Lloyds Shares Sale: Taxpayers 'Lost £230m'

Taxpayers took a £230m hit from the sale of a 6% chunk of Lloyds Banking Group shares to the private sector, says a National Audit Office (NAO) report.

The figure appears to undermine a claim at the time by Chancellor George Osborne that the share sale in September represented "a profit for taxpayers".

The Government acquired a 39% chunk of Lloyds Banking Group in 2009, in the wake of the financial crisis after it swallowed up troubled Halifax Bank of Scotland.

It returned a 6% portion of the bank to the private sector with a share sale to institutional investors earlier this year.

The £230m loss takes into account the cost of borrowing money to fund the £20bn bank bailout in 2009.

George Osborne claimed taxpayers made a profit from the shares sale

It would suggest that the overall loss of the bailout for the bank could be nearly £1.5bn if the rest of the taxpayer stake is sold off at a similar price.

Mr Osborne trumpeted in the autumn that the £6.2bn Lloyds share sale had resulted in the national debt being reduced by more than half a billion pounds.

That claim was later backed in data from the Office for National Statistics.

This £586m figure represented the difference between the value for accounting purposes of the shares on the Treasury's books - at 61p - and the 75p sale price.

The Treasury acknowledged at the time of the sell-off that the cash profit was far less, at £61m.

The latest report does not dispute these calculations but it takes into account the effective interest paid by the Government to make the bailout investments.

It also recommends that the Treasury should consider these financing costs when analysing the value to the taxpayer of any future sale.

However the report, which is broadly positive about the handling of the sale, said: "This shortfall should be seen as part of the cost of securing the benefits of stability during the financial crisis, rather than any reflection on the sale process."

UK Financial Investments, which manages the Government's stakes in the bailed-out banks, ran the sale.

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Plastic Notes Issued In UK From 2016

Plastic banknotes are to be issued for the first time when the new £5 featuring Sir Winston Churchill appears in 2016.

A £10 note featuring Jane Austen to follow around a year later will also be made from polymer rather than the cotton paper currently used, the Bank of England said.

It follows a three-year research programme that concluded plastic notes stay cleaner for longer, are more difficult to counterfeit and are at least 2.5 times longer-lasting.

A public consultation, giving people the chance to handle the notes, found 87% of 13,000 individuals who responded were in favour of polymer.

Bank governor Mark Carney said: "Ensuring trust and confidence in money is at the heart of what central banks do. Polymer notes are the next step in the evolution of bank note design to meet that objective.

"The quality of polymer notes is higher, they are more secure from counterfeiting, and they can be produced at a lower cost to the taxpayer and the environment."

The new notes will stay cleaner and last longer than cotton paper

The new notes will retain their familiar look, the Bank said, including the portrait of the Queen and a historical character.

A contract is expected to be signed with Innovia Security to supply polymer material, which would see Innovia establish a polymer production plant in Wigton, Cumbria.

The Bank acknowledged when it launched its consultation in September that plastic banknotes were more expensive to produce.

But it argued that because they are longer-lasting they should prove cheaper in the long run.

It also says that, being thin and flexible, they can fit into wallets as easily as paper banknotes.

The Bank said the new notes would be slightly smaller than existing paper notes, but the practice of note size increasing with denomination will be maintained.

More than 25 countries issue polymer banknotes, including Australia - which began printing them in 1988 - as well as New Zealand, Mexico, Singapore, Canada, and most recently Fiji and Mauritius.

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Unemployment Falls 99,000 To Four-Year Low

Unemployment has fallen by 99,000 as the number of people in work topped 30 million for the first time on record.

The jobless total fell to 2.39 million in the quarter to October, the biggest cut in over a decade.

It means the jobless rate is 7.4%, the lowest for more than four years.

The number of people in work was 30.09 million, an increase of 250,000 over the quarter and of almost 500,000 compared with a year ago.

Private sector employment reached a record high of 24.4 million, and long-term and youth unemployment also fell.

But 1.47 million people were in part-time jobs because they could not find full-time work, the highest total since records began in 1992.

The number of people claiming jobseeker's allowance fell by 36,700

Other data from the Office for National Statistics (ONS) showed a 45,000 fall in those classed as economically inactive, to 8.92 million - a rate of 22% and the lowest since 1991.

The number of people claiming Jobseeker's Allowance fell by 36,700 in November to 1.27 million, the 13th consecutive monthly cut.

The number of people unemployed for more than a year fell by 33,000 to 866,000, the lowest for over a year, while youth unemployment dipped by 19,000 to 941,000.

Public sector employment increased slightly, by 4,000, to 5.6 million, largely because of a rise in the NHS, although the figure fell by 11,000 in local government.

The employment rate for over-65s is now 10%, the highest since records began in 1992.

Average earnings increased by 0.9% in the year to October, down by 0.1% on the previous month, giving a weekly average of £476.

Nigel Meager, Director of the Institute for Employment Studies, said: "Today's statistics from ONS show another strong improvement, confirming that the UK labour market recovery is well under way."

Employment Minister Esther McVey said: "It is really encouraging news that the number of people in jobs has increased by a quarter of a million in the last three months, bringing the total number of people in work to a record-breaking 30 million.

"Together with a big fall in unemployment, this shows that the Government's long-term economic plan to get people off benefits and into work is proving successful."

The Bank of England has said it won't consider raising interest rates from 0.5% until the unemployment rate falls to 7%.

In a separate development the Bank of England said Britain's economic recovery may be at risk if sterling strengthens much further.

The bank said that the 2% appreciation in sterling over the previous month reflected a stronger economic outlook, but could jeopardise exports.

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Motor Insurance Premiums Could Be Cut

Car insurance premiums are too high, says the competition watchdog which is to look at ways of reducing them.

The Competition Commission said there could be caps on the cost of accident repairs and providing replacement vehicles for drivers.

The watchdog also said in its provisional report that too many accident repairs were not carried out to the required standard.

And it found the way add-on insurance products were sold made it difficult for customers to find the best-value products.

It said overall the £11bn market was not working well for drivers and believed too many were footing the bill for unnecessary costs incurred during the claims process after an accident.

These costs are initially borne by the insurers of at-fault drivers, but they feed through into increased insurance premiums for all motorists.

The watchdog was also concerned about the relationship between price comparison websites and insurers.

Alasdair Smith, who is leading the investigation, said: "We are now considering a range of possible measures, some of them far-reaching reforms, to ensure that the market better serves the interests of customers."

Mr Smith said that in most cases the party managing the accident claim - typically the non-fault insurer or intermediary - was not the party liable to pay the costs of the claim.

He added: "There is insufficient incentive for insurers to keep costs down even though they are themselves on the receiving end of the problem."

The commission estimates the extra premium costs due to the separation of control and liability on replacement cars and repairs to be between £150m and £200m a year.

It is considering whether to make a driver's own insurer responsible for providing a replacement vehicle or to give at-fault insurers greater opportunity to take control over managing claims.

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New Runways For Gatwick And Heathrow Airports

Building a controversial third runway at Heathrow airport has been shortlisted as one of the options for expansion by the Airports Commission in its first report.

The interim findings of an independent inquiry led by the former head of the Financial Services Authority, Sir Howard Davies, has also recommended a second runway for Gatwick airport.

Sir Howard has also said he would consider the idea of building a new airport in the Thames Estuary, plans for which have been backed by the London Mayor, Boris Johnson, although he did not include it on the shortlist of options.

He warned if the UK did not expand its airports then it would cost the economy £45bn over 60 years and that to cope with increasing passenger numbers the first new runway should be operation by 2030, the second by 2050.

Sir Howard said: "The UK enjoys excellent connectivity today. The capacity challenge is not yet critical but it will become so if no action is taken soon and our analysis clearly supports the provision of one net additional runway by 2030.

Heathrow dealt with 70 million passengers last year

"In the meantime we encourage the government to act on our recommendations to make the best of our existing capacity."

A third runway for Heathrow has met with bitter opposition and the publication of the report will likely trigger a substantial political row.

The Conservative party made its opposition to plans for the airport's expansion – supported by the Labour government - part of its 2010 election manifesto and ruled a third runway out when the coalition came to power.

Among the most vociferous opponents have been Mr Johnson and the Conservative MP, Zac Goldsmith, a keen environmentalist whose constituency is in the flight path.

Mr Johnson told Sky News that building another runway at Heathrow would be "bonkers".

He said that both the new runway options for Heathrow would involve "concreting over the M25 probably closing that major artery for five years at the least".

And he said that a second strip for Gatwick would make no difference to dealing with the air traffic.

Plans for a third runway at Heathrow have been controversial

He said: "A new airport in the inner estuary is the only credible hub option left, and the only one that would uphold this country's claim to be the natural financial, commercial and economic capital of Europe."

Last week he threatened to call for a judicial review if plans for the four-runway airport on the Isle of Grain, which at £112bn would cost five times as much as Heathrow expansion, were not included in the commission's report.

The commission said it had not shortlisted the Thames Estuary plan "because there are too many uncertainties and challenges surrounding them at this stage".

However, it will undertake further study of plans to see whether it was a "credible proposal" and may include it on the shortlist next summer. The Airport Commission's final report will be submitted in the summer of 2015, after the next General Election.

Mr Goldsmith, who has suggested he would leave the Tory party over the issue, said last week that any decision by the Prime Minister to back Heathrow expansion would represent an "off-the-scale betrayal".

Gatwick is running at 85% of its total capacity

Heathrow is currently operating at 98% of its capacity with 65m travellers using it in 2012 but the report pointed out that it was so busy passengers suffered "a high level of delay and unreliability".

If it is not allowed to expand, those in favour of a third runway claim that travellers to Europe will opt to fly into airports at Frankfurt, Paris and Amsterdam instead, at a cost to the UK economy.

Heathrow representatives told the commission that a third runway could be operating by 2029 allowing 260,000 more flights a year.

There are two options for the extra runway - to build a 3,500m (11,500ft) strip to the north-west of the site or to extend the northern runway to 6,000m (20,000ft) and use one half for take-offs and the other for landings.

Heathrow chief executive Colin Matthews welcomed the report saying: "This country needs a hub because without that we won't have the long-haul connections that we need."

Boris Johnson says a third runway for Heathrow would be "crackers"

However, Keith Taylor, Green Party MEP for the South East, said: "The political opposition to airport expansion in south east England is sadly melting away.

"There's no doubt that the Government will be pleased with this report. It gives them the cover they need to go on avoiding answering difficult questions on airport expansion and to prepare themselves for a colossal U-turn on Heathrow expansion."

The idea of expansion at Gatwick, which is currently running at 85% of its capacity and full capacity at peak times, has also met with opposition. It would be built to the south of the existing runway.

Georgia Wrighton, director of the Campaign for the Protection of Rural England in Sussex, said: "A second runway at Gatwick, together with sprawling development and car parks anticipated on a massive scale, would concrete over cherished open countryside."

The report did not include options for a new runway for Stansted or Birmingham airports, as had been suggested.

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Inflation Falls To Four-Year Low Of 2.1%

The annual rate of inflation hit a four-year low last month of 2.1% as recent energy price increases are yet to feed in to the figures.

The Consumer Prices Index (CPI) measure eased from 2.2% in October - partly due to falling fruit and vegetable prices.

The rises to energy bills are expected to make a large upward contribution to December's inflation figures.

The easing of inflation in November takes pressure off the Bank of England as it attempts to help bring the CPI measure back towards its target of 2% - giving it plenty of breathing space to keep interest rates low even as the economy picks up.

And the slowdown could be seen as providing at least a crumb of comfort to squeezed households where wage growth continues to lag behind the rise in the cost of living.

The CPI rate of 2.2% in October was sharply lower than September's 2.7%.

The Bank's interest rate setters have had to loosen their focus on inflation, maintaining ultra-low borrowing rates to help nurse the economy back to health.

But pressure to tighten monetary policy would increase if inflation started rising.

Cost-of-living increases are still outstripping pay rises, with the last published figures showing wage growth at 0.8%.

Meanwhile, the cost of filling a Christmas stocking has gone up, with games, toys and hobbies up 2.8% on October, taking the annual increase in prices in the sector up to 1.8%.

Restaurants and hotels increasing their rates by a smaller amount made a downward contribution to inflation.

Petrol prices also fell in November, but less steeply than last year, meaning they made an upward contribution to the overall rate.

The CPI rate has not been lower since November 2009, when it stood at 1.9%.

A separate measure of inflation, the retail prices index (RPI), which includes housing costs, remained the same at 2.6%.

Catherine McKinnell MP, Labour's Shadow Economic Secretary to the Treasury, said of CPI: "This small fall in the inflation rate is welcome, but with prices still rising much faster than wages the cost-of-living crisis continues.

"Families and pensioners are still set to face inflation-busting hikes in energy prices this winter, which the ONS says are not in today's figures.

"After three damaging years of flatlining, working people are on average £1600 a year worse off. But the Autumn Statement failed to set out a plan to tackle the cost-of-living crisis and earn our way to higher living standards for the many and not just a few."

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Music Industry Worth £3.5bn To British Economy

The music industry is worth an annual £3.5bn to the British economy - much more than previously thought, a new report has revealed.

Figures from UK Music, the trade body for the recorded and live music industry, show how much profit the sector makes and how much its 100,000 full-time workers are paid - a combined amount known as gross value added (GVA).

They also reveal music businesses generate £1.4bn every year from exports, while British chart-toppers including Emeli Sande, Adele and Ed Sheeran, whose albums dominated the 2012 sales chart, boost the UK's international brand and reputation by an estimated £72m.

Until now, it has been difficult to measure exactly how much the music industry is worth.

Adele, who has had two number one albums, is another British success story

Figures from the vast majority (86%) of record labels and music publishing companies are stored using inaccurate codes, while smaller companies and freelance workers earning less than the £79,000 VAT threshold do not feature in statistics at all.

UK Music, which described existing estimates as "flawed", pored through pages of data from thousands of businesses to calculate the GVA figure.

It found musicians, composers, songwriters and lyricists contribute the most (£1.6bn) to the economy and also employ seven out of every 10 people who work in the sector.

Live music contributes £662m, followed by recorded music (£634m), music publishing (£402m), music representatives (£151m) and music producers and recording studios (£80m).

The success of artists like Ed Sheeran has boosted Britain's reputation

Jo Dipple, chief executive of UK Music, said the results prove the industry is a "substantial contributor to the economy".

"Our music might be fun, but it's also a formidable asset to the UK," she said.

"The Government has said it wants to support the creative industries but until now it's not had the precise data to hand. It does now.

"A realistic picture of the how the industry is made up will lead to a better understanding of what investment and regulatory environment is needed to help our industry thrive.

"It's a great UK success story, but now it can be even better understood and developed."

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RSA Slumps Further Amid Downgrade Rumours

Shares in insurance giant RSA have fallen by a further 2.5% during early trading on Monday, amid rumours of a possible credit rating downgrade.

The slump comes after its chief executive Simon Lee quit in wake of the company's Irish crisis, as well as the company's third profit warning in less than six weeks.

On Friday, the FTSE 100 company, which owns More Than and has more than 20 million customers worldwide, announced it will need to strengthen reserves by some £130m, on top of the £70m "black hole" uncovered during a routine internal audit last month.

The announcement comes amid an ongoing review of RSA's Irish business amid fears of inadequate bookkeeping systems.

RSA chairman Martin Scicluna is upbeat about the company's 2014 prospects

Auditor PwC is expected to file its report next month.

RSA chairman Martin Scicluna previously said the company remained a "leading insurance brand" and insisted the outlook was more positive for 2014.

However, the business has warned it expects to pay out up to £25m after a surge in claims for damage caused by severe weather that battered the UK and Scandinavia earlier this month.

The losses, coupled with the issues identified in RSA's Irish division, prompted Standard and Poor's to cut its credit rating to A and place the company on so-called "CreditWatch".

Moody's, whose A2 rating has stood since December 2008, says the outlook for the company is "stable" but warned: "The reduced level of profitability (from recent announcements) are credit negative for RSA."

Mr Scicluna said: "We have enviable market positions across the globe and attractive businesses with healthy underlying profitability.

"We have deep expertise and capability across our management team.

"The board and I are confident that RSA will re-emerge as a stronger group in 2014."

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Young Entrepreneurs Set Up Shop In Britain

A new wave of young entrepreneurs behind innovative start-up businesses, including one which makes green energy from waste coffee, have arrived in the UK.

Under the Government's Sirius scheme, graduates from across the world are given a 12-month support package, including financial aid of up to £48,000, to set up in Britain.

The first 19 young entrepreneurs to be accepted onto the programme come from 13 countries including India, China and Germany, as well as African countries like Kenya and Nigeria.

They include Tim Brown, an ex-footballer who played for New Zealand at the 2010 World Cup, who founded ToBe, a company making running shoes which do not need socks.

"Our invention will totally revolutionise the way athletes train," he said.

"Being based in the UK will enable us to start up and develop alongside like-minded entrepreneurs and gain access to world class strategic advice and support."

Other entrepreneurs include Kenyan Edwin Openda and Italian trio Carlo de Micheli, Stefano Caso and Andrea Gurnari, whose Savesquared portable chargers allow smartphone users to charge their handset's battery for £1.

British pair Benjamin Harriman and Arthur Kay launched Bio-Bean to convert waste coffee grounds into biofuel, while Vietnam's Duy Nguyen, India's Amit Pate and David McGee, from the UK, founded Veri-tag.com, which helps consumers prove any branded products they buy are genuine.

Lord Livingston, the trade and investment minister, said: "The UK is one of the best places in the world to become a successful entrepreneur and we're committed to helping talented entrepreneurs from around the globe to build their businesses here.

"Looking at the high calibre of entries we've received for this programme, it's clear that Britain is fast becoming the country of choice for talented graduates to start and grow their businesses, which will ultimately help our economy to grow, boost productivity and create jobs, and succeed in the global race."

The Sirius programme, which offers young entrepreneurs business mentors and help gaining clients, is accepting entries until January 15, 2014.

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Johnson To Mull Legal Move Over Airport Snub

By Mark Kleinman, City Editor

Boris Johnson is expected to consider a legal challenge to an expected snub next week to his proposals for a new four-runway airport in the Thames Estuary.

Sky News understands that the Mayor of London has discussed the option of seeking a judicial review with his advisers if the Airports Commission sidelines the idea.

Mr Johnson is said not to have decided yet about whether to mount a potentially lengthy and costly legal challenge over the Commission's interim report, which will be published on Tuesday.

However, he said this week that a shortlist of options which favoured the expansion of Heathrow would be "scandalous".

Expansion of Heathrow is expected to head shortlist of options

"You would expect him not to rule anything out at this stage," said a person familiar with the London Mayor's approach to the issue.

The Commission, led by Sir Howard Davies, the former director of the London School of Economics, is expected to propose moving forward with three options for expanding aviation capacity in the south-east.

Each of the trio was said to be likely to include Heathrow, although Gatwick, the busiest single-runway airport in the world, was increasingly confident this weekend that standalone expansion of the Sussex site is now likely to be among them.

Speculation this week had suggested that Gatwick would only be included as part of a proposal that would also involve a third runway at Heathrow.

Mr Johnson met Transport Secretary Patrick McLoughlin on Thursday

However, Gatwick's owners have insisted that such a development would not be economically viable and that they would not proceed with a second runway under that scenario.

Sky News revealed on Thursday that David Cameron had met Sir Howard to discuss the interim report in recent days, and had urged the Commission to include a non-Heathrow option for consideration.

That could yet mean a revival of the London Mayor's proposal or an expansion focused on London's third airport, Stansted.

Sir Howard also met Chancellor George Osborne earlier this week while Sky News understands that Mr Johnson met Transport Secretary Patrick McLoughlin on Thursday.

The publication of an interim report, which will set out several options meriting further analysis ahead of a formal recommendation after the 2015 general election, was supposed to defuse political tensions over Britain's future aviation capacity.

Sky News understands, though, that the Government will publish an official response in the new year, underlining the difficulty it faces in navigating an issue that will feature in the manifestos of the main political parties in 18 months' time.

Stewart Wingate, Gatwick's chief executive, said: "Gatwick's case for a second runway is compelling. Compared to Heathrow we are cheaper, quicker, have a significantly lower environmental impact and we are the most deliverable solution.

"Heathrow's answer for passengers is to re-establish their monopoly which will mean high fares forever, and huge environmental damage to their local communities."

The requirement for new runway capacity has become more pressing as the south-east's airports reach bursting point.

Rival European hubs in Frankfurt and Paris are growing rapidly, while Dubai is expected to overtake Heathrow as the biggest airport by international passengers within two years.

A spokesman for Mr Johnson declined to comment on Saturday.

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