Air Fares: Heathrow Warns Over Charge Ruling

Heathrow has warned of "serious consequences for passengers" after the Civil Aviation Authority (CAA) rejected the airport's demands for inflation-busting increases in the amount it charges airlines.

In its final proposals on charges covering the five years from 2015, the CAA decided they could do not rise by more than the RPI rate of inflation - currently 3.3% - while the Gatwick formula for the same period should be RPI plus 0.5%.

Although for Heathrow this represents an improvement on the RPI minus 1.3% proposed by the CAA earlier this year, the latest figure has angered the airport's chief executive Colin Matthews.

He said: "The CAA's settlement could have serious and far-reaching consequences for passengers and airlines at Heathrow.

"We want to continue to improve Heathrow for passengers.

easyJet's boss has criticised the CAA's settlement plans

"Instead, the CAA's proposals risk not only Heathrow's competitive position but the attractiveness of the UK as a centre for international investment.

"We will now carefully consider our investment plans before responding fully to the CAA, he concluded."

The charges are important because in addition to crucial investment cash for airports, they also form part of an airline's calculations on ticket prices.

Virgin Atlantic accused the CAA of bowing to pressure from Heathrow.

Its statement said: "The decision to further increase charges at the airport for the next five years is another hammer blow for both UK consumers and overseas visitors wanting to travel to this country.

"Prices at Heathrow are already triple the level they were 10 years ago and coupled with ever increasing air passenger duty, passengers are facing some of the highest charges in the world and this is deterring inbound tourism and foreign investment."

The Gatwick proposal was given "a cautious welcome" by bosses of the West Sussex airport though easyJet suggested it was a poor deal for passengers.

Chief executive Carolyn McCall said of the proposed increase: "This is based on the airport's proposals and ignores those of the airlines who gave evidence to support a lowering in charges, which would have led to a reduction in fares paid by passengers."

She added that, using Gatwick's own figures, "passengers could be paying £28 more per flight for years in advance of the opening of a new £9bn runway without any real oversight by the CAA".

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UK Economy 'Grew 1.2% In Third Quarter'

Closely-watched readings of activity in the UK economy have measured an acceleration in GDP growth to 1.2% in the third quarter - partly driven by the housing market.

The estimate was announced by compilers of the Markit/CIPS Purchasing Managers' Index (PMI) following the reading for the service sector in September.

Markit's composite index, which brings together its surveys of services, manufacturing and construction, came in at 60.4 in September, with a figure above 50 signalling expansion.

It averaged 60.2 over the third quarter and Markit said it marked the fastest rate of quarterly growth since records began in 1998 and GDP growth for the quarter as a whole of 1.2%.

It would represent a sharp improvement on the 0.7% official rate of growth in the second quarter of 2013.

Surging property deals have boosted financial services in London especially

The PMI surveys for September suggested that overall employment recorded the fastest rise in six years and forecast that hefty amounts of outstanding business would continue to drive hiring.

This contrasts with the Bank of England's view that substantial spare capacity in the economy will put a brake on job creation, delaying a rise in the base rate of interest until the second half of 2016 under its current forward guidance.

The central bank said in August that it would not consider raising borrowing costs until the jobless rate falls to 7% unless inflation looked likely to get out of control.

The service sector survey out on Thursday covers transport and communication, financial intermediation, business services, personal services, computing and IT, hotels and restaurants but excludes retail.

Service providers also reported that a jump in new business last month placed strains on resources, with backlogs of work rising at the fastest pace in more than 13 years.

The workload, along with firms' optimism about future business, led to a solid rise in employment and some pay rises.

Chris Williamson, Markit's chief economist, said: "Growth is being led by financial services - linked in part to increased housing market activity - and the business sector.

"Consumer-facing services continue to struggle, reflecting the ongoing squeeze on incomes due to weak pay growth and high inflation."

Vicky Redwood, chief UK economist at Capital Economics, urged caution on the prediction of 1.3% GDP growth in the third quarter.

She said: "Admittedly, the official data that we have had so far suggest that this might be a bit of a tall order.

"Nonetheless, GDP growth should have at least beaten Q2's 0.7% quarterly rise and the surveys suggest that the fourth quarter is starting on a strong note too.

"Overall, then, more evidence that the recovery is becoming well-entrenched," she concluded.

The first official estimate of GDP growth for the third quarter is announced by the Office for National Statistics on October 25.

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Payday Lenders Facing Unlimited Fines

Tougher controls on payday lenders could see unlimited fines for companies which break the rules.

The Financial Conduct Authority (FCA), which will take over regulation of consumer credit from the Office of Fair Trading (OFT) in April 2014, said the sanctions were among a host of proposed new rules that would go out to consultation.

The organisation, which will cover tens of thousands of firms offering services such as overdrafts, credit cards and debt advice, was formed six months ago with the promise of strengthening protection for consumers.

Among its other recommendations are: limiting to two the number of times a payday loan can be rolled-over, banning misleading adverts and compulsory affordability checks for all loan applicants.

Payday loan firms have come under intense scrutiny in recent months after a damning report by the OFT found "deep-rooted" problems.

The Competition Commission is carrying out a full-scale investigation of the industry and will reveal its findings next year.

The OFT, which referred the £2bn industry to the commission, is worried 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 firms would be limited to doing this twice per customer under the proposals.

The FCA's chief executive Martin Wheatley said: "Today I'm putting payday lenders on notice: tougher regulation is coming and I expect them all to make changes so that consumers get a fair outcome.

"The clock is ticking," he added.

Payday lenders have said they have been working to improve standards and ensure loans are given only to those who can afford them.

Russell Hamblin-Boone, chief executive of the Consumer Finance Association (CFA), which represents many short-term lenders, said: "The CFA and its members have always supported well-designed, well-implemented regulation in order to protect consumers and drive up standards.

"Our tough code of practice and independent monitoring, which is unique in the industry, has paved the way for FCA regulation, so we look forward to seeing the detail of the draft rulebook."

The FCA has asked for feedback from consumers as well as lenders before implementing its rules next year.

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Tesco Confirms China Deal And UK Progress

Tesco is to pay £345m to secure a joint venture with a state-backed retailer in China and confirmed progress in restoring growth to its core UK business.

However, shares in the UK's biggest retailer were the biggest fallers on the FTSE 100 - losing 4.5% of their value in the first hour's trading on Wednesday - after it confirmed continuing troubles

While it reported a 23.5% drop in group pre-tax profits to £1.39bn in the six months to August 24 amid tough times in Europe and Asia, Tesco said its performance in the UK had strengthened, particularly in food.

Chief executive Philip Clarke has been spending £1bn overhauling the group's stores to arrest plunging like-for-like UK sales.

Major supermarket shares all suffered on Wednesday (prices correct 08.47)

That decline was stopped in the last half year, Tesco said, with sales measured as flat against the same period in 2012.

It announced the investment in its UK stores after being accused of taking its eye off the ball in the country, instead concentrating on a diversification of its UK business and looking abroad for growth.

It recently got out of the US and has now confirmed it is folding its 134 stores in China into a partnership with China Resources to become the second-biggest player in the market there.

Tesco becomes a solo operator in China to a minor stakeholder

Tesco is to hold a 20% stake in the venture having struggled so far to get to grips with the demands of the Chinese consumer.

The deal allows Tesco's boss to devote more efforts to the battle to retain its leading market share of over 30% in Britain.

Meanwhile, Sainsbury's continued to pile on the pressure as it reported like-for-like sales excluding petrol rising 2% in its second quarter.

Sainsbury's is growing its UK market share

The UK market - while dominated by Tesco - has witnessed a surge in competition with the likes of Aldi, Lidl and Waitrose challenging the other major players Morrisons, Sainsbury's and Asda.

Tesco suffered a 71% tumble in European trading profits to £55m and admitted the hit was worse than expected after conditions suffered in countries such as Ireland, Turkey and Poland.

Profits also fell sharply across Asia, down 12.4% to £314m, excluding China.

Tesco admitted the overseas woes would offset some of the benefit of its UK profits improvement over the full year.

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Energy Bills: Pensioners Face E.ON Price Hike

Labour claims the Government's efforts to simplify energy bills has backfired after one of the 'big six' suppliers withdrew its discount tariff for the over-60s.

E.ON's 'StayWarm' deal, which offered fixed-price energy for older customers based on their average consumption levels, will come to an end at the weekend.

The company said the move was forced by changes to the number of tariffs permitted by regulator Ofgem.

A company spokesman said: "Due to new Ofgem rules, which includes limiting the number of products we can offer, the StayWarm tariff will close as current contracts come to an end from October 7.

"We are writing to all customers as their contracts come to an end, and where possible we are also contacting them by phone with the aim of speaking to each customer to help ensure they switch to the best product for their needs."

Energy firms have not ruled out bill increases ahead of this winter

StayWarm, which allowed older people to plan their energy bills throughout the year, had been available to households inhabited by at least one person aged over 60.

The premium paid depended on the number of inhabitants and bedrooms, as well as geographical region.

But it had been unavailable for new customers since September last year.

The Government's energy regulator Ofgem is currently reforming the market in order to simplify bills, although consumer watchdog Which? has criticised its plans, claiming companies will still be allowed to include a standing charge as well as a unit price in their tariffs.

Luciana Berger claims Government has failed to reform energy pricing

Which? has called for simple tariffs, without standing charges and displayed in the style of petrol forecourt prices, to make it easier to spot the cheapest deal.

Luciana Berger, Labour's shadow energy and climate change minister, said of E.ON's decision: "This is yet more evidence that David Cameron's cack-handed reforms to energy tariffs have completely backfired.

"He promised to force the energy companies to put everyone on the cheapest tariffs - but now it looks like some pensioners will be paying more than they were before.

"If David Cameron is serious about tackling the cost of living crisis he should back Labour's plans to reset the energy market, freeze energy bills, reform Britain's energy market and put all over 75s on the cheapest tariff."

Labour's pledge to freeze energy bills for 20 months should the party win the next election sparked a furious backlash from the energy suppliers, saying the move threatened investment in Britain's energy structure and therefore blackouts.

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Cameron Vows Tories Will Build Better Britain

David Cameron has urged voters to hand him a majority at the next election so that the Tories can build a "land of opportunity".

The Prime Minister evoked Winston Churchill as he asked Britain to give the Conservatives the tools to "finish the job" of "clearing up the mess" left by Labour.

He said the economy was starting to turn the corner but warned that anyone who thought the struggle was over is "living in a fantasy land".

In a bid to adopt a more upbeat tone, his party conference speech talked of creating a better Britain and signalled he would slash taxes if he stays in power.

"We are Tories. We believe in low taxes. And believe me - we will keep on cutting the taxes of hard-working people," he declared.

But he also warned of further austerity as the Conservatives aim to pay off the deficit and then build up a surplus for the future.

There were no major policy announcements in the 49-minute address in Manchester, which Mr Cameron delivered much of directly to the camera.

The Prime Minister and wife Samantha walking to the conference hall

Instead, the Tory leader sought to draw clear dividing lines with Labour, accusing Ed Miliband of adopting a "crazy" anti-business agenda.

He dismissed Mr Miliband's promises to cut the cost-of-living as "all sticking plaster and quick fixes" - dubbing it "Red Ed and his Blue Peter economy".

Borrowing the slogan Mr Miliband repeated 17 times in his own speech, Mr Cameron declared: "I tell you what, Britain deserves better than that lot."

He insisted profit, wealth creation and enterprise were not "dirty, elitist words" but the driving force behind the recovery.

"It's businesses that get wages in people's pockets, food on their tables, hope for their families and success for our country," he said.

He branded Labour's plan to hike corporate tax rates for large businesses as "just about the most damaging, nonsensical, twisted economic policy you could possibly come up with".

And he warned the call for more state borrowing and spending to ease what the Opposition calls a cost-of-living crisis would risk putting the UK on the same track as Greece.

He also rejected Labour accusations that the Tories represent the privileged and said he wanted a society where everyone has "the chance to make it".

Mr Cameron declared that he is "fighting heart and soul for a majority Conservative government because that is what our country needs".

The Prime Minister putting the finishing touches to his speech

But he warned Tory ambitions should not be limited to repairing the damage caused by Labour and eliminating the deficit.

"Finishing the job is about more than clearing up the mess we were left," he said. "It means building something better in its place. In place of the casino economy, one where people who work hard can actually get on.

"In place of the welfare society, one where no individual is written off. In place of the broken education system, one that gives every child the chance to rise up and succeed.

"Our economy, our society, welfare, schools, all reformed, all rebuilt - with one aim, one mission in mind: To make this country, at long last and for the first time ever, a land of opportunity for all."

His speech followed a raft of policy announcements aimed at countering Labour's claim that it is the only party that will tackle the rising cost-of-living.

Tory plans include bringing forward the Help-to-Buy scheme, the prospect of a fuel duty freeze until 2015 and a tax break for some married couples.

Mr Cameron vowed a Tory government would replace the "casino economy" and "welfare society" as well as improve the education system.

He accused Labour of failing Britain's young people and disadvantaged households by giving up and consigning them to a life on benefits.

"If you expect nothing of people, that does nothing for them. Yes, you must help people, but you help people by putting up ladders that they can climb through their own efforts," he said.

"It's this party that is fighting for all those who were written off by Labour. It's this party that's for the many, not the few. Yes - the land of despair was Labour, but the land of hope is Tory."

The Prime Minister signalled the Tory manifesto would include measures to stop young people opting for a life on the dole when they have left school - with all under-25s "earning or learning".

He also sought to position the Tories as the true defenders of the NHS, hailed the "noble" calling of social work and vowed to drive regeneration in the North of England.

"Make no mistake who's looking forward in British politics," Mr Cameron said. "We'll leave the 1970s-style socialism to others. We are the party of the future."

Activists gave the speech a standing ovation as Samantha Cameron joined her husband on stage.

The pair left the hall to Fleetwood Mac's Don't Stop (Thinking About Tomorrow), famously used by Bill Clinton as the soundtrack to his successful campaign for the US presidency in 1992.

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US Shutdown: Deadline Passes Without Deal

A bitterly divided Congress has plunged the US into a partial government shutdown – the first in almost two decades – that will put some 800,000 workers on unpaid leave and close museums and national parks.

A deadline to fund government spending passed without agreement, and the shutdown went into force at 12.01am.

The Democrat-dominated Senate and Republican-controlled House of Representatives refused to back down in a clash over President Barack Obama's controversial healthcare law, known as Obamacare.

The deadlock means non-essential services, including some of America's most famous tourist attractions, will be forced to close.

Workers classified as essential government employees, such as air traffic controllers or Border Patrol agents, will continue to work.

Shortly after midnight, Mr Obama tweeted: "They actually did it. A group of Republicans in the House just forced a government shutdown over Obamacare instead of passing a real budget."

The last shutdown took place under President Bill Clinton

It is the first US shutdown in 17 years, with analysts concerned about its potential impact on Wall Street and global markets.

Mr Obama warned of the possible risks to the economy, saying a shutdown would have "very real economic impact, right away".

David Cameron said: "It is a risk to the world economy if the US can't properly sort out its spending plans."

It is "a reminder to all of us that we need to have properly planned public-expenditure systems, properly planned tax, properly planned arrangements for getting our deficit down", the British Prime Minister said.

New York's Statue of Liberty and the National Zoo in Washington, as well as Yellowstone and other national parks, are among the tourist attractions the shutdown will affect.

Republican opposition to the new healthcare law has been fierce

The Internal Revenue Service will suspend audits and taxpayer services, programmes for children will be halted and up to 800,000 government employees will be furloughed. More than a million others could be asked to work without pay.

The military's 1.4 million active duty personnel will remain on duty and Mr Obama signed a law on Monday to ensure they would receive their pay on time.

The Pentagon is looking for ways to ways to expand the number of Defense Department civilians who are exempt from furloughs, Defense Secretary Chuck Hagel said.

Mr Obama said he had been willing to negotiate, and placed the blame on Republicans, especially the hard-line Tea Party conservatives.

"One faction of one party, in one house of Congress, in one branch of government doesn't get to shut down the entire government just to refight the results of an election," Mr Obama said.

"Keeping the people's government open is not a concession to me."

The Republicans had sought to tie passing the government spending bill to a delay in major elements of the Obamacare reform.

They insisted the fault rested with Democrats who had refused to negotiate any changes to the healthcare law.

House Speaker John Boehner, who spoke to the president before the midnight deadline, claimed "the Senate has continued to reject our offers".

Some of America's most iconic landmarks will be affected by the shutdown

Mr Obama's healthcare law was passed by Congress and signed into law in 2010, despite opposition by the Republican Party, especially from within the Tea Party.

Some elements of the scheme - which aims to provide greater access to affordable health insurance for poorer sections of society - take effect today despite the shutdown because they operate with money that is not subject to the budget wrangling.

Market reaction was muted following stock market falls across the board on Monday in anticipation of the shutdown.

Japan's Nikkei rose slightly while in Europe the FTSE 100 share index was flat in early trading following the previous day's 0.8% drop.

Dow Jones Futures pointed to a rise on opening in New York.

The dollar dropped slightly against the pound while there was also a move towards safe havens as gold values rose by up to 0.5%.

A protester voices her dissatisfaction outside the Capitol building

London-traded Brent Crude fell by 0.4% to $107 a barrel as the shutdown was seen as potentially damaging to US economic growth prospects.

Much of the shutdown's economic impact will depend on how long it takes politicians to find a solution.

The last shutdown, under the Clinton Administration, lasted 21 days between December 1995 and January 1996.

The political dysfunction at the Capitol also raised fresh concerns about whether Congress can meet a crucial mid-October deadline to raise the government's $16.7trn debt ceiling.

This would force the country to default on its obligations, dealing a potentially painful blow to the economy and sending shockwaves around global markets.

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Minimum Wage Rises As Rogue Firms Targeted

Employers who fail to pay the statutory minimum wage face being named and shamed from today as the latest increases come into effect.

The adult rate has risen by 12p an hour to £6.31 and by 5p to £5.03 an hour for 18 to 20-year-olds.

The minimum for 16 and 17-year-olds increased by 4p to £3.72 while the apprentice rate goes up by 3p to £2.68.

The Government estimates that 890,000 people will receive a pay rise because of the changes.

Business Secretary Vince Cable said the Low Pay Commission recommended a rate which supported low paid workers without damaging their chances of getting a job.

"As signs of an economic recovery start to emerge, we need to do more to make sure that the benefits of growth are shared fairly across the board.

"That is why in addition to their ongoing annual remit, I am asking them (the commission) to extend their expertise to help the Government and business understand how we can deal with the issue of low wages in the economy.

In particular I have asked them to look at what economic conditions would be needed to allow the national minimum wage to rise in the future by more than current conditions allow," he said.

Unions have demanded the proceeds of growth are shared with workers.

TUC general secretary Frances O'Grady said: "Years of below-inflation rises mean that the UK's lowest-paid workers are now facing an historic living standards crisis.

"As the recovery takes hold we will need to see far bigger increases to the minimum wage to ensure that ordinary people and not just the super rich benefit from economic growth.

"This will need more than any one-off pre-election boost - we will need sustained stronger rises if the real value of the minimum wage is to be restored."

The Resolution Foundation think-tank said the minimum wage will be falling in real terms for the fifth year in a row despite the increase, because it is not keeping pace with rising prices.

Campaigners called for more companies and organisations to pay a so-called living wage, currently set at £7.45 an hour for the UK and £8.55 for London.

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Cyber Crime: Banks Ordered To Bolster Defences

The Bank of England is drawing up a "concrete plan" to help protect the UK's banking system from the mounting threat of cyber attack.

The development emerged today in minutes of last month's meeting of the Financial Policy Committee (FPC), which is charged with safeguarding financial stability.

The FPC's move was confirmed following two recent attacks on UK banks in which Barclays and Santander branches were allegedly targeted.

It cautioned there were a number of "potential vulnerabilities" in the banking system and said it wanted banks and other institutions - including the Bank of England - to draw up plans for protection as a priority.

The UK's banking sector is particularly at risk due to old and complex IT systems, as well as a high degree of interconnectedness and its reliance on centralised infrastructure, such as payment systems and clearing houses.

Treasury officials are already working on plans to assess, test and improve the system's resilience to cyber attacks.

But the minutes of the meeting of the FPC, which is chaired by Bank governor Mark Carney, said there now needed to be a "concrete plan" in place by the end of the first quarter of 2014, with a progress report before the end of this year.

Details of the FPC's worries come just days after the Ministry of Defence announced it was creating a new Joint Cyber Reserve Unit to help defend national security as it battles against hundreds of thousands of attacks against secure government sites each year.

The Bank also separately today published plans on how to stress test banks each year, proposing to initially limit the exercise to the eight largest players - HSBC, Barclays, RBS, Lloyds Banking Group, Standard Chartered, Santander, Nationwide Building Society and Co-operative Bank.

It has launched a consultation on the stress tests, with a deadline for feedback set for January 10 next year.

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Google Defends Tax Affairs From New Scrutiny

Google's tax arrangements are under further scrutiny after it revealed paying £11.6m in corporation tax last year on UK sales said to be as high as £3.5bn.

The US technology firm, which has faced Parliamentary criticism amid suggestions of tax avoidance in the past, has consistently argued it operates within the law.

The company, which recently celebrated its 15th birthday and employs around 2,000 people in the UK, said it paid the Treasury £156.1m in total during its last financial year.

The Daily Telegraph, citing filings at Companies House, reported its UK revenues for 2012 at £506m but Reuters said its total UK sales stood at £3.5bn.

Google's tax affairs rose to prominence again in June when a report by MPs found Google had made around £11.5bn in revenue from the UK between 2006 and 2011 but paid just £10m in corporation tax.

The Public Accounts Committee called for an HMRC investigation amid evidence from apparent whistleblowers while a Reuters investigation alleged that Google's UK staff were responsible for sales rather than marketing as the company has always insisted.

Today, a Google spokesperson said: "Like most multinationals, we pay the bulk of our £1.2bn corporate tax bill where our business originated, in our case the US.

"That's a rate of more than 19%, roughly what a UK-based company would pay.

"We're also a significant contributor to the UK economy- having created over 2,000 jobs.

This year alone we've invested more than £300m in property, and tax related to our UK operations totalled more than £150m."

Reuters journalist Tom Bergin, who conducted the news service's investigation into Google's tax arrangements, told Sky News he believed it was an "incredibly low" effective corporate tax rate.

He said: "Google reports half of its profits in Bermuda where it pays no tax so that's why Google has one of the lowest tax rates on its non-US income among any company.

"Google pays around 3 percentage points tax on its overseas profit so it is true when it comes to paying tax one of the few countries where Google does pays tax is the US.

"Of course that's because the US tax rules are considerably stronger than they are here in Europe and particulary in the UK.

So Google cannot possibly avoid paying tax in the US but when it comes to Europe and the UK it is a different matter, he concluded."

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