Debt Time Bomb? New Record Sum 'On Tick'

Mortgage approvals have hit their highest level since February 2008, while total household debt reached a new record last month, according to the Bank of England.

The Bank said 67,701 home loans worth £10.5bn were dished out in October - just 24 hours after confirming that its Funding for Lending Scheme (FLS) would no longer support mortgage borrowing from January to help prevent the market overheating and future debt risks.

It also highlighted rising consumer debt levels in separate figures which reflected concern over the property market, as total household debt hit a new high of £1.43trn in October.

The figures add weight to fears of a "perfect storm" for the economy amid unsustainable debt levels, rising prices and low wage growth.

Earlier this week, the Money Advice Service reported that only a fraction of the nine million people with serious debts were getting help.

People concerned about debts are advised to seek free help from charities

Nationwide said earlier on Friday that a monthly house price increase of 0.6% in November took average UK values to £174,566 from £173,678 in October, although prices were still around 6% below their 2007 peak.

A shortage of property on the market and incentives to help borrowers under Government schemes such as Help to Buy have been cited as reasons for national price growth, though it has been largely driven by soaring values in London and the South East.

Yesterday, the Bank of England took the first step in putting the brakes on the property market as it scrapped an initiative that has had a significant part to play in encouraging mortgage lending.

Governor Mark Carney said the FLS stimulus would instead focus purely on helping small business borrowing, which remains muted.

FLS has offered lenders access to cheap finance on condition that they pass on the benefits to borrowers, and experts yesterday said the Bank's move could spell the "beginning of the end" for ultra-cheap mortgage deals.

Nationwide provides a respected monthly report on house prices

Fears of a looming property bubble have been growing in recent months amid a string of reports suggesting demand in the housing market far outstrips the growth in the supply of homes.

The latest phase of Help to Buy, which offers state-backed mortgages to people with deposits as low as 5%, was launched in October.

This is expected to inject further activity into the market among credit-worthy buyers who have particularly struggled to get on the housing ladder or move up it since the financial crisis struck because they have a lack of upfront funds.

Lenders representing around two-thirds of the mortgage market have committed to coming on board the scheme and there are also signs of competition increasing to attract low-deposit borrowers from lenders which are outside the Help to Buy scheme.

The expansion in mortgage lending comes at a time of growing concerns about wider household debt, which hit a new high of £1.43trn in October - slightly above the total registered in 2009.

But the bank's figures showed a sharp drop in growth of consumer credit, made up of lending on credit cards, personal loans and overdrafts - growing by £457m over the month, halving a £1.1bn rise the previous month.

Experts suggested the figure was a sign that people remain wary of taking on more debt, despite some evidence of increasing confidence in recent months.

Matthew Pointon, a property economist at Capital Economics, said the mortgage lending and credit figures suggested that household finances were "not strong enough" to support a countrywide house-price boom.

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Bankers' Pay: Top Earners Net 35% Rise

The number of high earners in British banks rose 11% last year, with more than 2,700 people raking in above €1m (£833,000) at an average £1.6m - a rise of 35%.

The revelation from the European Banking Authority (EBA) threatens to reignite the row on bankers' pay in the wake of the financial crisis and various mis-selling and misconduct scandals.

News of the average total 2012 pay - including salaries, pensions and bonuses - for London's top earning bankers sparked a bitter response from the TUC.

The union organisation's general secretary Frances O'Grady said: "Britain's bankers are not suffering a cost of living crisis.

"The economic crash has led to the longest decline in living standards since the nineteenth century for ordinary people yet the bankers who caused it get richer every year."

According to the EBA, more than 3,500 bankers in Europe earned €1m or more in total - representing a big rise across the EU as a whole though Britain, with its larger financial services industry, had 12 times as many high earners as any other country.

The figures were released as the EU prepares to introduce caps, which would have easily been broken in London.

Regulators in Brussels decided that from 2014 bonuses for "risk-taking" staff can not exceed annual salary, or twice that if shareholders give their approval.

The data showed that banks in Britain and France in particular needed to adjust pay structures to meet new the rules because variable pay was almost four times fixed pay.

At least 10,000 bankers, most of them in London, are expected to be affected by the new bonus cap.

Banks such as Barclays, Deutsche Bank and HSBC are expected to cut bonuses and raise fixed pay to comply with the new rules.

The EBA figures, part of data-gathering efforts as the EU finalises the bonus cap rules, offer a rare glimpse into the pay of bankers across Europe.

Of the British bankers earning more than €1m, 2,188 worked in investment banking, 62 were in retail banking, 198 were in asset management and 266 were in other areas.

In Spain, which had to bail out its banking sector last year, the number earning at least €1m fell by a fifth to 100.

However, the average remuneration for those 100 was €2.2m, higher than Britain and Germany.

The figures include high earners from employees based in each country, rather than the domicile of the bank, so the UK figures - because of its dominance in financial services - include high earners from international lenders such as Goldman Sachs and JPMorgan.

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BoE Boss Warns Homeowners Over Rate Rise

Homeowners must find a way to pay their mortgages if interest rates rise because they will not be guaranteed a helping hand, the governor of the Bank of England has warned.

Mark Carney's message came after BoE figures showed mortgage approvals hit their highest level since February 2008, while total household debt reached a new record last month.

The recently-appointed Canadian governor urged would-be buyers to think of the debts they were taking on and whether they would be able to repay a 25-year or 30-year mortgage rather than relying on rising property values.

He told The Guardian: "Are you going to be able to service that mortgage five years from now, 10 years from now, if interest rates are higher?

"Or are you counting, even subconsciously, on the price of your house keeping going up and if something happens an ability to sell it quickly and not facing the consequences of not being able to pay?"

Against the market background where there is strong demand among would-be buyers to get on the property ladder, Mr Carney noted his concern about the lack of new homes being built.

It is hoped that strategic decisions made now to try to control mortgage lending will avoid the need for severe and drastic policy actions to be taken if there is a bubble in the property market.

Mr Carney says people with mortgages must think of the consequences

Mortgage approvals are running at levels not seen since Northern Rock was nationalised in February 2008.

Mr Carney said: "The right way to do policy - to protect against the boom and bust cycles - is to act early in a graduated, proportionate way - and that reduces the probability of having to act in a bigger way later."

Earlier this week the BoE confirmed its Funding for Lending Scheme (FLS) would no longer support mortgage borrowing from January to help prevent the market overheating and future debt risks.

The project, which was introduced in August 2012, offers lenders cheap money in return for loans to customers. It is to be limited to business lending from 2014.

Mr Carney said to try to use interest rates as a way of cooling down the housing market would be a "very blunt tool" as it could hurt recession-hit sectors of the economy which are starting to make a comeback.

He also called for "prudence" from lenders.

The BoE could also keep a watchful eye on the situation, he suggested, and try to head off a housing bubble by calling on regulators and lenders to cap the size of a mortgage compared to the value of the house - the so-called loan-to-value (LTV) ratio.

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Maternity Leave: New Shared Rights Unveiled

By Darren McCaffrey, Sky News Reporter

Fathers will have the option of sharing parental leave under proposals to be announced by Nick Clegg, who has branded the current system antiquated.

The Government has published final details of a significant shake-up which they will hope cater for a growing desire by men to play a more hands-on role in a baby's first months.

From 2015 a fully flexible system of parental leave will be introduced in England, Scotland and Wales which will allow new mothers to trigger flexible leave at any point after the first two weeks' of giving birth.

Mothers and fathers will be able to share the remaining 50 weeks between them as they like by taking the leave in turns, in different blocks, or at the same time.

Reforms will also extend parents' existing right to request flexible working to all employees in an attempt to reflect the increased role of grandparents and other carers.

In an effort to allay fears of the impact on smaller firms, bosses will have to agree any proposed pattern of time off and will retain the right to insist it be confined to a continuous block, with no more than two subsequent changes.

The proposal had met strong resistance within government.

The Liberal Democrats fought to stop last ditch attempts by their Conservative partners to drop the policy.

But father-of-three Mr Clegg said change was long overdue.

"Women deserve the right to pursue their goals and not feel they have to choose between having a successful career or having a baby," he said.

Labour's Gloria De Piero claims the plans hold nothing new for parents

"They should be supported by their employers, rather than being made to feel less employable or under pressure to take unchallenging jobs.

"Many businesses already recognise how productive and motivated employees are when they are given the opportunity to work flexibly, helping them retain talent and boost their competitive edge.

"This is good for families, good for business and good for our economy."

The changes, however, have been branded "a nightmare" which would heap more burdens on already-struggling firms by the Institute of Directors (IoD).

Deputy director of policy Alexander Ehmann said: "The IoD understands the case for a system of shared parental leave and how it could help to widen the talent pool available to employers.

"Unfortunately, today's announcements heap yet more burdens on struggling employers at a time when government should be freeing them to create jobs and wealth."

Labour attacked the announcement for providing nothing new to help families struggling with the rising cost of living.

Shadow minister for women and equalities Gloria De Piero said: "Nick Clegg claims to be on parents' side but he and David Cameron have done nothing to support families in the last three years.

"This reheated announcement contains nothing new for families suffering from this government's cost-of-living crisis. It proves you can't trust a word Nick Clegg says."

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Energy Bills: Govt Price Freeze Plea Denied

The Government is not asking the big six energy companies to freeze prices, Downing Street has insisted.

Sources had suggested the firms were being pressed to keep tariffs the same until after the 2015 general election.

It had been claimed the call was an effort to avoid another round of price rises that could be blamed on Government green levies.

But a Number 10 source told Sky News: "This story is utterly misleading. The Government has not asked for a price freeze. People should wait for us to announce our plans."

Energy Secretary Ed Davey was believed to be seeking a deal with firms

Energy minister Ed Davey has promised to help firms by introducing changes to the green levies that Prime Minister David Cameron and Chancellor George Osborne have pledged to "roll back".

But it is understood the energy companies have so far given no commitment.

Speaking while attending a EU summit in Lithuania, Mr Cameron said: "I want to help families by getting sustainably low energy prices - by increased competition and rolling back costs of some levies on peoples bills.

"I said I'd do it - we will do it. That's a world away from a vague promise about something you might do in 10 months time, without knowing how - that's a con. We're dealing with real policy and real difference."

Npower issued a statement saying: "If the green levies are rolled back then Npower will cut prices to its customers as soon as possible.

Bills are burned during a protest this month against prices and budget cuts

"We need to understand the detail of the roll back before we can comment further."

Meanwhile, an EDF statement said: "EDF Energy fully supports the ambitions behind the schemes and has consistently delivered its obligations.

"However, to ease the burden on customers, energy companies, politicians and consumer groups need to work together to define an affordable solution. The company believes changes can be made without impacting vulnerable customers."

Ministers are proposing to change the Energy Company Obligation (ECO) - one of the green levies branded "green crap" by a Tory source last week.

Labour leader Ed Miliband is to pledge to end the energy "rip-off"

Despite Downing Street's denial, the Government remains determined to announce a pledge or deal in the Autumn Statement on December 5.

It comes ahead of a speech by Ed Miliband later in which he will pledge to end the energy "rip-off".

The Labour leader is to call for a tough new regulator with powers to order firms to pass on wholesale savings to customers, and intervene in the market to ensure they get good value in the future.

An independent Energy Security Board would be created modelled on the Office for Budget Responsibility, to help draw up and implement a timetable for building energy capacity and ensure the lights stay on.

He will also promise action to boost competition among suppliers, simplify bills for customers and "secure energy which is affordable and available".

The shake-up - described by Mr Miliband as the biggest since privatisation in the 1980s - would be implemented during the 20-month price freeze he has pledged if Labour wins the general election.

Launching the party's energy green paper at Manchester Town Hall, Mr Miliband will refer to the famous "Tell Sid" campaign advertising British Gas privatisation under Margaret Thatcher.

"In the past three years it has become clear to everyone but this government that the energy market is broken," he is expected to say.

"Prices are rising year on year without justification. And Britain is not getting the investment in energy we need to secure supplies for the future...

"We have a new message for Sid: We will freeze your bills for 20 months. We will reset the market with real competition and proper regulation so that prices are affordable. We will secure the investment we need.

"We will stop you being ripped off and, together, we will power Britain into the next century."

Other commitments include preventing power generation companies doing exclusive deals with their retail arms and ensuring all environmental and policy levies on bills are delivering "value for money".

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Bankers' Pay: 'Explosion' In €1m Earners In UK

The number of high earners in British banks rose 11% last year, with more than 2,700 people earning above €1m (£833,000).

The revelation from the European Banking Authority (EBA) threatens to reignite the row on bankers' pay in the wake of the financial crisis and various mis-selling and misconduct scandals.

According to the EBA, more than 3,500 bankers in Europe earned €1m or more in total - representing a big rise across the EU as a whole though Britain, with its larger financial services industry, had 12 times as many high earners as any other country.

The figures were released as the EU prepares to introduce caps, which would have easily been broken in London.

Regulators in Brussels decided that from 2014 bonuses for "risk-taking" staff can not exceed annual salary, or twice that if shareholders give their approval.

The data showed that banks in Britain and France in particular needed to adjust pay structures to meet new the rules because variable pay was almost four times fixed pay.

At least 10,000 bankers, most of them in London, are expected to be affected by the new bonus cap.

Banks such as Barclays, Deutsche Bank and HSBC are expected to cut bonuses and raise fixed pay to comply with the new rules.

The EBA figures, part of data-gathering efforts as the EU finalises the bonus cap rules, offer a rare glimpse into the pay of bankers across Europe.

Of the British bankers earning more than €1m, 2,188 worked in investment banking, 62 were in retail banking, 198 were in asset management and 266 were in other areas.

In Spain, which had to bail out its banking sector last year, the number earning at least €1m fell by a fifth to 100.

However, the average remuneration for those 100 was €2.2m, higher than Britain and Germany.

The figures include high earners from employees based in each country, rather than the domicile of the bank, so the UK figures - because of its dominance in financial services - include high earners from international lenders such as Goldman Sachs and JPMorgan.

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Student Loans: £5bn Unaccounted For Says NAO

More than £5bn paid out in student loans is unaccounted for because the Government does not have enough information about the recipients.

There are 368,000 student borrowers for whom there is no current employment record, or other details on earnings, according to a study by spending watchdog the National Audit Office (NAO).

This could be because they are unemployed students living in the UK, EU students who have returned home or UK students who have moved overseas.

It means the Government does not have enough information to decide whether these students should be making repayments on their loans, and if so, how much.

The NAO report claims the Business Department (BIS) is not doing enough to find out whether borrowers are earning enough to start repayments.

Students currently repay their loans when they earn £21,000, and repayments are linked to earnings.

It also says there are around 14,000 former students, with a total debt of £100m, living overseas who are behind on their repayments.

The Student Loans Company, which helps collect the payments, could take a "more targeted approach" to this group, says the NAO.

Earlier this week, the Government sold off older student loans totalling nearly £900m to a private debt collection agency for £160m.

Universities minister David Willetts called the sale "good value for money" and said it would help reduce public sector debt.

More than a third (35%) of new loans taken out are not expected to be repaid, according to Government figures, and around half of students are not expected to repay their debt fully.

Under a major overhaul of higher education, which saw tuition fees at English universities treble to a maximum of £9,000, student loans are now written off after 30 years.

A BIS spokesman said: "We are continually improving the collection process for borrowers and we will carefully consider the NAO's recommendations as part of this programme."

Shadow Higher Education Minister Liam Byrne said: "Labour has warned ministers time and time again that tripling fees overnight would create huge new debts that lots of students, facing a cost-of-living crisis, couldn't afford to pay back.

"Worse of all, we may be at the point where so many students loans are being written off, that the government's new student finance system is actually more expensive than the old arrangements, even though the government is asking students for three times as much money."

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Bank Acts To Curb Debt Risks To Economy

By Ed Conway, Economics Editor

The Bank of England has taken its first major step to clamp down on rising house prices and ballooning household debt levels, cutting the incentives for banks to lend to consumers.

The Bank's Financial Policy Committee (FPC), chaired by Governor Mark Carney, said that starting from January banks would no longer get cheap loans from the Bank in exchange for lending to households through mortgages and other debt.

The move is likely to reduce the amount banks are willing to lend on home loans and may push up mortgage rates while shares in major housebuilders including Persimmon, Barratt Developments and Taylor Wimpey fell more than 6% immediately after the announcement.

The Bank also revealed new research showing that households with loan-to-income ratios greater than five now account for around a fifth of total UK mortgage debt, in the latest sign of overheating in the housing market.

The decision will be seen as a significant shift from the Bank, which until now had insisted that it was comfortable with rates of house price inflation, which on some metrics are rising at the fastest rate since the crash of 2008.

Persimmon was among the stocks hit following the bank's announcement

The FPC said from hereon the Funding for Lending scheme, under which banks receive cheap funding from the Bank of England for every pound of net lending they themselves hand out, would be focused entirely on small businesses.

Banking analysts have claimed that by far and away the biggest impact of Funding for Lending had been to boost lending levels to households, and to help reduce the borrowing rates they face.

The move may come as an embarrassment to the Chancellor, as it will mean the Bank is effectively clamping down on the housing market at precisely the same time as the Treasury is attempting to stimulate it through his new Help to Buy scheme.

However, the Bank said that while it had the power to recommend changes to Help to Buy, it did not think any were necessary at present.

The report said: "Rising house prices - and any subsequent falls - needn't in themselves pose a threat to financial stability.

"It is the interaction of developments in the housing market with a range of factors, including household indebtedness and leverage in the banking sector, which gives rise to financial stability risks."

Mr Carney said: "Over the past year the Funding for Lending scheme has contributed to the recovery by helping to significantly improve credit conditions, especially for households.

"The changes announced today refocus the FLS where it is most needed - to underpin the supply of credit to small businesses over the next year - without providing further broad support to household lending that is no longer needed."

George Osborne said: "Now that the housing market is starting to pick up, it is right that we focus the scheme's firepower on small businesses.

"Small firms are the lifeblood of our economy. That's why we're reforming the banks, introducing the employment allowance and now focusing the Funding for Lending scheme to support them."

More follows...

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Npower Confirms 1,460 UK Job Losses

The big six energy firm npower has confirmed it is cutting 1,460 UK jobs, just days before its latest increase to household bills takes effect.

The supplier said a proposed restructuring was aimed at boosting its customer service activities and would result in the closure of three sites - with back office functions outsourced to India.

Npower - which was last week identified as the most complained-about energy firm among consumers - said that subject to consultation, the restructure would involve around 1,460 redundancies as more work is performed by outsourcers Capita and Tata Consultancy Services (TCS).

It said that under the proposals, customers would continue to be served on the phone by people based in UK call centres and bringing teams together would reduce the number of sites npower owns.

Npower said that drawing on outsourced partners' extra capacity to handle calls at peak times would mean call waiting times being kept to a minimum while a transfer of 540 npower staff to Capita would maintain some continuity for customers.

Call centre work is transferring to Capita

It confirmed the plans would mean the closure of offices in Stoke on Trent, affecting around 550 employees.

An office in Oldbury was also to be shut with the loss of 400 staff while 430 staff at Rainton Bridge in Sunderland and another 80 in Leeds were also facing the axe.

The company said while npower's call centre in Thornaby on Teesside would close, all roles there would be secure and relocate to Rainton.

Paul Massara, its chief executive, said "Today we have set out our proposed vision of how we would improve customer service, calling on the support of leading retail outsourcing partners.

"I understand that these changes would be incredibly hard for some of our employees and we'll be doing everything we can to support them over the next few months.

"This restructure is necessary if we are to deliver the levels of service our customers deserve.

"All calls would still be answered in the UK. We would have the flexibility to keep call waiting times down during busy periods, and continue to keep costs down so we can keep bills down."

The news follows a tough few weeks for energy firms amid a massive backlash against the latest bill increases - with npower's average rise of more than 10% due to take effect on Sunday December 1.

Npower has been in the headlines more than its major competitors in recent weeks.

Npower blamed higher costs for its decision to shelve Atlantic Array

It confirmed a week ago it was to offload 770,000 customers to Utility Warehouse in a deal that will raise it £218m and only this week said it was pulling out of the £4bn Atlantic Array windfarm project.

The decisions have raised speculation about whether its parent firm RWE sees a future in the UK, amid mounting pressure for stiffer regulation of the energy industry. 

Reacting to confirmation of the job losses, Unison claimed the decision would backfire on the company.

The union's Matt Lay said: "Npower are riding roughshod over their staff and customers.

"Customers have just had a 10.4% rise in their energy bills but clearly the company's thirst for profits knows no bounds.

"These so called savings will backfire on the company who have consistently let their customers and staff down by not investing enough in the workforce, technology or in the latest customer service techniques."

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Payday Loans To Be Capped By Government

The cost of payday loans will be capped under new laws by early 2015, the Government has announced.

The industry has been criticised over the affordability of the loans and the way they are marketed, with critics claiming the firms take advantage of vulnerable people.

The Competition Commission is currently investigating the industry and an Office for Fair Trading (OFT) report in September said there were "deep-rooted" problems in the way the loan companies operate.

New financial regulator the Financial Conduct Authority (FCA) will now be forced by the Government to cap the loans.

The Government will amend the Banking Reform Bill currently going through Parliament to formally establish the cap.

The Labour leader has also heavily criticised the industry

The move comes after the Labour leader Ed Miliband spoke out over what he called the "Wonga economy".

Earlier this month he said payday loan companies were "running riot through our communities".

"They are responsible for a quiet crisis of thousands of families trapped in unpayable debt," said Mr Miliband.

Mr Miliband has also called for a ban on payday advertisements during children's television shows, accusing the companies of using "cartoon characters, trendy puppets or cute plasticine figures" to attract children.

George Osborne denied that the move marked a turnaround for the Government, which had initially resisted calls for a cap and denied that Labour had taken the lead on the issue.

The payday loan industry is worth £2bn

He said: "I don't accept it's a departury from any philosophy. The philosophy is we want markets that work for people, and people who believe in the free market, like myself, want that free market to be properly regulated."

He told the BBC Radio 4 Today programme: "The idea that we are following Labour - the Labour Party were in office for 13 years, Ed Balls and Ed Miliband. This issue came up, they were in the Treasury all those years, they did absolutely nothing.

"I am happy to pay tribute to some individual MPs like Stella Creasy, like Robin Walker the Conservative, who have campaigned on this issue.

"But the idea that the Labour leadership, who were running this country for 13 years and did nothing in this space, took a lead is, frankly, fanciful."

However, Ms Creasy said: "Just two months ago this Government criticised Ed Miliband for wanting to reform broken markets, and now today we see them following Labour's lead on the need to act against legal loan-sharking.

Critics claim affordability checks are not being properly carried out

"Whether in Parliament or out on Britain's streets in the Sharkstoppers campaign, we have been making the case that capping is a tried and tested method used in many other countries to tackle the problems caused by payday lenders. For too long David Cameron has ignored our pleas to act and it is cash strapped consumers caught in the spiral of debt these companies generate who have paid a heavy price as a result."

Business Minister Jo Swinson warned in September that interest rate caps to tackle payday lenders could mean people who could pay back loans found they could not get credit and turned to "unsavoury alternatives".

The Competition Commission investigation into the £2bn industry is due to reveal its findings next year.

It will be looking at claims that firms are emphasising the speed of the loan over cost and are "skimping" on affordability checks.

There have also been complaints of payday firms unexpectedly draining people's bank accounts through a type of recurring payment called a continuous payment authority.

Payday loan bosses defended their business in front of MPs

The Financial Conduct Authority, which will take over regulation of consumer credit from the Office of Fair Trading (OFT) in April 2014, was already considering new controls before today's announcement.

Among its proposals are unlimited fines, limiting to two the number of times a payday loan can be rolled-over and compulsory affordability checks for all applicants.

Bosses of three payday loan companies, Wonga, QuickQuid and Mr Lender, defended their industry when they appeared in front of MPs earlier in November.

Henry Raine, head of regulatory and public affairs at Wonga, told the Business, Innovation and Skills Select Committee: "Wonga's business is aiming to lend to people who can pay us back, that's how we make money.

"The vast majority of people pay us back on time. We freeze interest after 60 days and 25% of people pay us back early."

Mr Raine said around 3% of loans, equating to around 40,000 of Wonga's 1.25 million customers, go to the 60-day period.

He said Wonga's record compared favourably with the rest of the loan industry, including credit card companies and banks.

The company also made a film telling the stories of 12 of its customers.

Wonga's chief operating officer told Sky News the film was made because "the silent majority of people using our service was not being heard".

He added: "Generally you hear a lot of criticism about our service out in the media and actually the super positive stories that we see every day from our customer feedback are not being heard, so we wanted to redress that balance and allow their voice to come out."

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Student Loan Sale Nets Government £160m

The Government has sold off student loans totalling almost £900m to a private debt collection agency for £160m amid warnings of an impact on every taxpayer.

The sale, revealed over the weekend by Sky's City Editor Mark Kleinman, covers loans taken out by 250,000 students who began courses between 1990 and 1998 amid intensifying efforts in Government to raise money for the public purse from the student loan book.

The National Union of Students (NUS) was quick to criticise the sale, telling Sky News it amounted to "the public subsidising a private company making a profit from public debt."

The Department for Business Innovation & Skills (BIS) said Erudio Student Loans was selected as the successful bidder through a "competitive process".

It said its offer was judged to represent the best value for money for the taxpayer and the price paid exceeded the estimated value to the Government of retaining the loans, which have a poor return rate.

Of the 250,000 loans sold, around 46% are earning below the repayment threshold, 14% of borrowers are still repaying and 40% are not repaying their loans in accordance with their terms.

BIS argued the private sector was thought best placed to collect the outstanding debt as it allowed the Student Loans Company (SLC) to concentrate on administering newer loans.

Universities Minister David Willetts said: "The sale of the remaining mortgage style student loan book represents good value for money, helping to reduce public sector net debt by £160m.

"The private sector is well placed to maximise returns from the book which has a deteriorating value.

"The sale will allow the Student Loans Company to focus on supplying loans to current students and collecting repayments on newer loans.

"Borrowers will remain protected and there will be no change to their terms and conditions, including the calculation of interest rates for loans."

The mortgage-style loans at the centre of the sale were the last of their kind on the Government's books.

Under the terms, borrowers are required to repay in fixed monthly instalments over a set period of five or seven years with interest charged at a rate equivalent to the Retail Prices Index (RPI).

But repayments can be deferred for a year at a time if a borrower's income is below a threshold of 85% of national average earnings - currently £28,775.

The coalition is drawing up plans to sell the entire outstanding student loan-book, which has a face value of roughly £40bn.

But such a move was criticised by the National Union of Students in the wake of today's sell-off.

Its president, Toni Pearce, said: "This announcement is extremely concerning and is one that will see the public subsidising a private company making a profit from public debt, which is incredibly problematic.

"The impact of this sale won't only affect borrowers, but will affect everybody.

"The simple fact is that having these loans on the public books would be better off for the Government in the long run. Selling off the loan book at a discount to secure a cash lump sum now doesn't make economic sense.

"The current student loans system is completely unsustainable. Forcing debt onto students as a way of funding universities is an experiment that has proven not to work and there needs to be some serious thought about moving the system away from this ridiculous model."

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RBS To Probe Claims It Drove Firms To Collapse

The Royal Bank of Scotland has hired a law firm to investigate allegations the bank deliberately drove small businesses to collapse for its own gain.

The claims are contained in a dossier, compiled by government adviser Lawrence Tomlinson, which has now been passed to City regulators by Business Secretary Vince Cable, as Sky News revealed at the weekend.

The report suggests RBS - the largest lender in the UK to small firms - drove businesses to collapse so it could buy back their assets at rock-bottom prices.

Chancellor George Osborne has described the allegations as "shocking", but small business campaigners say anecdotal evidence suggests the practice was widespread.

A spokeswoman for RBS - 80% owned by the taxpayer - confirmed that it had now hired law firm Clifford Chance to look into the claims.

Mr Cable referred the claims to City watchdogs

Mr Tomlinson, who has been compiling the report independently for the past six months, focuses allegations on the turnaround division at RBS - its Global Restructuring Group (GRG).

The division handles loans classed as being risky and is understood to have the power to scrap loan deals, impose inflated interest rates and charge hefty penalties.

But the report alleges that firms not necessarily in immediate financial distress are "engineered" into GRG, sometimes through small technical breaches of loan terms, such as late filing of minor financial information.

They are then hit with exorbitant rates and fees, which in some cases cause them to collapse, allowing RBS to buy their property and assets on the cheap for the benefit of its West Register property arm, according to Mr Tomlinson.

His report claims that fees charged by GRG can run into hundreds of thousands of pounds.

One business that submitted evidence to Mr Tomlinson said that it forked out £256,000 in fees alone while in GRG.

Another said that RBS made them pay an immediate sum of £40,000 to continue borrowing terms with the group.

Mr Tomlinson said he was calling for "immediate action to stop this unscrupulous treatment of businesses".

In response, RBS said it was "already committed" to an inquiry on how it treats small firms, following recommendations by Sir Andrew Large whose full report was released on Monday.

Sir Andrew, the former deputy governor of the Bank of England, said RBS failed to understand even the basic needs of its small business customers.

An RBS spokesman also said that GRG's role was key to helping the bank face up to its commercial property "mistakes" made in the run-up to the financial crisis.

He said: "In the boom years leading up to the financial crisis, the over-heated property development market became a major threat to the UK economy.

RBS is the largest lender in the UK to small firms

"RBS did more than its fair share to fuel this and commercial property lending was one of the key drivers of our near collapse as valuations rapidly plummeted.

"GRG successfully turns around most of the businesses it works with, but in all cases is working with customers at a time of significant stress in their lives.

"Not all businesses that encounter serious financial trouble can be saved."

The report found a "disproportionately high" number of complaints against RBS, but also hinted at similar practices at other banks.

Fellow part-nationalised Lloyds Banking Group was also accused of concentrating on short-term gain at the expense of its business customers but the bank was angered by its inclusion in the dossier - suggesting there was no basis for such a claim.

Its statement said: "The specific practices discussed in the report are attributed to another bank and are not a reflection of Lloyds Banking Group's approach."

The report said Santander UK was among a few banks that were praised by small business customers for their treatment."

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Royal Mail Fails To Meet Delivery Targets

Royal Mail has been warned it faces an investigation and possible fines if it does not improve services after missing key performance targets.

The postal regulator Ofcom said the recently-privatised company missed a requirement to deliver 93% of all first class letters on the day after collection, reaching 91.7%.

Ofcom said Royal Mail was also required to meet a target of 91.5% of next-day delivery for first class post in almost all of the UK's geographic postcode areas to provide a good level of service across the UK, and not just in more densely populated areas.

But Royal Mail achieved this level in only 62% of the required postcode areas in the year to March 2013.

Royal Mail met other targets, including a requirement to deliver 98.5% of second class letters within three days of collection.

It either exceeded or narrowly missed targets relating to areas such as special delivery, parcels and delivery to the correct address.

"Ofcom is concerned about Royal Mail's failure to meet certain service targets, and has made clear to the company that it must take all necessary steps to meet these in future," the regulator said.

Its report on the postal sector noted that Royal Mail was now on a firmer financial footing and productivity was gradually improving though competition in delivery from other operators still accounted for less than 1% of UK mail volumes.

Royal Mail said in a statement: "We were disappointed that we didn't meet all of the regulatory quality-of-service targets we were required to last year. This remains a key area of focus for us.

"Royal Mail has the highest service specification of any major European country and we take our service performance very seriously.

"The quality of our service to customers is key to our success."

Ofcom noted that customer satisfaction with Royal Mail was high though only just over half of the consumers surveyed were satisfied with the cost of postage, with 30% dissatisfied.

Business users, who account for around 90% of all mail sent, were also largely happy with Royal Mail's service with just 7% dissatisfied.

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Ex Co-op Bank Chairman Paul Flowers Arrested

Former Co-op bank chairman Paul Flowers has been arrested in connection with a drugs supply investigation, police have said.

West Yorkshire Police said officers detained the 63-year-old in the Merseyside area on Thursday night and he is being questioned at a police station in West Yorkshire.

Mr Flowers, a Methodist minister, was suspended by both the church and the Labour party following claims about drugs.

His arrest comes as the Co-op is seeking to recover £31,000 paid to him since he quit his £132,000-a-year post in June.

Police outside Mr Flowers' house in Bradford

In a statement, it said: "When Paul Flowers relinquished his responsibilities in June, it was agreed, as per his contractual obligations, that his fees for the rest of his period of office would be paid.

"Following recent revelations, the board stopped all payments with immediate effect and no further payments will be made."

Mr Flowers, who led the Co-op Bank for three years, has been accused of incompetence after the bank found a £1.5bn black hole in its finances.

This followed the purchase of Britannia Building Society in 2009 and abortive attempts to take on hundreds of Lloyds Bank branches.

The Co-op is in trouble after a series of bad deals

The bank now faces a rescue which will see 50 branches close and investors including US hedge funds take control of 70% of the business.

The crisis at the Co-op is expected to be high on the agenda at a Prudential Regulation Authority board meeting at the Bank of England later.

Conservative MP David Davis has said George Osborne and the Treasury had "serious questions to answer" about the oversight of the bank.

"There are really serious questions to answer about what they were all doing," he told the Financial Times.

Mr Flowers has been described as "very believable, very plausible"

He said issues over the bank's operations were raised by a rival at the time of the aborted takeover bid of Lloyds branches.

"These problems were apparent to a rival and would have been - with a bit of work - to anyone else," Mr Davis said.

Labour - which accuses Prime Minister David Cameron of seeking to "smear" the party over its relationship with the Co-op - seized on the comments in a bid to move the spotlight on to the Conservatives.

Leader Ed Miliband insists the party acted with the "utmost integrity" in its dealings with Mr Flowers and suspended him when the allegations about his private life emerged.

Labour has come under fire over its dealings with the Co-op

Shadow chancellor Ed Balls, who received a £50,000 donation to his office from the Co-operative Group, said he had "nothing to hide".

He told Sky News political editor Adam Boulton that he had never had a phone call or a meeting with Mr Flowers and stressed that the donation came from the Co-op Group and not the Co-op Bank.

Mr Cameron has announced an inquiry into the bank's ailing finances and the decision to appoint Mr Flowers - with details expected to be announced within days.

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Energy Bills: Ofgem Targets Power Operators

The energy regulator has moved to help cut household energy bills in future by rejecting business plans from five of the six companies that own and operate Britain's local electricity network.

The five firms, whose activities form below 20% of an annual electricity bill, were found by Ofgem to not offer enough in terms of value to consumers in their plans. 

The watchdog found that Western Power Distribution (WPD), which covers South Wales, the Midlands and the South West of England, was the only company that achieved eligibility to have its price controls agreed early.

It did not name the five firms which it said fell foul of its efforts to lower costs.

There are 14 regional distributors operating in the UK.

WPD's business plans, which cover the period from 1 April 2015 – 31 March 2023, included around £7bn of total expenditure, of which around £3bn was for investment to upgrade and maintain WPD's network. 

Ofgem said the agreement meant the distribution element of the electricity bill would be reduced for its customers by an average of 11.6% or around £11.30 in 2012/13 prices.

Hannah Nixon, Ofgem's senior partner for distribution, said: "We understand that energy costs are a big concern for consumers and we set a high target for demonstrating value for money.

"We are pleased that nearly all companies have pledged to cut bills, but we feel that most companies can go further in cutting their costs and expect to see further improvements when they resubmit their plans in March.

Regulation of the distribution sector operates differently to that which sells direct to households and manages billing.

Customers have to rely on regulation from Ofgem to limit charges from distributors as they operate on a regional monopoly basis rather than in competition with each other, as the main energy companies do.

Those firms - dominated by the so-called 'big six' - have been under fire over inflation-busting rises to bills announced ahead of winter.

Those that have raised prices have pledged to cut the increases back should the Government confirm it will take the cost of green levies out of bills and shift them to general taxation.

Labour has demanded greater intervention to cap bills - accusing ministers of standing idle amid a cost of living crisis for families as price rises continue to outpace wage increases.

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Co-op: Flowers In £75k Charity Expenses 'Scam'

Disgraced former Co-op bank boss Paul Flowers claimed £75,000 in false expenses from a drugs charity, it has been alleged.

Mr Flowers, a former Labour councillor, totted up the claims over five years during his time as the chairman of the trustees at Lifeline, according to the charity's chief executive Ian Wardle.

Mr Wardle told Sky News that he had raised questions over Mr Flowers' claims in 2004 and there had been an investigation during which the former Methodist minister was asked to account for his claims item by item.

Mr Flowers, 63, is under investigation by police after being filmed by a newspaper allegedly buying and using illegal drugs, including crystal meth, crack cocaine and ketamine - a horse tranquilliser used as a party drug.

Mr Wardle said that the "total cost of clearing up the mess" left by Mr Flowers during his time at the charity, which helps people with drug and alcohol problems, was £150,000.

Mr Flowers has been accused of incompetence while leading the Co-op Bank

He said: "I developed concerns at the beginning of 2004 about some of the claims which had been made and I spoke to our treasurer at the time and we then involved our solicitor and then to cut a long story short in June 2004 I raised the matter formally, fully and in depth with our trustee body.

"Our trustee body suspended Reverend Flowers and then we investigated the claims and we investigated five years of claims."

Mr Wardle said that after taking advice from a QC  they had sought to keep the matter quiet because they feared it would cause significant damage to the charity's reputation.

He said that he had filed a 70-page report on the matter to the Charity Commission.

The development comes amid the deepening crisis over Mr Flowers appointment to lead the Co-operative Bank, which was sparked by the drugs sting revealed in a newspaper on Sunday.

Len Wardle quit as boss of the beleagured bank on Tuesday

David Cameron on Wednesday announced there would be an inquiry into Mr Flowers' appointment to the bank and its ailing finances.

The Labour leader Ed Miliband has come under increasing pressure over the matter after it emerged that he Mr Flowers had been invited on to Labour's business advisory group and made a £50,000 donation to shadow chancellor Ed Balls.

Questions have also been raised over loans of more than £18m made to Labour at interest rates lower than those charged to ordinary customers.

Mr Miliband has sought to distance himself from Mr Flowers saying his party has acted with "utmost integrity" in dealing with the Co-Op and that Mr Flowers was "never my close adviser".

Mr Flowers managed to secure his £132,000-a-year position at the head of the Co-operative Bank for three years despite a past mired in scandal, it has subsequently emerged.

It has been disclosed that Mr Flowers resigned from his position on Bradford Council after being caught with pornography on his council laptop in 2011. He was also convicted of gross indecency in a public toilet with a man in 1981.

And it also emerged Mr Flowers was caught drink driving after celebrating his 40th birthday in 1990.

Speaking on Wednesday, Mr Cameron said: "Why was Rev Flowers judged suitable to be chairman of a bank? Why weren't alarm bells ringing earlier, particularly by those who knew? I think it will be important in the coming days that if anyone does have information they stand up and provide it to the authorities."

A £1.5bn black hole was discovered in the bank's finances

Len Wardle, the chairman of the Co-operative Group, resigned on Tuesday over his role leading the board that appointed Mr Flowers.

Mr Flowers resigned his post as chairman of the Co-operative Bank in June after a £1.5bn black hole was discovered in its finances, leading to accusations of incompetence.

The bank found a massive gap following the purchase of Britannia Building Society in 2009 and abortive attempts to take on hundreds of Lloyds branches.

During an appearance before the Commons Treasury committee earlier this month, Mr Flowers stumbled over basic facts and figures relating to the bank.

The Methodist Church, which had already suspended Mr Flowers for a three-week period under its rules, has said the suspension was now indefinite and that its disciplinary procedure would be put on hold until after any police investigation.

Mr Flowers has apologised for doing things that were "stupid and wrong" in relation to the drugs claims - but has not elaborated.

His whereabouts remain unknown.

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Tube Row As Modernisation Will Cost Jobs

Unions and Labour have attacked plans to modernise London's Tube operations which will include a 24-hour service at weekends but result in 750 job losses.

Mayor Boris Johnson and London Underground (LU) managing director Mike Brown said their proposals would result in greater use of technology including contactless bank card payments from next year, extended Wi-Fi coverage at underground stations and improved ticket machines.

From 2015, travellers would be able to take the Tube home at any hour of the night on Fridays and Saturdays on core parts of the system, initially the Piccadilly, Victoria, Central and Jubilee lines and parts of the Northern line, they said.

The pair insisted all Tube stations would continue to be staffed and billions of pounds of investment would continue but admitted the plans were designed to deliver savings of £50m a year.

LU said it was committed to delivering the reduction in operational staff numbers without any compulsory redundancies.

LU argues passenger services must be fit for a modern London

Mr Johnson said: "For 150 years the Tube has been the beating heart of London, its tunnels and tracks providing the arteries that have transported millions of people and helped to drive the development and economic growth of our great city.

"Now it is time to take the Tube to the next level and so for the first time in London's history, we will provide a regular 24-hour Night Tube service at weekends.

"This will not just boost jobs and our vibrant night-time economy, it will further cement London's reputation as the best big city on the planet to in which to live, work, visit and invest."

Mr Brown insisted: "People are at the heart of this vision - our customers and staff. My commitment to London is that all Tube stations will continue to be staffed and controlled in future, with more staff visible and available to help customers buy the right ticket, plan their journey and keep them safe and secure."

Unions reacted with fury - with the leader of the TSSA rail union, Manuel Cortes, accusing Boris Johnson of being the "hypocrite of the decade."

He said the announcement would lead to the closure of all 268 Tube ticket offices by the end of next year.

The general secretary of the RMT union raised the threat of industrial action.

Bob Crow said: "No matter how this is dressed up by Boris Johnson and his officials, today's announcement is all about slashing almost £250m from the annual London transport budget and the proposed cuts will decimate staffing levels and hit the most vulnerable users of tube services the hardest.

"The mayor must believe he is some sort of magician if he thinks he can slash jobs and still run safe services when everyone knows that staffing has already been cut to the bone while passenger demand continues to rise."

Shadow London minister Sadiq Khan claimed the mayor of London had "ripped up his manifesto promise to the people of London."

He added: "Commuters will have nowhere to turn when their Oyster card is lost, stolen or broken.

"It will make the daily commute more difficult for everyone but, more worryingly, there are serious concerns about whether there will be enough staff at London's busy stations to respond in emergency situations.

"We support looking at the way TfL (Transport for London) staff work so that it reflects the changing needs of the modern underground system, but the mayor is using this as an excuse to cut staffing levels, which is reckless and irresponsible."

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Public Finances Boosted By Housing Recovery

The Treasury's coffers improved last month as stronger economic growth and the housing market recovery helped boost tax revenues.

Stamp duty revenues surged by nearly half to more than £1bn in October to help knock nearly £200m off public sector borrowing compared to the same month last year.

The figure - excluding the distorting effect of bank bailouts - dropped from £8.24bn to £8.08bn, the Office for National Statistics said.

It meant that public sector net borrowing in the financial year to date - excluding the bailouts - stood at £64.8bn, down 8.2% on the same time last year.

Stamp duty revenues were up by £400 million to £1.2 billion amid a buoyant property market spurred by Government initiatives such as the Help to Buy scheme.

The take from income tax and capital gains tax rose 2.3% to £10.3bn but corporation tax fell 8.2% to £7.4bn.

Borrowing would have been lower but for the £331m cost of awarding 10% of Royal Mail shares to employees though the controversial privatisation knocked £2bn off net debt.

The UK's debt figure, excluding bailouts, stood at £1.21trn in October, equivalent to 75.4% of gross domestic product (GDP).

The figures represent the last set of official borrowing data before Chancellor George Osborne delivers his Autumn Statement next month.

It is widely expected the Office for Budget Responsibility (OBR) will cut its forecast for 2013/14 borrowing from £120bn to possibly as low as £100bn - given the better-than-forecast improvements in the wider UK economy.

Samuel Tombs, of Capital Economics, said the borrowing figures were a "little disappointing" but still suggested the annual deficit was on course to come in about £15bn below the estimate set by the independent OBR.

He added: "With upward revisions to the OBR's forecasts for growth in GDP and tax receipts in future years also likely, the Chancellor certainly has some scope to fund a net giveaway during his Autumn Statement."

But the Treasury played down any expectations of an end to austerity.

A spokesman said: "Britain's hard work is paying off, the Government's long term economic plan is working, and the deficit is down by a third.

"But today's figures remind us that the job is far from done and a growing economy alone will not be enough to eliminate the deficit.

"The only way to ensure that the recovery is sustainable and the deficit keeps on coming down is to carry on taking difficult decisions to control government spending."

More follows...

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Debt Crisis: Poorest Enduring 'Perfect Storm'

A report is warning of the impact of a debt trap on the poorest in society, with unsecured debts nearing £160bn in the UK.

The Maxed Out study by the right-leaning think tank the Centre for Social Justice (CSJ) charted a "perfect storm" of rising living costs, falling real wages, low savings and expensive credit.

It calculated that essential bills had increased by 25% since 2007 and 3.9 million British families did not have enough savings to cover their rent or mortgage for more than a month, while thousands were being made homeless every year because they were unable to meet their payments.

Households in the poorest 10% of the country were found to have average debts more than four times their annual income, with their average debt repayments amounting to nearly half their gross monthly income - pushing more people towards payday lenders and loan sharks because banks were reluctant to lend.

It said payday lenders alone had increased business from £900m in 2008/09 to just over £2bn in 2011/12, according to the CSJ, with eight million loans taken out.

Despite signs of a national economic recovery, the CSJ said personal debt in the UK remained close to its all-time high of £1.4trn while average household debt stood at £54,000 - nearly twice the level of a decade ago.

The CSJ report highlighted fears that the number of households being made homeless will increase in the coming years should interest rates rise though that is likely to be at least two years away as the Bank of England has said it will only consider raising the base rate when unemployment falls from its current 7.6% rate to 7%.

Maxed Out suggests growing numbers are turning to payday lenders

The report concludes: "Rising personal debt levels represent a significant problem for people in Britain.

"While most personal debt is healthy and manageable, such as an affordable mortgage, student loan or low-interest credit card used to bridge income gaps, for many people their debt has become unhealthy and unmanageable.

"While people of all income levels can end up seeking debt advice or declaring bankruptcy, the problem of debt seems to be more of an issue for low-income and vulnerable households.

"A perfect storm of rising living costs, decreasing real wages, low savings and expensive credit seems to have pushed many to the edge and over a financial cliff edge."

CSJ director Christian Guy added: "Years of increased borrowing, rising living costs and struggling to save has forced many families into a debt trap that is proving very difficult to escape.

"Problem debt can have a corrosive impact on people and families. Our report shows how it can wreak havoc on mental health, relationships and wellbeing.

"Across the UK people are up until the early hours worrying about their finances and bills.

"Some of the poorest people in Britain are cut off from mainstream banking and have no choice now but to turn to loan sharks and high-cost lenders."

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Co-Op: Paul Flowers' Home Searched By Police

Police have searched the home of former Co-operative Bank chairman Paul Flowers.

Mr Flowers, a Methodist minister who led the bank for three years, is under investigation after being filmed allegedly buying and using illegal drugs including crystal meth, crack cocaine and ketamine.

A West Yorkshire Police spokesman said: "Officers executed a search warrant at an address in Hollingwood Lane, Great Horton (Bradford), yesterday as part of an investigation into alleged drugs offences arising from a national Sunday newspaper story."

Reverend Flowers has already apologised for doing things that were "stupid and wrong" in relation to the drugs claims - but has not elaborated.

The Mail On Sunday filmed Mr Flowers allegedly buying drugs

Labour Party leader Ed Miliband is also under pressure over when he and shadow chancellor Ed Balls knew that Mr Flowers had resigned as a councillor in Bradford after adult material was found on his computer.

In a letter to Mr Miliband, Conservative Party chairman Grant Shapps wrote: "Was your shadow chancellor, Ed Balls, aware of this when he accepted £50,000 to fund his personal office?

"When you met Mr Flowers on 6 March, 2013, did you discuss the £1.2 million loan agreement that the Labour Party entered into with the Co-operative bank, just weeks later?"

There are questions over what Ed Balls knew about Mr Flowers' resignation

Mr Shapps also challenged Mr Miliband to give details of his private meetings with the minister and explain what advice the former Co-op chairman gave as a member of Labour's business advisory group.

Mr Flowers has also been accused of incompetence and resigned his post as chair in June after a £1.5bn black hole was discovered in its finances.

The bank found a massive gap following the purchase of Britannia Building Society in 2009 and abortive attempts to take on hundreds of Lloyds branches.

It now faces a rescue which will see 50 branches close and investors including US hedge funds take control of 70% of the business.

Mr Flowers was criticised for a stumbling performance in front of MPs

During an appearance before the Commons Treasury committee earlier this month, Mr Flowers stumbled over basic facts and figures relating to the bank.

He was also pressed on whether he had approved the £50,000 donation to Mr Balls while a member of the bank's board.

"My recollection is that we paid for a particular researcher to assist the shadow chancellor in the work that he needed to do, and that we believed to be a legitimate and proper use of resources," he replied.

A spokesman for Mr Balls said: "The Co-op Group, not the bank, donated £50,000 to the shadow chancellor's office, which was declared in the normal way at the time.

"Ed (Balls) has never discussed the donation with Paul Flowers. Ed's been to a few events which Rev Flowers has also been at, but he's never had a meeting or phone conversation with him."

Co-operative group chairman Len Wardle has resigned over the scandal

Mr Flowers resigned from Bradford Council in September 2011, saying it was due to personal reasons and increased responsibilities at the Co-op.

But a spokesman for the council said: "Inappropriate but not illegal adult content was found on a council computer handed in by Cllr Flowers for servicing. This was put to him and he resigned immediately."

It has also emerged that the Methodist minister was convicted of gross indecency in 1981, reportedly over a sex act in a public toilet.

A church spokesman said that at the time he went through the "usual procedures" before being allowed to continue in his role.

The scandal surrounding Mr Flowers has also led Co-operative Group chairman Len Wardle to resign.

Mr Wardle brought forward his plans to retire by six months, acknowledging that he led the board that had appointed Mr Flowers.

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Energy Bills: Npower Deal Creates 'Big Seven'

A new player in the UK energy market is to be created after npower agreed a deal to offload 770,000 customer accounts.

They form part of npower's Electricity Plus and Gas Plus subsidiaries, which were sold today for £218m to Telecom Plus, a supplier of energy and telephony services trading as Utility Warehouse.

The deal, which will not result in any change to customer service and contracts, is expected to complete by early January.

It is the result of new rules from the industry regulator Ofgem which limit the number of tariffs on offer to domestic customers to a maximum of four.

As Utility Warehouse already manages the brands on behalf of npower, the sale will allow the two companies to continue to offer their customers up to four tariffs under their respective brands.

It will also meet demands for greater competition in the industry at a time of rising energy prices - a situation that has resulted in fierce debate in recent weeks over political intervention to ensure a fair marketplace for consumers.

Npower, which is part of Germany's RWE Group and recently topped a league table for customer complaints, currently has 5.4 million household accounts while price rises have prompted more people to look at switching from big six firms to a smaller competitor.

Npower's chief executive Paul Massara said: "In one move we have helped to create the biggest independent competitor in Britain's household energy supply market.

"This is good for competition and good for consumer choice. Today's announcement shows that Britain is well on the way to having a 'big seven' rather than a 'big six'."

Utility Warehouse will continue to receive its gas and electricity from npower under a new 20-year energy supply agreement which should enable it to provide more competitive tariffs to its customers.

The company said the deal boosted its medium-term target of supplying gas, electricity, fixed-line telephony, mobile telephony and broadband to more than one million customers.

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Co-op Chair Quits Amid Flowers Drug Scandal

Len Wardle, chair of the Co-operative Group, has resigned after "serious questions" were raised by the scandal over its former banking chairman Paul Flowers.

Mr Wardle had announced last month that he planned to step down amid the wider financial crisis at the bank but quit on Tuesday with immediate effect.

Reverend Flowers, who has already apologised for doing things that were "stupid and wrong" - but without elaborating - has been suspended from the Methodist Church and by the Labour Party after being filmed in a newspaper sting allegedly trying to buy illegal drugs.

The substances said to be at the centre of the claims include cocaine and ketamine - a horse tranquilliser - used as a party drug. 

Len Wardle joined the Co-op's board in 2002 (image credit Co-op)

The allegations against Reverend Flowers, which are the subject of a police inquiry, exacerbated pressure on Britain's biggest mutual which is having to explain the background to the bank's financial difficulties - largely a result of its merger with Britannia in 2009.

Mr Wardle said in a statement: "The recent revelations about the behaviour of Paul Flowers, the former Chair of The Co-operative Bank, have raised a number of serious questions for both the Bank and the Group.

"I led the Board that appointed Paul Flowers to lead the Bank Board and under those circumstances I feel that it is right that I step down now, ahead of my planned retirement in May next year.

"I have already made it clear that I believe the time is right for real change in our operations and our governance and the Board recently started a detailed review of our democracy.

"I hope that the Group now takes the chance to put in place a new democratic structure so we can modernise in the interests of all our members."

The Co-op confirmed Mr Wardle would be replaced by Ursula Lidbetter, currently Group deputy chair and chief executive of the Lincolnshire Co-operative Society.

His decision was announced hours after The Co-op Group launched a fact-finding probe and a root-and-branch review of its structure after "serious and wide-ranging" allegations about Reverend Flowers, who resigned in June after three years as chair of the banking arm after a £1.5bn black hole was discovered in its finances.

The Group statement on Monday said: "Given the serious and wide-ranging nature of recent allegations, the new executive management team has started a fact-finding process to look into any inappropriate behaviour at the Co-operative Group or the Co-operative Bank and to take action as necessary.

Paul Flowers is being investigated following the Mail On Sunday's claims

"In addition, the board of the Co-operative Group has launched a root and branch review of the democratic structure of the organisation.

"We need to modernise to ensure that the interests of all our seven million members are properly and directly represented in the oversight of our business activities."

While announcing Mr Wardle's decision to quit, the Co-op said on Tuesday that Ms Lidbetter would chair the Group through the governance review, which will include consideration of how the Board is constituted and chaired.

The Co-op Bank discovered a massive gap in its finances following the purchase of Britannia Building Society in 2009 and abortive attempts to take on hundreds of Lloyds branches.

It faces a rescue which will see 50 branches close and investors including US hedge funds take control of 70% of the business, leaving the wider Co-operative Group with just 30% - described as a "tragedy" by former group chief executive Peter Marks.

The scandal surrounding Reverend Flowers has intensified the focus on the bank's troubles.

Critics have questioned how he could have been appointed given his apparent lack of experience in banking and Andrew Tyrie MP, chairman of the Treasury Select Committee, has said that it was clear he was "manifestly unsuitable".

Regulators have said he went through the appropriate process when he joined the Co-op's board as a non-executive director but did not face further scrutiny when he became its chairman.

In a separate development, Labour has come under pressure to return a £50,000 donation backed by Reverend Flowers.

The donation, made by the Co-operative Group, emerged as the party suspended his membership over the drug allegatons.

Labour's leadership has since attempted to distance itself from Mr Flowers, a former councillor, after it emerged he attended a private meeting with Ed Miliband in March.

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Supermarkets Taken To Task Over Offers

By Poppy Trowbridge, Business And Economics Correspondent

Some of Britain's biggest supermarkets have been accused of running so-called special offers that often see customers "paying over the odds".

Consumer group Which? analysed more than 70,000 grocery prices and found examples of what they call misleading multibuys and dodgy discounts.

Richard Lloyd, executive director, told Sky News: "People are at best paying what they would have done, or often we have found paying over the odds, paying extra when they think they are getting a discount. That can't be fair.

"These special offers simply aren't special at all. That is why we need to see the rules change to force the supermarkets to play fair."

One example found by Which? was a Sainsbury's special offer for Carex Aloe Vera & Eucalyptus Moisturising Antibacterial Handwash, where the item was priced at £1.80 for seven days, then was on offer at "was £1.80, now 90p" for 84 days.

Ocado sold a 12-pack of Beck's beer as "was £12.19, now £9" for almost a month but had only sold the item at the higher price for three days.

Asda increased the regular price of Muller Light Greek Style Yoghurt from £1.50 to £2.18 before it went on a "two for £4" offer, costing shoppers £1 more.

Shoppers are being urged to look carefully at special offers

It also increased the price of Uncle Ben's Express Basmati Rice from £1 to £1.58 before offering for "two for £3" and then returning the rice to £1 when the offer ended.

With inflation having outpaced average wage growth for about five years, rising food prices are one of the top worries for consumers.

Which? wants the Government to make the rules for special offers simpler, clearer and stricter.

The consumer group says if these changes are not made swiftly, it will consider using its formal legal powers to ensure the practice is tackled.

In the meantime shoppers should look carefully at the special offers, Mr Lloyd added.

"Make sure that you are not getting misled into buying something that you think is a good deal when that is just not the case," he said.

The British Retail Consortium, which represents the supermarket industry, said in a statement: "Across the tens of thousands of promotions available every day, regrettably, occasional errors do slip through.

"Retailers work very quickly to rectify these mistakes whenever they are found."

Both Asda and Sainsbury's also issued statements apologising for what they called pricing errors.

Sainsbury's said: "We are absolutely committed to fair and transparent promotions and carry out regular audits and thorough training on this."

Asda's statement said: "We take pricing seriously, and we've recently employed a new team within the business that looks at all aspects of our pricing process and pricing practices in store and online.

"Sometimes mistakes can happen, but we would never deliberately mislead our customers ... "

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OECD Growth Upgrade Is Boost For Chancellor

By Ed Conway, Economics Editor

George Osborne has been handed a further fillip as the Organisation for Economic Co-operation and Development upgraded its forecast for UK economic growth by more than any other major economy.

The OECD said it expected Britain's economy to grow by 1.4% this year and 2.4% next year – higher than the 0.8% and 1.5% respective rates it was forecasting in its last Economic Outlook in June.

It is the biggest upgrade for any of the world's major economies.

The OECD upgrade follows on the heels of the International Monetary Fund, which also upgraded Britain's economic growth projections by more than any other leading country in October.

It is the latest boost for the Chancellor, who is expected to present an improved picture of the UK economy in his Autumn Statement next month.

George Osborne will be making his Autumn Statement on December 5

A Treasury spokesman said: "The OECD have revised their forecast for UK GDP up by more than any other G7 country over the next two years. This provides more evidence that the UK's hard work is paying off and the country is on the path to prosperity.

"Today's report also highlights the risks that remain to the recovery and urges the UK to stick to the government's plan that is growing the economy, lowering the deficit and inflation, and creating jobs. This is the only sustainable way to raise living standards for hardworking families."

However, the OECD's Economic Outlook did warn that the UK faced a number of risks in the coming years – one of which was the possibility of an overheating housing market.

It said: "The recently established government 'Help to Buy' property programme needs to be carefully monitored, as planned, and swiftly adjusted if it risks triggering sharp increases in house prices as a result of supply rigidities."

The Paris-based organisation said the Bank of England should consider raising interest rates towards the end of 2015. However, some economists think the moment of tightening will come even sooner than that.

:: Spreadsheet comparison of OECD forecasts

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Aberdeen Shares Soar On Scottish Widows Deal

Aberdeen Asset Management has seen its shares surge 11% after it agreed a deal to buy its rival Scottish Widows Investment Partnership (SWIP) from the taxpayer-backed Lloyds Banking Group.

The deal, valued at up to £660m, would increase the value of assets managed by Aberdeen to around £350bn - transforming it into the largest listed fund manager in Europe.

Aberdeen's deal is mainly share-based, which gives Lloyds a stake of around 10%, valued at £560m.

It will also pay up to £100m as "deferred consideration payable in cash" in five years.

Sky News City Editor Mark Kleinman first reported the impending sale last month.

The announcement comes as Aberdeen released its full-year results to September 30.

It revealed an underlying pre-tax profit of £482m, up 39% on the previous year.

The deal means Lloyds will enter into a long-term management relationship with Aberdeen.

The sale of SWIP does not include the core asset of Scottish Widows plc, which includes the group's life, pension and investment business.

Lloyds is 33% owned by taxpayers and has a refocused strategic goal of building UK business and retail banking while selling off non-core assets.

Aberdeen's chief executive Martin Gilbert called the transaction was "significant".

He said: "It strengthens our investment capabilities and adds new distribution deals."

Lloyds boss Antonio Horta-Osorio added: "I'm very pleased today to be announcing this strategic partnership with Aberdeen Asset Management.

"This is a good deal for them, and a good deal for Lloyds Banking Group."

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Emirates Airlines In Boeing And Airbus Spree

Emirates Airlines has gone on a 200-plane spending spree, as its home base of Dubai reiterates plans to become the world's biggest aircraft hub.

The airline has agreed to buy 150 Boeing 777 mini jumbos and confirmed purchase of 50 Airbus A380 superjumbos.

The order from Boeing is valued at $55.6bn (£34.5bn), excluding engines, while the purchase from its European rival Airbus amounts to $20bn (£12.4bn) at list price.

Emirates' appetite for plane purchases will not cease, the airline's president Tim Clark said.

"I don't think Emirates is going to stop with this order," Mr Clark, speaking at the Dubai air show, said.

"The intention of the government of Dubai is to fill the new airfield here on this site," at Al-Maktoum International Airport which opened for passenger operations last month.

In total Gulf airlines, led by Dubai's Emirates and Abu Dhabi's Etihad, struck plane deals worth almost $150bn (£93bn) on Sunday.

The buying spree underscored a shift in power in the aviation industry, as oil-rich, fast-growing economies of the Gulf take advantage of their strategic position between East and West to draw more travellers from hubs in Europe and Asia.

An Emirates Airbus A380 lands on the runway at Manchester Airport

But it comes at a price - both Airbus and Boeing signed deals to buy some $5bn of parts and materials from Abu Dhabi, in a sign Gulf states are seeking a reciprocal boost to their economies from the huge orders they have placed with the plane firms.

Dubai has in the past announced ambitions to turn Al-Maktoum into the world's largest aviation hub once completed, with five runways and a capacity to handle 160 million passengers.

"They're hoping to get that in the state of readiness for 2020-2022 and the scale of that will allow us to grow our fleet further," Mr Clark said.

"When we have more firm lines on that, we will be revisiting our fleet plans and routes structures."

Mr Clark said the commitment to buy 150 Boeing aircraft would be finalised before the end of 2013.

Emirates was in discussions for four to five years with Boeing over the new airliner that is scheduled to enter service around 2020.

"In the last months we've got it where we wanted it to be," said Mr Clark. "Basically the terms are agreed with Boeing."

The biennial Dubai air show got off to a bright start Sunday, with orders from the big three Gulf carriers - Emirates, Etihad Airways and Qatar Airways - for Boeing and Airbus planes hitting $141.5bn (£87.5bn), excluding the price of engines.

Emirates flew its first routes out of Dubai with just two aircraft in October 1985, using a leased Boeing 737 and an Airbus 300 B4.

It now has more than 200 aircraft, excluding the newly announced purchases, and flies to 70 countries.

The airline accounts for around 40% of all flights at Dubai International Airport.

:: The air show was hit by a Gulf sandstorm on Sunday, cutting visibility dramatically.

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Burton's Biscuits Bought By Canadian Fund

The Ontario Teachers' Pension Plan has agreed to buy the British maker of Wagon Wheels and Jammie Dodgers.

Burton's Biscuits is the UK's second-largest biscuits manufacturer, employing 2,000 people around the UK with annual sales of £340m.

The deal was first reported by Sky News City Editor Mark Kleinman on Saturday.

The pension fund has not revealed the value of the deal to buy the biscuit maker.

Burton's is also the name behind Cadbury Fingers and Maryland Cookies.

Based in Hertfordshire, Burton's traces its roots back to the mid-1800s when it was founded by George Burton.

It employs more than 2,200 people around the UK in manufacturing facilities in Llantarnam, Edinburgh and Blackpool, a chocolate refinery in Moreton and a central distribution hub in Liverpool.

Ontario Teachers has become a voracious acquirer of British companies in recent years, taking over National Lottery operator Camelot and nursery chain Busy Bees.

Burton's is one of a sizeable number of mid-sized British companies which has been through several phases of private equity ownership.

In 2009, Apollo and the Canadian bank CIBC seized control of the company after Duke Street Capital, its previous owner, was forced to surrender control to the biscuit-maker's lenders.

Another private equity group, HM Capital, had bought the company in 2000 from Associated British Foods, owner of the Primark retail chain.

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Clegg Calls For New Tax Cut To Help Millions

Deputy Prime Minister Nick Clegg is calling on his coalition partners to raise the income tax threshold for a fifth time so the Government can "reward" voters for years of austerity.

The Liberal Democrat leader wants Chancellor George Osborne to take advantage of the improving economy and raise the threshold at which people start paying income tax to at least £10,500 by the time of the general election in May 2015, aides have said.

The cut would be worth £100 a year to 24 million ordinary rate taxpayers while taking around half a million people out of income tax altogether.

The Lib Dems have already seen the coalition achieve their manifesto commitment to raise the personal allowance to £10,000 - which was finally reached in the last Budget in March.

Mr Clegg is now keen to be able to claim the political credit for a further advance in what he regards as his "signature tune" policy.

He will write to party activists next week declaring his intention to fight for a "workers' bonus" to reward voters for the sacrifices they have made during the years of austerity.

The move, expected to cost the Treasury £1bn, is likely to infuriate the Tories, who believe they should take just as much credit.

Lib Dems however pointed out that in the televised debates before the last general election, Mr Cameron argued that raising the personal allowance to £10,000 would not be possible.

A source close to Mr Clegg said: "Our polling shows that raising the tax allowance is both strongly associated with the Lib Dems and popular. We know that we are on to a vote winner here.

"The Tories once said this policy wasn't affordable but now they like to claim credit for it. Will they now join the Lib Dems in going further and faster?"

For Labour, shadow treasury chief secretary Chris Leslie dismissed the call, saying the coalition's changes had left working families worse off overall.

"Working people facing a cost-of-living crisis need help right now, but Nick Clegg's Government has instead prioritised a huge tax cut for those earning over £150,000," he said.

"When it comes to people on middle and low incomes, the Government is giving with one hand but taking away much more with the other.

"The Lib Dems need to explain how their proposal would be paid for and why they refuse to back Labour's plan to freeze energy bills and reform the market."

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Unions Probe: Review Into Intimidation Claims

David Cameron has set himself on a collision course with the unions by announcing an independent review into allegations of intimidation and bullying.

The move follows claims of sabotage and harassment related to the bitter industrial dispute which almost led to the closure of the petrochemical plant at the Grangemouth oil refinery in Scotland.

Downing Street said the wide-ranging review, headed by Bruce Carr QC, will investigate allegations of the use of so-called "leverage" tactics by the unions as well as the impact of such disputes on the critical national infrastructure.

However, in a sign of renewed coalition tensions, the Liberal Democrat Business Secretary Vince Cable made clear he had only agreed to the inquiry on the basis that it would also examine the practices of employers.

The Unite union dismissed the review as a "Tory election stunt" and warned that no trade union would be prepared to "collaborate" with it.

The review follows claims that Unite sought to intimidate executives from Ineos, the refinery's owners, including sending "mobs" of demonstrators to protest outside their homes and premises associated with Ineos chairman, Jim Ratcliffe.

In recent weeks the Prime Minister has repeatedly attacked the union in the Commons, challenging Labour leader Ed Miliband to hold an inquiry into claims of vote-rigging in the Falkirk constituency party in an attempt to secure the selection of Unite's favoured candidate for parliament.

Unite general secretary Len McCluskey has always denied any intimidation or bullying on the part of the union, insisting that it was acting within the law.

As part of his remit, Mr Carr will consider whether existing laws are sufficient to prevent what Government sources described as "inappropriate or intimidatory actions" in trade disputes as well as the response of the police to complaints.

Unite claimed Grangemouth employees had been bullied during the dispute

More generally, the review will look at the underlying causes of industrial relations difficulties in affected industries, the potential impact on the UK's critical national infrastructure and the consequences for investor confidence in key sectors.

It will also make recommendations on the respective roles of government, employers and employee representatives in ensuring effective workforce relationships.

Cabinet Office Minister Francis Maude, a Conservative, said: "Allegations about trade union industrial intimidation tactics, including attempts to sabotage businesses supply chains and harass employers' families are deeply concerning.

"That's why we need an independent review to get to the bottom of these activities, as well as to look at the role played by government, employers and employees in industrial disputes.

"This forms part of our long-term plan to ensure Britain remains competitive and to secure an economic recovery for hard-working people."

Mr Cable, in contrast emphasised that Britain had generally enjoyed good industrial relations for the past two decades while strikes were at a historically low level.

"There were clearly some very serious matters going on in Grangemouth," he said.

"That is why I have agreed to a proportionate and rational review of industrial disputes, including leverage and other tactics used by both unions and employers.

"There are rogue unions but there are also rogue employers, some of whom have in the past engaged in illegal tactics like blacklisting. This Government will tolerate neither."

A Unite spokesman said: "This review is a sorry attempt by the coalition to divert attention from the cost of living crisis.

"Vince Cable may not have noticed but the Grangemouth dispute has been settled.

"This review is nothing more than a Tory election stunt which no trade unionist will collaborate with."

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Banks Urged To End Expensive Phone Charges

High street banks, credit card companies and insurers are being urged to cut high-rate customer lines after a study found almost three quarters are costly 084 or 087 numbers.

Which? found that 177 out of 242 customer or complaints lines for financial services such as current accounts, loans and credit cards - or 73% - were premium-rate numbers.

The companies included leading high street banks and building societies such as HSBC, Lloyds Bank, Nationwide and TSB Bank, credit card providers American Express, Capital One and Tesco Bank and insurers Aviva, Churchill and Direct Line.

The watchdog found that four in 10 people (39%) prefer to call financial firms with an inquiry and nearly a third (31%) would rather complain by phone.

However, nearly all of the credit card providers studied (95%) use 084 or 087 numbers for complaints or customer service help lines, and 89% of current account providers use them for complaints or customer service help lines.

Existing customers are also being charged more than new ones, with free 0800 numbers used for 52% of sales or new customer lines compared with just 26% for existing customers and 21% for complaints.

Populus surveyed 2,070 adults online between August 30 and September 1.

Barclays and Barclaycard have announced they will offer a freephone or basic rate number for all customer help lines, while NatWest and RBS are also dropping costly calls.

Which? has called on other providers to follow their example.

The EU Consumer Rights Directive ban on the use of expensive numbers for customer help lines comes into force next year, but financial firms are excluded.

Which? is calling on the Financial Conduct Authority (FCA) to clarify existing rules to stop financial services companies from using high rate numbers on complaints lines, and change the rules so they also cover customer help lines.

The watchdog's executive director Richard Lloyd said: "Millions of us prefer to deal with our bank on the phone, yet we are expected to cough up for a costly call when we do.

"It's not right that financial companies are being let off the hook."

Ashok Vaswani, chief executive of Barclays Retail and Business Banking, said: "For many customers the telephone is the most convenient way in which to contact us, so it's right that we have taken this step to ensure that no customer need dial a premium or high rate number simply to speak to us."

A British Bankers' Association spokesman said: "We expect to see many banks changing to use local numbers for complaints in the near future and it is good to see that some banks have already committed to doing so."

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