make savings”.

“Money is being squeezed and the size of the repayments will make it harder for some to make the savings it needs to. I don’t see why the NHS can’t go back to its lenders to renegotiate the deals, just as we would with our own mortgages.”

Dr Mark Porter, of the British Medical Association, added: “Locking the NHS into long-term contracts with the private sector has made entire local health economies more vulnerable to changing conditions.

“Now the financial crisis has changed conditions beyond recognition, so trusts tied into PFI deals have even less freedom to make business decisions that protect services, making cuts and closures more likely.”

Nigel Edwards, director of policy at the NHS Confederation, which represents trusts, accepted there was a problem.

“They were planned for a different world. I’m sure that in some cases people feel their hands are tied.”

But a Department of Health spokeswoman said the schemes were providing “value for money” and were “affordable”.

She added: “All trusts, not just those with PFI contracts, will need to deliver significant efficiencies over the coming years in order to meet rapidly rising demands while protecting front-line services.

“One of the benefits of PFI is that the buildings are always contractually required to be kept in good condition – good maintenance will always cost more than not maintaining facilities to a high standard.”
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Communities department publishes all spending over £500

The Department for Communities is publishing details of all spending for more than £500 made during Labour’s last year in power.

Communities Secretary Eric Pickles says it is part of “greater openness in spending” aimed at cutting waste.

His department is publishing 1,900 items of spending in 2009-10 – listed in categories like taxis and catering.

They show that £16m was spent on events, marketing, advertising and promotion in the last financial year.
‘Out in open’

Thursday’s publication is made up of £314m worth of spending in 2009/10 by the department and a further £337m by quangos linked to it.

Figures will also show that £635,000 was spent on taxis and cars and £310,000 on food and catering.

Mr Pickles said it would allow taxpayers to “go through the books and hold ministers to account”.

He has already asked councils in England to publish details of all expenditure over £500 – although they will not be forced to do so.

Mr Pickles said: “This department, like the rest of Whitehall, needs to look at where every penny is going and getting this data out in the open will help that process.”

He added that the figures were already showing how the department could spend more carefully, get better deals and question purchases.

All departments – apart from health and international development – have been asked to find ways to reduce costs by between 25% and 40%, as the coalition government seeks to tackle the budget deficit.
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bbc.co.uk/news

Bank of England forecasts ‘choppy’ economic recovery

The UK economy faces a “choppy recovery” over the next two years, the governor of the Bank of England, Mervyn King, has warned.

His comments came as the Bank lowered its economic growth forecast, and said inflation would stay higher for longer than previously forecast.

The Bank now expects the economy to grow by about 2.5% in 2011, down from its previous forecast of about 3.4%.

It added that a lack of bank lending would limit economic growth.

The Bank’s Quarterly Inflation Report came after the latest official unemployment data showed a further fall in the jobless total.

The number of people unemployed in the UK fell by 49,000 to 2.46 million in the three months to June, according to the Office for National Statistics.

This is the second consecutive month that the jobless number has fallen.

VAT impact

The Bank said the main factor behind its prediction that inflation would remain higher than previously forecast was the government’s decision to raise VAT to 20% from 17.5% at the start of next year.

The most recent official figures showed that Consumer Prices Index inflation stood at 3.2% in June, above the Bank’s target rate of 2%.

Retail Prices Index inflation, which includes housing costs, was higher still, at 5%.

The Bank’s warning that the UK faces a difficult economic recovery could increase fears of a double dip recession.

However, while Business Secretary Vince Cable spoke at the weekend about his concerns of the UK falling back into recession, so far no leading economist has said such an outcome is likely.

He will promise “uncompromising strategy” to reduce the £5.2bn annual cost of fraud and error.

Mr Cameron will also outline plans for more penalties and prosecutions.

Credit ratings firm Experian said it was in talks over a deal which could see it paid according to the number of fraudsters uncovered.

It said it already had a contract to scrutinise new housing benefit claimants, in a deal agreed by the previous government which had saved £17m.

Experian, whose activities include monitoring people’s spending patterns and working to combat credit card fraud, added that it could undertake a wider commitment which could see it examining claims for other benefits.
‘Payment by results’

Work and pensions minister Chris Grayling said credit agencies held “extensive data” which could be used to cut benefit fraud.

He told BBC Radio 4′s Today programme: “The whole point is that we are introducing, across a number of government activities, payment by results…

“Government should pay people outside organisations when they get the job done.”
Continue reading the main story
Analysis
Norman Smith Chief political correspondent, BBC Radio 4

Cracking down on benefit cheats is one of the hardy perennials of modern politics. Almost all governments promise to do it – and earn themselves glowing headlines in the process.

But actually recouping money fraudulently claimed is much harder than simply talking tough about it.

In part this is because of the sheer complexity of the system; in part because there are so many claimants. Nearly 5m people are on out of work benefits.

Critics also point out that the actual level of fraud is comparatively small. Only about 1% of all benefits are fraudulently claimed. Indeed more money is lost through administrative error than benefit fraud.

The only real way to significantly reduce the benefits bill is to get people back into work.

The difficulty, as most experts in this field agree, is that in the short term this actually costs money rather than saves it.

Mr Grayling added: “Why should government not use the same tools that are available to independent organisations?”

He said only firms which worked “within the rules” would be considered for contracts.

Writing in the Manchester Evening News, the prime minister said tougher penalties, more prosecutions, measures to encourage others to shop cheats and greater efforts to recover to recover “stolen” payments would also be included.

He said: “At a time when we’re having to take such difficult decisions about how to cut back without damaging the things that matter the most, we should strain every sinew to cut error, waste and fraud in our welfare system.

“Welfare and tax credit fraud and error costs the taxpayer £5.2bn a year. That’s the cost of more than 200 secondary schools or over 150,000 nurses.

“It’s absolutely outrageous and we can not stand for it.”

A simplified benefits system being developed by Work and Pensions Secretary Iain Duncan Smith would help reduce the £1.6bn annual bill for administrative errors, he said.

Mr Cameron has previously said that reducing benefit fraud and error would be the “first and deepest” cut in public spending.
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UK jobs market recovery ‘to stall’

Recovery in the jobs market will “stall” this year as demand for workers in the public sector falls, new research has warned.

According to the Chartered Institute of Personnel and Development (CIPD), a third of employers expect to cut jobs in the next three months.

The public sector employers in particular are planning cuts, with 36% of them looking to lose staff.

The size of the cuts being considered has also increased, the CIPD said.

Across all sectors employers are expecting to make an average of 5.5% of their workforces redundant, the survey of 600 companies suggests, up from the 3.6% average cut being considered three months ago.

Despite the threat of cuts, the CIPD’s net employment index, which measures the number of companies planning to hire against the number planning to lose staff, is still in positive territory at +two, down from +five three months ago.

But the difference between the public and private sectors is stark. For the private sector alone, the index shows strong hiring intentions at +19 while in the public sector, the index gives a reading of -35.
Jobless rise predicted

“The employment situation looks like a case of the good, the bad and the ugly,” said Gerwyn Davies, CIPD public policy adviser and report author.

“While the number of employers planning to make redundancies is similar to that in the spring, this trend masks the true extent of forthcoming job losses in the third quarter of the year.
Continue reading the main story
“Start Quote

The big question is whether the private sector can create new jobs in sufficient numbers and quickly enough”

End Quote Alan Downey Head of public sector at KPMG

“This is being driven chiefly by public sector organisations, where redundancies will affect almost 8% of the workforce on average.”

He added that a rise in unemployment over the medium term was now on the cards.

“The CIPD believes that a rise in unemployment in the next two years remains a distinct possibility as the private sector recovery is offset by the 600,000 public sector job losses the government expects over the next five years.”

Alan Downey, head of public sector at KPMG, which helped carry out the research, said it was not clear that the private sector would be able to fill the gap left by a shrinking public sector.

“The big question is whether the private sector can create new jobs in sufficient numbers and quickly enough,” he said.

The latest official figures showed that unemployment fell in the three months to May this year, to a total of 2.47 million.

In October the scale of cuts to government departmental budgets will become clear when the government announces the results of its spending review.

Cuts of 25% are anticipated for most departments.

According to the CIPD’s survey, job losses are most likely in local government.

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RBS half-year profits hit £1.1bn

RBS HQ The bank has announced about 23,000 job cuts since 2008

Royal Bank of Scotland has seen its pre-tax profit leap to £1.14bn in the first half of the year from £15m a year

It reported an operating profit of £1.6bn compared with an operating loss of £3.4bn in 2009.

RBS, which is 84%-owned by the taxpayer, has announced 23,000 job losses worldwide since October 2008, including 17,100 in the UK.

Earlier this week, it agreed to sell 318 branches to Santander.
Big Banking

* Investment bank boosts Barclays
* RBS half-year profits hit £1.1bn
* Lloyds sees sharp swing to profit
* Northern Rock returns to profit

RBS’s results follow upbeat performances from Barclays, HSBC and Lloyds.
‘Good progress’

Chief executive Stephen Hester said the bank’s five-year restructuring plan was “on track”.

“We are making good progress with disposals and overall business restructuring,” he said, but he added that the rebuilding of RBS was “a marathon not a sprint”.
Continue reading the main story

“Start Quote

The semi-nationalised bank does appear to be on the mend – although it’s a long way from full strength”

End Quote
image of Robert Peston Robert Peston Business editor, BBC News

* Read Robert’s blog

RBS said that its net lending was down by 3% on 2009 levels to £14.4bn, but that the bulk of its loans were to small businesses.

Banks have been criticised for not doing enough to support firms during the economic downturn.

Like its rivals, RBS insists that in the current climate it cannot lend faster than its customers want to repay their existing debts.

“The semi-nationalised bank does appear to be on the mend – although it’s a long way from full strength,” BBC business editor Robert Peston said.

The group’s net interest margin – the gap between what it pays in interest and what it charges in loans – rose to 3.77% from 3.57% a year earlier

“RBS would of course point out that regulators are forcing it to hold more capital relative to assets, which forces it to charge relatively more for loans to maintain its return on capital,” our business editor said.
Government rescue

Last year, RBS was told to sell branches by the European Commission to safeguard competition concerns after it was bailed out by the UK government.

ROYAL BANK OF SCOTLAND GROUP
Last Updated at 06 Aug 2010, 10:13 UK Royal Bank of Scotland Group twelve month chart
price change %
53.00 p + +1.00 + +1.92

More data on this share price

The sale of the branches to Santander earlier this week includes 311 RBS-branded branches in England and Wales, and seven NatWest branches in Scotland.

Spain’s Santander already owns the Abbey, Alliance & Leicester and Bradford & Bingley brands in the UK.

The sale will earn a premium of about £350m on the assets’ value.

RBS said on Friday that the sale of its credit card payment processing business, GMS, was at “an advanced stage”.

Reports suggest two private equity investors will buy the firm in a £2bn deal that would generate up to £900m profit for the bank.

‘Recovery’

RBS led a consortium that bought Dutch bank ABN Amro before the credit crunch in 2007, but the deal was a disaster, weakening its balance sheet and forcing the government to pump in about £45bn to keep the bank afloat.

The bank has put £282bn in toxic debts into a taxpayer-backed insurance scheme, but RBS will bear the first £60bn of losses on these.

Most of the banks reporting this week have reported an improvement in the amount set aside for bad debts, which have helped give the results an overall boost.

Barclays reported pre-tax profits of £3.95bn for the first half of 2010 – up 44% on the same period last year.

Lloyds, which is 41%-owned by UK taxpayers, saw its pre-tax profit come in at £1.6bn, compared with loss of £4bn in the same period in 2009.

And HSBC reported pre-tax profits of $11.1bn (£7bn) for the first six months of 2010 – more than double its profits for the same time last year.

“A lot of this recovery is down to the recovery in the economy, with borrowers having less difficulty keeping up with loan repayments,” our business editor said.
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Council challenges decision to axe school building fund

Leaders of a council denied funding to rebuild nine secondary schools are meeting the education secretary to try to get him to change his mind.

The councillors from Sandwell in the West Midlands will hold talks with Michael Gove in London.

The government has scrapped more than 700 schemes to build new schools in England, saying they were wasteful.

Last month Sandwell was wrongly told repair work would go ahead, only to be informed days later it was a mistake.

Sandwell council leader, Darren Cooper, told BBC Radio 4′s Today programme: “Our schools are in such a poor state. Some of them date back to the 1920s.
School Building Cuts

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* Q&A: Scrapped building scheme
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* In pictures: Rebuilding schools

“And clearly that is not conducive to good quality of education for young people – an environment that’s falling apart.”

The councillors from Sandwell are the first to directly petition for the work to go ahead as planned.

Mr Gove has admitted he knew he was going to disappoint local authorities when he stopped the £55bn Building Schools for the Future (BSF) programme.

He said there would still be money available to rebuild or refurbish dilapidated schools but thought the BSF scheme, set up by the previous government, was a waste of taxpayers’ money.

Although the fund was created in 2004, only 180 projects have been completed.

The decision to axe the scheme at the beginning of July meant a total of 735 projects were called off across England.

A further 151 are in limbo while civil servants decide if they should be cancelled or go ahead.

It has led to an outcry, not only from those involved with schools, but also from the construction industry.

The chairman of the Children, Schools and Families Select Committee, Graham Stuart, said Mr Gove was working hard to ensure hundreds of school buildings would still be improved.

He told Today: “All the schools in Sandwell were originally mis-categorised and it turned out that was entirely the responsibility of Partnerships for Schools; the quango that was inherited, so he’s [Mr Gove] not had an easy time of it.

“But I hope from this that we can end up, which is the important thing, with better value for money, a more fair allocation of the benefits and ensuring that we deal with those schools which most need it.”

www.bbc.co.uk

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4 August 2010 Last updated at 09:22

Lloyds Banking Group profits hit £1.6bn

Lloyds Banking Group has reported a return to profit for the first half of the year, largely due to a drop in the amount set aside to cover bad loans.

Pre-tax profit at the bank, which is 41%-owned by UK taxpayers, came in at £1.6bn, compared with loss of £4bn in the same period a year earlier.

Money set aside to cover bad loans fell from £13.4bn to £6.5bn.

On Tuesday, Northern Rock reported a return to profit for the period, while on Monday HSBC posted a profit of £7bn.

Total income at Lloyds rose by almost a third, to £12.5bn from £9.8bn, while costs fell by more than £1bn, largely as a result of job losses, both of which helped to boost profits.

Shares in Lloyds rose by more than a penny, or 1.7%, to 73.1p in early trading following the results, which were better than analysts had expected.

“The first half of 2010 was a significant milestone for Lloyds Banking Group as the group returned to profit,” Lloyds said.

“Despite the challenging economic environment, the core business performed strongly and we continued to see positive momentum across all the key income lines.”

The bank also said it was “well positioned to deliver strong financial performance over the coming years”.
Bail-out

Lloyds reported earlier this year that it had made a profit in the first quarter, but did not give any details.

In 2009, the bank made an operating loss of £6.3bn, almost unchanged on the £6.7bn it lost in 2008.

Part of these losses were due to the costs of taking over HBOS during the financial crisis. Lloyds has been accused of not undertaking proper due diligence on the takeover, and therefore underestimating the extent of the bad loans on HBOS’s books.

This meant the government had to step in to bail out the troubled bank, to the tune of £21bn.

The turnaround in the first half of this year makes it more likely that taxpayers will see a profit from their investment in the bank, analysts say.

The Lloyds share price is now about the same level it was when the government took its stake in the bank, when the fees associated with the investment are taken into account.
Lending targets

The bank also appears to be on course to hit gross lending targets set by the government as part of the conditions of the bail-out.

Lloyds said it had lent £23.7bn to businesses during the first half year, against a target of £44bn for the year to the end of March, and £14.9bn in new mortgages, against a target of £23bn.

However, net lending figures, which take into account not just money loaned out, but money repaid as well, paint a slightly different picture.

“[Lloyds'] total net loans to all households and businesses have dropped 1% to £368bn, and it is charging more for that credit relative to what it pays for funds,” said the BBC’s business editor, Robert Peston.

Lloyds boss Eric Daniels told the BBC the reason for the flat net lending was the fact that businesses and consumers were looking to pay down debt rather than increase their debt levels further.

“We are ahead of our lending commitments, but what we can’t do is prevent our customers from paying back. Our customers are behaving very prudently. Credit is available,” he said.
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COI jobs go as government advertising budget slashed

The government is to get rid of 287 advertising and marketing jobs as part of its spending cuts programme.

Staff numbers at the Central Office of Information (COI) will fall by two-fifths from 737 to 450.

The move follows a government freeze on “non-essential advertising”, with the COI’s budget estimated to have fallen by more than half.

Chief executive Mark Lund said the operation would become “leaner” and still deliver an “excellent” service.

Staff are being offered the chance to apply for voluntary redundancy, although there are expected to be compulsory lay-offs.
‘Effective’

A formal 90-day has begun and will end on 1 November.

The COI said its turnover on advertising and marketing had fallen by an estimated 52% in June this year, when the spending freeze was imposed, compared with the same period in 2009.

Mr Lund said: “COI has always adapted to meet the requirements of government and the changing media landscape. A leaner COI is in line with new government priorities.

“Our future will be grounded in continuing to deliver excellent communications to achieve government aims, in the most cost efficient and effective way possible.”

COI does not have its own dedicated budget but works for Whitehall departments and public sector bodies, having a turnover of £531m in 1009/10.

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Fixed retirement age to be axed

By Martin Shankleman Employment correspondent, BBC News

Employment Minister Edward Davey: “This isn’t forcing people to retire later, it gives them the choice”

The government is planning to scrap the default retirement age in the UK from October 2011.
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Under the proposal, employers would not be allowed to dismiss staff because they had reached the age of 65.

Activists, who have long campaigned against the rule, welcomed the proposal as a “victory” against ageism.

Currently, an employer can force an employee to retire at the age of 65 without paying any financial compensation.

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The only obligation on an employer is to hold a meeting with the member of staff to discuss plans at least six months before their 65th birthday.

At the end of that meeting it is entirely at the discretion of the employer whether or not to terminate employment.
‘Unresolved problems’

The government has launched the start of a consultation process about scrapping the rule.

Given that an employer must give six months’ notice before forcing someone to retire on the grounds of age, it means the changes could be felt from 6 April next year.

Continue reading the main story

Christine Hall

I wouldn’t want to sit at home, I’m quite a sociable  person and hate the thought of the door closing at 65”

End Quote Christine Hall, 58 College administrator

After that date, no new forced retirement notices could be issued.

The CBI business group criticised the speed of the proposed changes saying it left firms “with many unresolved problems”.

The government’s timetable to scrap the default retirement age would give companies little time to prepare, it added.

However Rachel Krys of the Employers Forum on Age was delighted, saying it was “really unfair” that people had been forced out of jobs because of their age.

“We have to stop these blunt discriminators,” she added.

The charity Age UK, which has led the campaign to end the default retirement age, welcomed the government’s plan.

Last year it challenged the rule in the High Court but was unsuccessful.

“We’ve fought really hard to get government to do this,” a spokesman said.

“It is a massive win for hundreds of thousand of employees who are at risk of being forced out of their jobs.”

Economic benefit

news.
David Yeandle of the Engineering Employers Federation: “It will make it more difficult for workforce planning”

Proposals to change the retirement law formed part of the government’s Coalition Agreement, and was included in both parties’ manifestos, but previously no deadline had been set.

The government hopes the change will encourage people to work for longer, against a background of an ageing population.

That could ease the strain on public finances as more people continue to pay tax, while at the same time claiming the state pension.

Activists have argued it could inject billions of pounds extra into the economy.

But some employers are worried it will complicate the job of managing a workforce and add to overall costs.

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Bank of England governor hints rates will stay low

The governor of the Bank of England Governor, Mervyn King, has said he is more concerned about the strength of the recovery than inflation.

His comments, made during an appearance in front of the House of Commons’ Treasury Select Committee, suggest he believes interest rates should stay low for the foreseeable future.

Mr King said he could not be confident that growth was firmly established. Latest figures show the UK economy grew by 1.1% in the second quarter.

The gross domestic product (GDP) figures were stronger than had been expected. But Mr King said there was no pressing need to rein in rising growth or curb inflation.

He said: “The debate is about the appropriate degree of stimulus, not about applying brakes.”

The latest minutes from the Bank’s Monetary Policy Committee (MPC), which sets interest rates, showed one member out of eight voted to raise rates from their current level of 0.5% to curb inflation.

The central bank governor’s comments were in harmony with a report from the National Institute for Economic and Social Research (NIESR).

‘Political theatre’ The think tank said that growth would not pick up over the rest of the year, leaving annual economic growth at a sluggish 1.2% because of cuts in government spending.

NIESR questioned whether cuts of the scale planned were necessary for the UK. One of its researchers, Ray Barrell, said: “The idea of a Greek-style crisis in the UK was always very unlikely.

The ‘emergency’ budget was more about political theatre than economic necessity.”

NIESR’s views have an added importance as the think tank’s head, Martin Weale, has just become the MPC’s ninth member. He will cast his first vote on the level of interest rates next week. ______________________________________________________________________________________________

UK ‘misled’ on broadband speeds, says Ofcom repot

Britons are not getting the broadband services they are being sold, research by the regulator Ofcom suggests.

Its analysis of broadband speeds in the UK shows that, for some services, 97% of consumers do not get the advertised speed.

It also shows a growing gap between the claims ISPs make for broadband and the speed being delivered.

To fix the problem, Ofcom is revamping the code of conduct for ISPs and asking for changes to how broadband is sold.

Growing gap The regulator’s survey shows that the average residential broadband speed in the UK has risen in the last 12 months from 4.1Megabits per second (Mbps) to 5.2Mbps.

The report also reveals the changing nature of UK broadband.

Now 65% of UK homes have fixed line broadband and 24% of those users are on services sold as being able to support 10Mbps or more. By contrast, in April 2009 only 8% of homes had signed up for such a service.

Unveiling the figures, Ed Richards, chief executive of Ofcom, said the survey revealed a “growing gap” between what people were sold and the reality of their broadband service.

“The gap between the average headline speed and actual speed has increased in this period even though the actual speed has risen,” he said.

In 2009, he said, when actual speeds for broadband were 4.1mbps, the average that those services were being advertised for stood at 7.1Mbps.

In 2010, when people are generally getting 5.2Mbps out of their broadband, ISPs are claiming they will support speeds up to 11.5Mbps. Average download speeds, Ofcom/SamKnows Mr Richards

acknowledged that selling broadband was tricky because of the many factors that can influence the speed that a consumer experiences.

“It is not a homogenous product,” he said. “There are challenges of wiring, line length and interference and so on.

It’s not as simple as taking an absolute standard product. It’s a complicated product, more complicated than anyone imagined.” Despite this, he said, the way broadband was advertised typically by using the words “up to” before a speed was not as clear as it could be.

The speed survey found that, in some cases, hardly any customers got the “up to” speed that was being advertised.

Continue reading the main story

“Start Quote The burning issue seems to be the way broadband is advertised”

For example, the survey found that on DSL services advertised as being “up to” 20Mbps, only 2% of customers got speeds in the range of 14-20Mbps. Of the others, 32% were getting a 8-14Mbps service and 65%, 8Mbps or less.

A spokesman for BT, Britain’s largest ISP, said it gave customers an idea of the speed they were likely to get on their line so their expectations were realistic.

“People get what they sign up for,” he said.

“They are informed when they sign up so they know what speed to expect.” In some cases, he said, technical problems might stop those estimated speeds being reached.

“If the customer’s line cannot achieve that for whatever reason, then the customer can leave us without penalty,” he added.

Code changes

In an attempt to improve how broadband is sold, Ofcom has been pushing ISPs to adopt a new code of practice, which will mean consumers get more information about speed as they sign up for a new provider.

The code is due to come in over the next 12 months and all the UK’s larger ISPs have signed up for it.

Speed limit sign, PA Few Britons get the broadband speeds being advertised suggests research.

It will mean that, instead of being given a single figure, consumers will get an idea of the range of speeds their line can support.

This will be provided as a “durable record” so there can be no dispute if reaching an estimated speed proves elusive.

“Ofcom is trying to move the market on from speed,” said Alex Salter, co-founder of broadband measurement site SamKnows which gathered the figures behind the analysis.

“While it is a handy statistic ISPs can use to communicate such a complex service to consumers, it has proven to be misleading,” he said.

Mr Salter said giving more information about a service would help the growing number of consumers who are very knowledgeable about the type of broadband they need.

Many people were looking for information about delay and jitter on their line as they used higher quality video streams and took part in online gaming.

Mr Richards from Ofcom said the regulator had made its views known to the Advertising Standards Authority which was now conducting a review of the way broadband was sold.

“We do want to see clearer advertising and we make no secret about that,” he said. “We want advertising that is more meaningful to the consumer.” A spokeswoman for the ASA said the review would be completed by the end of 2010.

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Bank bonuses ‘must be restrained’

Finance Minister Mark Hoban (left) stands next the Chancellor, George Osborne, on budget day Mr Hoban (back) confirmed plans for two new bank taxes announced in the Budget A Treasury minister has called on banks to exercise restraint in paying bonuses when the public and private sectors are under pressure to cut labour costs.

Financial Secretary Mark Hoban said banks needed to show they operated in a “fair and stable” way in allocating bonuses this year.

He also confirmed the government was looking at ways to tax banks’ profits.

Last week, the European Parliament approved a deal placing new limits on bankers’ bonuses from next year. Under the terms of the deal, bankers will receive no more than 30% of their bonus immediately and in cash, a limit that falls to 20% for larger bonuses. Remaining payments will be deferred and linked to long-term performance.

“Start Quote if anything, the creation of the coalition government has made life even more unpleasant for Britain’s banks and bankers” Mr Hoban was addressing an annual dinner of the British Bankers’ Association (BBA) at Mansion House, where he was given a “cool reception” by bankers, according to BBC business correspondent Simon Jack.

The Conservative minister said:

“We have the opportunity to send a clear message to the public that the banking system now operates in a way that is fair and stable and no longer rewards employees based on short-term performance whilst leaving investors and taxpayers exposed to the long-term risks.” He said that by “visibly reforming the way they operate, banks can show they exist to serve the whole economy, not just their own interests”.

Bonuses ‘regulated’ However, the bonus culture was later defended by the head of the BBA, Angela Knight, who had described the reputation of bankers as akin to a “a leper colony to some, or carriers of bird flu to others” at the dinner.

She said that bonuses in the UK were already regulated and were assessed against “proper performance figures”.

On a warm and muggy night at the Mansion House in the heart of the City of London, the Financial Secretary to the Treasury, Mark Hoban, got a cool reception from a gathering of top bankers. His message that the government is actively considering the option of imposing a new tax on financial transactions and bankers pay, on top of the banking levy, went down like a vuvuzela during speeches peppered with World Cup references.

Angela Knight, chief executive of the BBA, admitted that the banking fraternity were about as popular as a leper colony, but was grateful the England football team were more unpopular still.

The industry said they had been drowned out by their own vuvuzela chorus of 150 reports, consultations and commissions in the last two years.

The Lord Mayor of London, seated with HSBC chairman Stephen Green, pointed out that while London agonised over regulatory and tax reform, East Asian markets continued to power ahead.

That thought was met with universal recognition and may set the tone for the start of the BBA conference.

“The whole question of pay was put into regulation last year,” she told BBC Radio 4′s Today programme. “The only country in the G20 to do it was here in Britain.” ‘Myths’

In a separate speech to the BBA on Tuesday, the Royal Bank of Scotland boss, Stephen Hester, warned of public misperceptions about banking.

“If we do not constructively challenge these myths, then we will be seen as drifting further away from the public interest, with potentially damaging consequences,” he said.

As an example of these “myths”, he mentioned the belief that “banks have little interest in supporting small businesses”, whereas he said the truth was that it was the small businesses who had little interest in borrowing.

He also attacked the “casino label” for investment banking, claiming that this business financed the building of schools and hospitals, and helped people to buy homes.

Mr Hester welcomed government plans for a banking commission.

“To date, there has been too much focus on potential remedies, without taking the important first step to actually learn the lessons of the financial crisis.”

He hoped the commission would agree with his view that speculative “proprietary trading” had little to do with the crisis. New bank taxes Mr Hoban, in his speech, confirmed that the new coalition government planned to introduce two new taxes on banks.

The first will be a “bank levy” aimed at raising £2.5bn ($1.7bn), that was included in George Osborne’s first budget and will apply to banks’ risky borrowing.

The Treasury launched a consultation on this tax on Tuesday, the day after Mr Hoban’s speech.

The idea is to discourage banks from relying on the kind of short-term unguaranteed borrowing – such as repos, wholesale deposits and interbank deposits – that evaporated during the financial crisis, in what amounted to a modern-day bank run. Ordinary retail deposits, which are government guaranteed and a more stable source of funding for banks, will probably be exempt from the bank levy.

Secondly, a “financial activities tax” will be charged on the profits earned by banks plus the bonuses they pay.

The two taxes were both originally proposed by the IMF in April to be applied by governments across the globe. ____________________________________________________________________________________________ 23 July 2010 Last updated at 09:47

UK economic growth jumps to 1.1%

UK economy UK economic growth beat expectations to grow at a brisk 1.1% in the second quarter

The UK economy grew by a faster-than-expected 1.1% in the second quarter of the year, according to official data.

The figure – a preliminary estimate from the Office for National Statistics (ONS) – was almost double the 0.6% growth rate expected by economists.

It was also a marked pick-up in pace from the 0.3% growth of the first three months of the year.

Much of the growth came from the key services sector, which makes up about three-quarters of the UK economy.

_____________________________________________________________________________________________ 22 July 2010 Last updated at 09:25

David Cameron focuses on foreign trade policy

David Cameron in New York David Cameron spoke as he met financial and business leaders in the US .

David Cameron has promised to transform British foreign policy so that it is focused primarily on promoting UK businesses abroad.

Speaking in New York on the last day of his trip to the US, the prime minister said he wanted diplomats to use every opportunity to win orders for UK firms.

He announced that he was appointing a civil servant with expertise in business to head the Foreign Office.

The department would also recruit a commercial director, Mr Cameron said. ‘Open for business.’

The prime minister was speaking as he met financial and business leaders in the US.

Analysis Continue reading the main story James Landale Deputy Political Editor, BBC News For the Britain’s ambassadors across the world, life is about to change.

David Cameron wants them to put aside their long telegrams home, their low politics and their high diplomacy and instead focus on one thing alone – trade.

He said he wanted to reorientate the Foreign Office so that every diplomat went into every meeting with a clear set of commercial priorities that they wished to achieve.

Mr Cameron made the announcement as he banged the drum for UK plc with some of the largest corporations in the US.

His point was quite simple – if the Britain is to drag itself out of recession while cutting the deficit it is going to need companies in the US and elsewhere to buy British goods.

All prime ministers tout for business overseas, but few have so much riding on it.

The new permanent secretary at the Foreign Office will be Simon Fraser, who has been at the Department for Business since May 2009.

Mr Cameron described him as “Britain’s leading expert on trade in the civil service”.

The prime minister told reporters: “I want to refashion British foreign policy, the Foreign Office, to make us much more focused on the commercial aspects… making sure we are demonstrating Britain is open for business. “I think it is a big opportunity. As we come out of recession and into recovery we have got to pay our way in the world and I want to reorientate the Foreign Office to be much more commercially minded.” He added:

“I want us to be much more focused on winning orders for British business overseas, attracting inward investment back into Britain. “I want to make sure that whenever any British minister, however junior, is meeting any counterpart, however junior or senior and for however short a time, they have always got a very clear list of the commercial priorities we are trying to achieve, whether that is pushing forward British orders, attracting inward investment or promoting bilateral or unilateral trade talks.

“This is extremely important for Britain as we come out of recession and go into recovery.”

Mr Cameron rounded off his two-day visit to the US – his first visit since becoming prime minister – after talks with UN Secretary General Ban Ki-moon.

A No 10 spokesman said it had been “a meeting of minds on the full range of current global challenges”.

He said the two men had agreed on the current strategy in Afghanistan, on the need for concerted effort for a diplomatic solution to the Iran nuclear issue, and the need for Israel and the Palestinians to engage in peace talks.

Earlier in the day, Mr Cameron met – and shared a hotdog with – the city’s Mayor Bloomberg.

Lockerbie On Tuesday, the prime minister held talks in Washington with President Obama, discussing issues such as Afghanistan, the Gulf of Mexico oil spill and the global economy, as well as the case of British computer hacker Gary McKinnon, who is facing extradition to the US.

The two leaders held a joint press conference after their meeting in which Mr Obama called his country’s relationship with the UK “truly special”, while Mr Cameron said it was “essential”.

The PM also met a group of four US senators who are calling for an inquiry into the release of Lockerbie bomber Abdelbaset Ali al-Megrahi.

Mr Cameron said later he was “not minded” to order an inquiry, because he did not need one to know that the Scottish government’s decision to free Megrahi had been “wrong”. _____________________________________________________________________________________________

UK to open Earth observation hub

By Pallab Ghosh Science correspondent, BBC News Earth from space

The new hub will focus on environmental monitoring Science minister David Willetts is to announce a new UK centre for monitoring the Earth from space.

The Earth observation hub will focus on acquiring environmental data, such as information on deforestation and the impact of climate change.

The hub will be based at the International Space Innovation Centre (ISIC) at Harwell in Oxfordshire, which will open in April 2011.

The aim is to bring together UK expertise in Earth observation.

The hub will also be used as a flight operations centre for controlling satellites.

It addition, it will develop the expertise to analyse environmental information coming from space, helping scientists learn more about how the planet is being affected by climate change.

Tracking pollution Professor Alan O’Neill, director of the National Centre for Earth Observation, said: “By bringing together the best of our space science base with industrial researchers, we hope to develop a wide range of applications. “These include global monitoring of deforestation, concentration of greenhouse gasses, and levels of marine pollution.”

Up to 40 scientists will be based at the centre.

Many of them will be involved in gathering and presenting the vast amounts of information coming from environmental satellites.

The data will be made available to scientists across the world and to the public.

Details of the hub will be announced by the Science Minister David Willetts in a speech on Wednesday morning at the Farnborough Air Show.

He is expected to say that the centre will not become a “centralising force”; rather, it will serve as a hub to link regional space capabilities and promote knowledge-sharing between academia and industry.

A preview of Mr Willetts’ speech stated: “ISIC will operate at arm’s length from the UK Space Agency so that it becomes a common facility within the Harwell campus. “And at Harwell, the new European Space Agency facility is already working well, especially in climate change science and related applications. “Soon it will have an incubator for new space businesses and work on space exploration. This is a fantastic additional catalyst for UK space.” ____________________________________________________________________________________________

Tax system ‘to be simplified to encourage investment’ Money

The UK taxation system is over-complicated, the government says

The “spaghetti bowl” of UK tax law is to be simplified to cut the burden on business and attract foreign investment, George Osborne has said.

The chancellor is setting up an Office for Tax Simplification to streamline the 11,000 page tax code. He said Britain had “one of the most complex and opaque tax codes in the world”.

And he wanted a “permanent body to push against the forces of complication” and make life easier for firms. Announcing the new body, Mr Osborne said his “dream” was “that people might actually understand the tax laws with which they were being asked to comply with”.

The new body will initially conduct two reviews – streamlining 400 tax reliefs, allowances and exemptions and simplifying the tax system for small businesses, including a simpler alternative to the controversial IR35 code.

It will advise ministers where the tax system is too complex but it will not look at tax credits, which Mr Osborne said he considered part of the benefits system.

‘Economic boost’

The chairman of the new body will be former Conservative MP and Treasury minister Michael Jack and its director will be John Whiting, formerly of PricewaterhouseCoopers, who is tax director at the Chartered Institute of Taxation. Neither will be paid.

The government says the tax system became a “hindrance” to business under Labour and that by simplifying it and making it more competitive for small firms, it will stimulate economic growth.

In a speech, Treasury minister David Gauke said: “The tax system created by the previous government was overly complex and has made the tax affairs of millions of families and businesses across the UK extremely complicated.

“We need to reduce the complexities in our tax system and the coalition is committed to delivering that goal.

“The Office for Tax Simplification will provide important advice that will help inform us in making the right reforms to the tax system that will help to pave the way to bringing more international business to the UK, which will give our economy the boost it so urgently needs in the years ahead.”

The OTS’s remit covers UK taxes and duties administered by HM Revenue and Customs, but it will not deal with tax credits or taxes administered by other bodies nor will it have any influence on setting tax rates.

In his first Budget last month, George Osborne set out plans to reduce the headline rate of corporation tax by 28% to 24% over four years in an effort to show Britain was “open for business”.

But this will be partly paid for by cuts in capital allowances, which provide tax breaks to firms investing substantially in operational assets such as machinery.

Critics say this will penalise small and medium-sized manufacturing firms.

In May the government set up the Office for Budget Responsibility, to provide the government with independent forecasts of UK economic growth and public deficits. _____________________________________________________________________________________________

David Cameron launches Tories

Big society plan David Cameron: “I think we’re onto a really big idea, a really exciting future for our country”

David Cameron has launched his “big society” drive to empower communities, describing it as his “great passion”.

In a speech in Liverpool, the prime minister said groups should be able to run post offices, libraries, transport services and shape housing projects.

Also announcing plans to use dormant bank accounts to fund projects, Mr Cameron said the concept would be a “big advance for people power”.

Voluntary groups have queried how the schemes will be funded.

The idea was a central theme in the Conservative general election campaign and Mr Cameron denied that he was being forced to re-launch it because of a lack of interest first time around. Related stories * How should you contribute to society? * Going big on the ‘big society’ idea While reducing the budget deficit was his “duty” and in “the national interest”, he said giving individuals and communities more control of their destinies was something that had underpinned his philosophy since he became Conservative leader in 2005.

“There are the things you do because it’s your passion,” he said.“Things that fire you up in the morning, that drive you, that you truly believe will make a real difference to the country you love, and my great passion is building the big society.

” ‘People power’

The prime minister said community projects would be established in four parts of the UK – Liverpool; Eden Valley, Cumbria; Windsor and Maidenhead; and the London borough of Sutton – as part of efforts to “turn government completely on its head”.

Each of the project areas – which Mr Cameron said had approached ministers asking to be involved – will be given an expert organiser and dedicated civil servants to ensure “people power” initiatives get off the ground.

Analysis Continue reading the main story Norman Smith Chief political correspondent, BBC Radio 4 The ‘big society’ is David Cameron’s Big Idea.

His aides say it is about empowering communities, redistributing power and fostering a culture of volunteerism.

Perhaps no wonder then that Tory candidates during the general election found it difficult to sell the idea to voters.

So why is David Cameron returning to this theme ?

In part because he does view it as his answer to Big Government – but there are also more basic political motives.

First, it’s about providing a different agenda to the day by day litany of cuts, cuts and more cuts. Second, it is – as Eric Pickles has acknowledged – about saving money.

If people are doing things for free then you don’t have to pay public servants to do them for you. So beneath the grand-sounding philosophy there is hard-nosed, practical politics behind the ‘big society’ message.

The initiatives being championed include a local buy-out of a rural pub, efforts to recruit volunteers to keep museums open, support to speed up broadband supply, and giving residents more power over council spending.

These schemes and others in the future, he said, would represent “the biggest, most dramatic redistribution of power from elites in Whitehall to the man and woman in the street”.

In the past, he said, the talents and initiative of people had been wasted, claiming that over-centralised government had turned public sector workers into the “weary, disillusioned puppets of government targets”.

Mr Cameron acknowledged the transformation he was seeking would not happen overnight and stressed it was not a matter of the government stepping aside and letting people fend for themselves.

“Of course there is not one lever you can simply pull to create a big society,” he said.

“We should not be naive enough to think that simply if government rolls back and does less, then miraculously society will spring up and do more. “The truth is we need a government that helps to build a big society.”

As well as encouraging greater volunteering and philanthropy, Mr Cameron confirmed plans to use funds stuck in dormant bank and building society accounts to enable “some of the most dynamic” charities, social enterprises and voluntary groups to take over the running of public services.

It is hoped that hundreds of millions of pounds will eventually be available in start-up funding through a Big Society Bank, to be matched by private investment.

‘Great agenda’

Mr Cameron rejected suggestions that the plans were “cover” for substantial cuts in public services due next year and that the public were either confused or disinterested by the proposals.

“I don’t accept that people don’t understand what this is,” he said. Everyone was aware of the “great work” that volunteers were already doing in communities up and down the country, he said, and it was his ambition to simply expand this. “It is incredibly simple idea and one, I think, is catching on,” he said. Labour leadership contender Ed Miliband said the proposals rang “hollow” because the government was intent on “withdrawing” from many public services and the voluntary sector could only flourish in partnership with the state.

“You cannot say you are all in favour of the big society and volunteering and, at the same time, cut back on that support,” he told the BBC’s Daily Politics.

Voluntary groups have broadly welcomed the idea but expressed concerns about how it would be financed, given that public funds are likely to be cut as part of the budget squeeze. “It is going to be very challenging for them to play a bigger role if they have less resources to do it,” said Ben Kernighan, from the National Council for Voluntary Organisations. __________________________________________________________________________________________

NHS shake-up ‘hands funding powers to GPs’ Surgery Doctors would pay hospitals direct under the new proposals

GP practices are set to be handed responsibility for most health services under ministerial plans for a radical shake-up of the NHS in England.

Local trusts and strategic health authorities would be sharply scaled back to make way for their new role.

Health Secretary Andrew Lansley believes GPs are best placed to understand patients’ needs and to decide where money should be spent.

But there are concerns GPs may not have the skills or will to take on the role. Before becoming health secretary in the new coalition government, Andrew Lansley spent six-and-a-half years shadowing the brief.

That is almost unheard of in politics. It meant he came into the job with a clear vision of what he wanted to achieve.

Indeed, he had already started talking to the British Medical Association before the election. He believes – and doctors agree – that the medical profession is best placed to know what works and should, therefore, be handed the purse strings.

But if the proposals are to work there needs to be strong accountability to ensure doctors do not get themselves into a financial mess.

Who will perform that role is as yet unclear. Everyone involved will be looking to see if the white paper answers that key question next week.

Q&A:

The NHS shake-up

Discussions with doctors’ representatives over the plans are continuing, and the government has confirmed it will publish further details in a white paper next week

‘Radical plans’

The NHS budget currently stands at £100bn a year.

About 80% of this is given to local health managers working for 152 primary care trusts, which in turn commission services for their areas.

The plans involve setting up groups of practices which would work together in consortia, then buy in management skills, possibly from people doing the same job for existing primary care trusts.

The consortia would take charge of billions of pounds of funds for mental health, hospital and community services.

The NHS budget has been protected by the coalition government, and is not subject to the severe cuts of other Whitehall departments.

But the health service has been told to save up to £20bn by 2014 to help it cope with the ageing population, rising drug prices and lifestyle changes such as obesity.

The Royal College of Nursing has claimed almost 10,000 posts – double the number from two months ago – are being cut despite government promises to protect frontline services.

The white paper is also expected to make reference to the creation of an independent NHS board to oversee NHS services.

Market dynamic

The acting chief executive of the NHS Confederation, Nigel Edwards, told BBC Radio 4′s  Today programme there were “some quite significant risks” in transition to the new system.

“Obviously it is going to take time to implement this and the PCTs at the moment are the people who keep the lid on the performance and financial management of the system,” he said.

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We will have to see the details, but there is certainly a willingness to look at this Dr Laurence Buckman, British Medical Association Mr Edwards also said the reform would move the NHS from a market where large organisations place big contracts, to one similar to the gas or telecoms market, where demand is shaped by many individual purchasing decisions.

“I think the concept here is lots of individual decisions by GPs – when they make referrals and send people to hospital – will be added up and we will have a greater market dynamic,” he said.

“GPs will also help plan services and direct strategy for hospitals by telling hospitals what they need for the longer term.”

Mr Edwards said he expected many GPs to recruit former staff from PCTs to help them cope with the additional workload, which will involve “quite a big step up from what they’ve been doing before”.

Values

The move to having GP consortia controlling spending has long been championed by Mr Lansley – and in recent months the British Medical Association has indicated it is open to working with the government on the idea.

Dr Laurence Buckman, chairman of the BMA’s GPs committee, said: “We will have to see the details, but there is certainly a willingness to look at this.”

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GPs will also help plan services and direct strategy for hospitals by telling hospitals what they need for the longer term Nigel Edwards.

NHS Confederation

He added the plans had the potential to improve services as GPs were “much quicker to respond to patients”.

Dr Mike Dixon, chairman of the NHS Alliance, a group of doctors who support GPs getting involved in commissioning, agreed. “Staff on the front-line know what is good care and what is bad care.

They are more sensitive to the needs of patients and I think this will lead to better outcomes.”

A spokesman for the Department of Health said details of its plans for a patient-centred NHS would be published in a white paper shortly.

He added: “In rec