Treasury Gets £35bn Windfall From QE Interest

The Treasury is to receive a £35bn boost as part of a deal with the Bank of England that will effectively reduce public debt.

Chancellor George Osborne and Bank Governor Sir Mervyn King have agreed that the BoE will give the Treasury interest earned through its £375bn economy-boosting programme known as quantitative easing (QE).

The cash - currently on the BoE's books - will flatter the public accounts by reducing the budget deficit, while also acting as a "small loosening of monetary conditions" equivalent to taking more QE action, according to the Bank.

The announcement comes a day after it decided not to extend QE at its monthly policy-setting meeting.

The Treasury said the agreement was in line with similar practices surrounding QE in the United States and Japan.

In a letter to Mr Osborne, Sir Mervyn stressed the cash transferred to the Government would likely need to be paid back to the Bank in the future.

The move comes at an apt time for Mr Osborne as he faces pressure on his plans to cut borrowing.

But JP Morgan Chase economist Malcolm Barr said it was "still likely" that the Chancellor will need to push back debt reduction targets in his upcoming autumn statement.

Shadow chief secretary to the Treasury Rachel Reeves said it was a "smoke and mirrors" deal.

"Instead of changing course and taking action to create the jobs and growth we need to get the deficit down. The Chancellor seems to think he can just be bailed out in the short term by money from the Bank of England," she added.

Under the arrangement, £11bn is expected to be handed to the Treasury this year, with the remaining £24bn paid in four instalments over the next financial year.

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Exclusive: Royal Mail To Deliver Float

By Mark Kleinman, City Editor

The Government is to begin sounding out City investors about their appetite to buy shares in Royal Mail ahead of a potential flotation of the postal service.

I have learned that ministers and the Shareholder Executive, the body which manages state-owned assets, have sanctioned a preliminary roadshow of major City institutions to begin in the new year.

The Government will wait until Royal Mail's Christmas trading performance is clear before commencing discussions with prospective investors.

On Tuesday, Royal Mail will unveil half-year results which are expected to show continued progress in restructuring the core UK letters division, which has seen tens of thousands of jobs axed in an attempt to secure the company's survival.

A decline in letter volumes accelerated by the explosion of the internet has only been partially offset by the growth in Royal Mail's parcels business.

Moya Greene, the Canadian chief executive of Royal Mail, is likely to confirm the plans for initial talks with City investors alongside the results.

A privatisation of Royal Mail would be arguably the most significant privatisation of a UK asset since John Major sold the railways during the 1990s.

Analysts say that a restructured Royal Mail could be worth as much as £4bn, although that figure is likely to be at the upper end of the range that a flotation could attract.

Ms Greene is also likely to reaffirm a ministerial commitment to make shares available to Royal Mail employees as well as the public.

A flotation is viewed in Whitehall as a more attractive option than an outright sale of the company because of the shortage of trade buyers and the political difficulties of negotiating a takeover by a financial investor such as a private equity firm.

Michael Fallon, the business minister, is taking a hands-on role in discussions about the potential sell-off.

Barclays is advising the board of Royal Mail, which is chaired by Donald Brydon, a leading City figure, with UBS advising the Government.

Royal Mail's finances have been knocked into shape by hiving off the company's historic pension deficit onto the taxpayer. The regulatory regime dictating stamp prices and other areas of its operations have also been loosened by Ofcom.

Royal Mail declined to comment.

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Chancellor Told To Halt Petrol Price Hike

George Osborne is facing renewed pressure to abandon a planned increase in fuel duty, amid warnings the rising price of petrol was putting household budgets under more strain.

As MPs prepare to vote on Monday on the planned 3p a litre increase due in January, the consumer organisation Which? said more people than ever before were being forced to cut back on motoring costs.

It said its latest polling found a record 85% of people expressed fears about rising fuel prices - a nine point increase since July.

Those saying they would cut back on motoring costs rose seven points to 39% - another record high - while one in 10 said they had had to dig into their savings to cover their motoring costs.

Overall, one in three people said they were finding it difficult to live on their current income, with 33% also cutting back spending on the essentials last month. Getting on for half  - 44% - said they were planning to cut back on food and groceries in the coming months.

Which? said the figures showed 8.7 million households curbed their spending on essentials last month, while 6.4 million households dipped into their savings to cover their outgoings.

Which? executive director Richard Lloyd said: "Rising fuel prices are the number one consumer worry and people are already telling us they're having to cut back and dip into savings just to get by.

"On the back of inflation-busting energy bill rises and increasing food prices, consumers can little afford another hit on their household budget. We're calling on the Government to think again about their plans to increase fuel duty in January.

"The forthcoming Autumn Statement must focus on measures that will help put money back in the pockets of consumers, because the economic recovery is at risk if we don't increase consumer confidence."

For Labour, shadow treasury minister Cathy Jamieson said: "Families, pensioners and businesses are still feeling the squeeze. Labour will vote on Monday for a delay in this fuel duty increase at least until next April."

A Treasury spokesman said: "The Government recognises that the rising price of petrol is a significant part of households' day-to-day spending.

"Since coming to office the Government has listened to the concerns of motorists about high pump prices and acted. Fuel is now 10p a litre lower than under the previous government's plans."

:: Pollsters Populus interviewed 2,100 UK adults on behalf of Which? online between October 26 and 28.

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BA Owner Faces Strike Threat Over Job Cuts

Staff at Spanish airline Iberia have rejected a restructuring plan that involves 4,500 job cuts and are willing to strike, labour unions said.

The threat of industrial action comes after IAG - the company formed by merging BA and Iberia - revealed an operating profit of just £13.5m in the nine months to September 30.

In addition to cutting nearly a quarter of the workforce, IAG has proposed a staff salary cut of 25-35% for three years.

"We are willing to take any necessary action," the airline unions said in a statement.

The results show Iberia is the weak link in the group, making a standalone operating loss of £209m in the period, while BA contributed operating profits of £228m.

On a pre-tax basis, taking wider cost pressures into account, the group made a loss of £134m in the nine months.

IAG shares have shed 40% of their value since the group's formation in 2011.

Iberia is Europe's leading carrier to Latin America, but it has been battling against increased competition from low-cost airlines and high-speed trains, labour disputes and Spain's deep economic crisis.

It is bleeding cash as revenues fail to cover its high operating costs, with a 15% spike in fuel costs.

"Iberia is in a fight for survival and we will transform it to reduce its cost base so it can grow profitably in the future," IAG chief executive Willie Walsh said in a statement.

Mr Walsh is no stranger to battles with trade unions and took on employees of BA over reforms when he was boss of the UK flag carrier.

He has also been a vocal critic of the British Government's aviation policy and said it was a "disgrace".

A BA aircrew strike in 2010 cost the airline up to £7m per day, but Mr Walsh used contract pilots and retrained ground staff on planes.

Mr Walsh stood firm on an airline's decision to withdraw travel perks from striking cabin crew, but staff called the ploy "bullying tactics".

Mr Walsh rejected suggestions the withdrawal of concessions was a "punishment" or an attempt to "break the union".

He added: "We told them about the consequences if they went on strike."

IAG's transformation plan for Iberia includes the fleet being downsized by 25 aircraft and routes cut by 15% in 2013, to concentrate on longer haul, profitable destinations.

Iberia head Rafael Sanchez-Lozano said: "It is unprofitable in all its markets. We have to take tough decisions now to save the company and return it to profitability.

"Unless we take radical action to introduce permanent structural change the future for the airline is bleak."

Whilst the possibility of strikes by Iberia staff now loom, passengers booked from Heathrow to Madrid should feel secure, Business Travel News editor-in-chief Malcolm Ginsberg.

"Previously Iberia operated out of Terminal 3 at Heathrow but have now joined sister carrier British Airways in Terminal 5," he told Sky News.

"From a practical point of view if an Iberia flight is cancelled at short notice it should be relatively easy to transfer to British Airways - providing they have space."

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Treasury Gets £35bn Windfall From QE Interest

The Treasury is to receive a £35bn boost as part of a deal with the Bank of England that will effectively reduce public debt.

Chancellor George Osborne and Bank Governor Sir Mervyn King have agreed that the BoE will give the Treasury interest earned through its £375bn economy-boosting programme known as quantitative easing (QE).

The cash - currently on the BoE's books - will flatter the public accounts by reducing the budget deficit, while also acting as a "small loosening of monetary conditions" equivalent to taking more QE action, according to the Bank.

The announcement comes a day after it decided not to extend QE at its monthly policy-setting meeting.

The Treasury said the agreement was in line with similar practices surrounding QE in the United States and Japan.

In a letter to Mr Osborne, Sir Mervyn stressed the cash transferred to the Government would likely need to be paid back to the Bank in the future.

The move comes at an apt time for Mr Osborne as he faces pressure on his plans to cut borrowing.

But JP Morgan Chase economist Malcolm Barr said it was "still likely" that the Chancellor will need to push back debt reduction targets in his upcoming autumn statement.

Shadow chief secretary to the Treasury Rachel Reeves said it was a "smoke and mirrors" deal.

"Instead of changing course and taking action to create the jobs and growth we need to get the deficit down. The Chancellor seems to think he can just be bailed out in the short term by money from the Bank of England," she added.

Under the arrangement, £11bn is expected to be handed to the Treasury this year, with the remaining £24bn paid in four instalments over the next financial year.

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Olympic Stadium: Dismay Over Delayed Future

By Enda Brady, Sky News Correspondent

Olympic and Paralympic champions have voiced their dismay at news that the stadium may not open fully until the summer of 2016.

Four bids are still being considered as full-time tenants at the Stratford venue, but each bid will require significant and time-consuming modifications.

Dennis Hone, chief executive of the London Legacy Development Committee, revealed this week that it will not re-open until August 2015 at the earliest and probably not before August 2016.

Olympic champion Jessica Ennis told Sky News it was important the stadium was opened to the public without delay.

She said: "I've some amazing memories of the stadium, like a lot of other athletes.

"I'd love to see it opened to the public as soon as possible."

Leyton Orient FC are among four bidders to use the stadium in Stratford

Paralympic double gold medallist Hannah Cockroft said it was vital to speed up the process so that the goodwill generated by the success of London 2012 could be tapped into.

"The danger is that if it's not opened fully to the public for four years then that interest will wane," she said.

"It's an amazing venue and people want to see it, they want to be a part of it. I really hope they sort this out, they have to."

A transformation project costing nearly £300m is currently under way at the site and is expected to last up to 18 months.

The park itself will be opened to the public on July 27 next year, one year to the day the Games opened in London.

Maria Miller, Secretary of State for Culture, Media and Sport, told Sky News: "The stadium is vital for the legacy of the Games, but the important thing is to get the right tenant in."

The four bidders are West Ham United FC, Leyton Orient FC, a Formula One venture and the University College of Football Business - an academic institution owned and run by Burnley FC.

A final decision is expected in the first half of 2013, or possibly sooner.

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HSBC Offshore Account Holders Investigated

HM Revenue and Customs (HMRC) has said it is studying a list of British HSBC customers in Jersey after a whistleblower handed over a list of names, addresses and account balances.

The department will now investigate the customers' details to establish whether any of them used the offshore accounts to evade tax.

Together, the 4,388 UK-based customers have a total of £699m in the bank accounts - which were often undisclosed to tax authorities, the Daily Telegraph claimed.

It said a number of criminals, former bankers, doctors, mining and oil workers, celebrities and other well-known figures are on the list.

"We can confirm we have received the data and we are studying it," HMRC said in a statement.

"We receive information from a very wide range of sources which we use to ensure the tax rules are being respected.

"Clamping down on those who try to cheat the system through evading taxes and overclaiming benefits is a top priority for us and we value the information we receive from the public and business community."

HSBC, the UK's largest bank, said: "We are investigating the reports of an alleged loss of certain client data in Jersey as a matter of urgency.

"We have not been notified of any investigation in relation to this matter by HMRC or any other authority but, should we receive notification, we will cooperate fully with the authorities.

"HSBC remains fully committed to adoption of the highest global standards including the procedures for the acceptance of clients."

The report comes after the bank set aside a further $800m (£500m) to cover settlements for breaching anti-money-laundering rules, as revealed by Sky News' City Editor.

The move takes its total bill to around $1.5bn (£935m) to cover fines from US authorities, which are investigating the bank's procedures in Mexico.

Tax authorities around the world are in the process of clamping down on people who evade taxes by putting their money offshore.

Last week a Greek magazine published the details of more than 2,000 HSBC clients with Swiss accounts.

The information came from a list distributed to European authorities in 2010 by Christine Lagarde, then France's finance minister, after a whistleblower in Geneva sold the details.

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Sales Boost For John Lewis As Comet Collapses

John Lewis has become the latest retailer to get a boost from the collapse of electricals chain Comet.

The department store saw sales shoot up by over 17% over the seven days to November 3, when compared with the same period last year.

It said a number of factors helped drive the increase, including the "likely demise" of rival Comet.

"The later half term across much of the country undoubtedly helped drive footfall into the shops, as did the distinctly autumnal weather," it said in a statement.

"Beyond that, new product launches in technology, a competitor's 'extravaganza', and the sad news of another's likely demise undoubtedly combined to provide a lively end to the week."

Sales of electricals were particularly strong, it said, with the number of large appliances sold at its second-highest level to date.

Comet advertised its sale on its website

A week ago, Comet called in administrators Deloitte who are attempting to wind down the business.

It launched a "massive" liquidation sale on Thursday, but many customers were left disappointed by the level of discount.

On Friday, Matt Bodell tweeted: "FYI anyone thinking of going Comet for the liquidation/clearance sale. Dont bother its like 10% off. Hold out for the prices to drop in 2wks (sic)."

And Graeme Chapman added: "sad it may be about Comet but their going out of business sale isn't much of a sale."

Although some shoppers were more successful, with Rachael Imison tweeting: "Awesome bargains to be had in comet!! Bought myself a little Christmas present."

Dixons - the UK's largest electricals retailer - has also benefited from its rival's demise.

The chain, which owns Currys and PC World, has seen its share price jump since speculation about Comet going into administration began on November 1.

Between October 31 and November 8, shares in Dixons Retail rose almost 20% to 24.7p, having peaked at a 22-month high of 25.8p the day after the rumours began.

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BA Owner IAG Hit By Iberia Performance

IAG - the company formed by merging BA and Iberia - has made an operating profit of just £13.5m in the nine months to September 30.

The results show Iberia is the weak link in the group, making a standalone operating loss of £209m in the period, while BA contributed operating profits of £228m.

On a pre-tax basis, taking wider cost pressures into account, the group made a loss of £134m in the nine months.

IAG has announced a transformation plan for Iberia, which will result in 4,500 job losses at Iberia.

Iberia's fleet is being downsized by 25 aircraft and its routes are being cut by 15% in 2013, to concentrate on those which are most profitable.

"Iberia is in (a) fight for survival," the carrier's chief executive Rafael Sanchez-Lozano said in a statement.

"It is unprofitable in all its markets. We have to take tough decisions now to save the company and return it to profitability.

"Unless we take radical action to introduce permanent structural change the future for the airline is bleak."

Mr Sanchez-Lozano added: "However this plan gives us a platform to turn the business around and grow."

The group reported a 9% increase in passenger numbers and a 15% hike in fuel costs, as more job losses look likely at the Spanish airline.

Mr Sanchez-Lozano said "the Spanish and European economic crisis has impacted on Iberia, but its problems are systemic and pre-date the country's current difficulties."

IAG said it was announcing "a comprehensive plan to save Iberia after record losses and return it to profitability."

The parent group's said plans to cut 4,500 jobs are designed to safeguard around 15,500 posts across the airline.

IAG added that a deadline of January 31, 2013, had been set to reach agreement with unions over the cuts.

The group warned: "If agreement is not reached, deeper cuts and a more radical reduction in the size and scale of Iberia's operations will take place to secure the natural long haul traffic flows at Madrid and safeguard the company's future."

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Payday Loans: 'Majority Miss Payments'

A consumer group has demanded regulators crack down hard on payday loan firms amid research suggesting 57% of customers have incurred stiff penalty charges for missing payments.

Which? claims 29% of people who go to payday loan firms - which can apply annual interest rates of more than 4,000% - do so in the knowledge they have no chance of paying back what they owe within the timescale of the loan deal.

The industry is designed to offer short-term loans to people to cover bills until pay day - with the interest rate climbing steeply if the terms are breached.

It has led to revelations that some borrowers have ended up owing thousands after taking out loans for just a few hundred pounds.

According to Which?, 20% of people who took part in its survey complained of being hit by unexpected charges.

An increasing number were using payday loans to cover essentials such as food as the squeeze on household budgets continued to be felt, the group said.

Its Executive Director Richard Lloyd said: "It's shocking that half of all people taking out payday loans have been unable to pay the money back and it's a depressing sign of the times that almost a third were hassled by debt collectors in the past year.

"Payday loans are leaving many people caught in a spiral of debt and taking out more loans just to get by.

"That's when they're hit by excessive penalty charges and roll over fees.

"The Office of Fair Trading must do more to clamp down on irresponsible lending by introducing tighter rules for payday lenders.

"Better affordability assessments and clearer charges would be the first steps to clean up the industry and better protect consumers."

The industry has defended itself by insisting customer satisfaction levels are high and they are offering a financial lifeline to people at a time when mainstream banks are largely ignoring the needs of their customers.

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