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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Debenhams Hits Suppliers With 'Santa Tax'

Debenhams has told suppliers they will be paid 2.5% less for their goods to fund expansion plans - just eight days before Christmas.

The department store wrote to key suppliers of its own-brand wares explaining they would take the money from their accounts, without negotiation.

The move has been described by some as a "Santa tax".

Finance chief Simon Herrick wrote to suppliers telling them that they had to contribute to modernisation plans.

He said: "As we will mutually benefit from the growth of Debenhams we are now seeking a contribution from our suppliers to support our commitment to on-going investment.

Debenhams reported a small fall in profts in August

He said this would include: "A single sum contribution on all outstanding payments on your account at close December 17. An additional discount of 2.5% applied to all open orders on our system at close on December 17.

"This is a contribution and not a permanent amendment to your trading terms with Debenhams."

The firm denied that it was an attempt to boost poor Christmas trading, adding: "We have asked suppliers for a contribution to support our commitment to ongoing investment in the business."

Debenhams' chief executive Michael Sharp has been facing fierce competition from rivals as consumers cut back spending on all but the most essential of items.

The modernisation programme has included a £25m facelift for London's Oxford Street branch but this has so far failed to improve the chain's financial performance.

The company reported a 2.7% fall in pre-tax profits to £154m in the year to the end of August.

Debenhams is planning to open 14 new stores over the next four years.

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Bitcoin Value Slumps Amid China Restrictions

The virtual currency Bitcoin has dramatically fallen in value after China's biggest trading platform banned deposits in yuan.

BTC China said the action follows new regulations from Beijing, which keeps a tight grip on the yuan and enforces capital controls, which the e-currency threatens to upend.

At its peak, Bitcoin traded at $1,250 (£764) but on Wednesday one Bitcoin was listed for sale for as little as $636 (£389).

Bitcoin was invented after the global financial crisis by a mysterious computer guru and can be stored either virtually or on a user's hard drive.

The e-money offers a largely anonymous payment system, which China's central bank, the People's Bank of China, warned can be used for illegal activities.

Two weeks ago it ordered financial institutions against providing Bitcoin-related services and products.

The central bank reportedly banned domestic third-party payment companies from providing clearing services for virtual currency trading platforms earlier this week.

Analysts worry the new restrictions will all but destroy Bitcoin trading in China.

"If the channel for depositing yuan in the platforms was completely cut off, all domestic exchanges would be invalid," James Gong, a digital currency expert and member of the US-based Bitcoin Foundation, told AFP.

"Bitcoin trading might be forced underground or shift to overseas markets," he said.

BTC China posted an apology on its website for the new ban on deposits, calling the measure "temporary".

"Due to new government regulations, BTC China will temporarily suspend CNY (yuan) deposits.

"Rest assured that BTC China will continue to operate normally. We deeply apologise for any inconvenience."

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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."

He said that politicians would have to chose which runway to build first - one at Gatwick or one at Heathrow - as work on them would not be able to be carried out at the same time.

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".

Plans for a third runway at Heathrow have been controversial

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

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.

Gatwick is running at 85% of its total capacity

The Airport Commission's final report will be submitted in the summer of 2015, after the next General Election, and the Transport Secretary, Patrick McLoughlin said the Government would not indicate a preference on options until after that.

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".

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.

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

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.

The north west option would see 1,500 homes demolished and the loss of 30 listed buildings, the extension would see 720 homes flattened and affect eight listed buildings.

Heathrow chief executive Colin Matthews welcomed the report saying: "I think the report we received today is good news for trade, for jobs and for the UK as a whole."

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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Fracking Plans For Two-Thirds Of England

Two-thirds of England could be opened up to the highly controversial process of fracking under a Government-backed drive for shale gas.

Energy firms will be given the chance to bid for licences to drill across every county, apart from Cornwall, including National Parks and Areas of Outstanding Natural Beauty.

Energy minister Michael Fallon said shale gas exploration could bring growth, jobs and energy security to the UK.

The announcement has prompted an angry response from environmentalists who said the plans would cast a "dark shadow" over many communities in Britain.

Critics of the process of using high-pressure water to blast gas from rock deep underground say that it is highly damaging to the environment with risk of pollution from the waste water. Fracking has also been found to cause earth tremors.

A report by engineering giant Amec set out the potential benefits of shale gas, including the creation of between 16,000 and 32,000 jobs, and £100,000 to communities where sites are based.

Fracking has sparked angry protests at Balcombe in Sussex

Mr Fallon said that shale gas production in the United States was having an "enormous impact" on household bills.

He said: "It has the potential to have an impact here. It can reduce our dependency on liquid natural gas.

"We face the prospect of having to import 70% of our gas by 2030 if we have not found any shale by then."

Greenpeace said that allowing fracking on such a large scale - half of Britain and two-thirds of England - would create enough waste water to fill 40,000 Olympic-sized swimming pools.

Friends of the Earth energy campaigner Tony Bosworth said: "These plans cast a dark shadow over many communities across Britain who could now face the threat of fracking in their backyard.

"The Government admits shale gas and coal bed methane development could have significant impacts on local people and the environment, while experts say they won't bring down energy bills."

Fracking has proved to be hugely controversial, sparking protests in areas including Balcombe in Sussex.

Fracking involves blasting rock with water to release gas

The  Amec report, which said as many as 2,880 wells could be drilled across Britain, warned that communities at the heart of fracking projects would be badly affected by site traffic.

It said that they would see as many as 51 truck journeys a day for three years.

Consultations will be held in the coming months, and a new licensing round to allow companies to explore for shale gas will be launched in the summer.

Mr Fallon forecast a high degree of interest from companies, with between 50 and 150 licences issued.

He said: "There could be large amounts of shale gas available in the UK, but we won't know for sure the scale of this prize until further exploration takes place."

A report out earlier this year by the British Geological Survey suggested there could be enough shale gas in the north of England to supply Britain for 40 years.

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Metro Bank Chairman Hill Cuts Stake In Lender

By Mark Kleinman, City Editor

The founder and chairman of Metro Bank has reduced his stake in Britain's first new high street lender for more than a century as part of a £385m fundraising.

Sky News has obtained documents circulated among Metro Bank shareholders on Tuesday which reveal that Vernon Hill has opted not to take up his entitled allocation of shares during the cash call, which is aimed at accelerating the company's expansion.

The documents show that Mr Hill now holds just under 4.6m shares, compared to more than 3.8m a month ago. However, the volume of new shares being issued means that the chairman now owns just under 9% of Metro Bank's 'A' shares, a sharp reduction from the 13% he owned prior to the latest capital-raising.

Metro Bank confirmed to existing investors this week that it had secured nearly £300m in the initial phase and would now proceed with a further £100m to provide funds to expand its rapidly-growing branch network.

"The previous offer, which closed on December 6 2013, successfully raised £287.5m and was oversubscribed with exceptionally strong demand from both existing and new shareholders. This additional capital raise will be used to further support Metro Bank's continued unprecedented growth in deposits, lending and accounts and offers the opportunity to further strengthen our shareholder base," Mike Brierley, chief financial officer, said.

"A number of significant international investors subscribed or wished to subscribe in the last round. We hope to be able to fulfil their orders in this follow-on offer."

Sky News revealed last month that Metro Bank was seeking £285m to accelerate its growth, following the introduction of rules aimed at making it easier for customers to switch current account providers.

Among the lender's existing shareholders are the billionaire Reuben brothers and Steven Cohen, the head of the US hedge fund SAC Capital, which was last month the subject of the biggest-ever insider trading settlement in the US.

The documents circulated this week also name Brave Heart Connection, an American connection, as a major Metro Bank shareholder, while Wellington Management has doubled the size of its stake.

A recent circular to shareholders outlined the escalating losses at Metro Bank, which lost £14.3m before tax in the three months to September and £38.6m in the year-to-date. That took the lender's total losses since being set up to nearly £140m.

However, Vernon Hill, chairman, and Craig Donaldson, chief executive, told shareholders that the second quarter of 2013 "will therefore have marked the peak quarterly loss and that quarterly losses will now fall until the bank achieves profitability".

The losses underline the costs associated with breaking into the UK's retail banking sector at a time when Government ministers are attempting to foment new competition through a string of new policy measures, including reducing capital and liquidity requirements for new entrants.

Metro Bank declined to comment.

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Jobless Fall Raises Chance Of Interest Rate Rise

A big fall in the number of unemployed has raised the prospect of interest rates rising much earlier than expected.

The latest official figures showed 99,000 fewer people were jobless in the three months to October while the number in work topped 30 million for the first time on record.

It meant the jobless total fell to 2.39 million - the biggest cut in over a decade - over the period.

The Office for National Statistics (ONS) said that left the jobless rate at 7.4% - its lowest level for more than four years - and nearing the threshold for when the Bank of England may consider raising borrowing costs by increasing the base rate of interest.

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.

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

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.

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 the base rate of interest from 0.5% until the unemployment rate falls to 7%.

It currently expects that rate to be achieved in the latter half of 2015 though economists raised fears today that consumers may endure rising borrowing costs earlier, as a result of the acceleration in the job market's recovery.

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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Hinkley Point Nuclear Deal With EDF Faces Probe

An inquiry has been launched into whether a £16bn government deal with French energy giant EDF to build a nuclear plant in the UK meets EU rules.

Britain has agreed to subsidise the project to build two reactors at Hinkley Point C in Somerset, promising guaranteed power prices from the plant for 35 years.

The European Commission said it wanted the views of third parties because of the unprecedented nature and scale of the Hinkley deal.

It said it had "doubts that the project suffers from a genuine market failure" and it would assess whether the nuclear plant could in fact be built without government support.

"When public money is spent to support companies, the Commission has the duty to verify that this is done in line with the EU state aid rules," it added.

The coalition signed a deal with EDF in October to build the two reactors at Hinkley Point C, the country's first nuclear plant in two decades.

EDF is heading a consortium to build the plant, which will take about 10 years to build.

The project could derail David Cameron's efforts to lure £110bn of investment into Britain's ageing electricity infrastructure by the end of the decade.

Regulators have warned that the UK risks blackouts unless it speeds efforts to replace obsolete power plants.

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Facebook And Banks To Face IPO Lawsuit

Facebook, its CEO and several banks must face a lawsuit over alleged misleading of investors ahead of the company's initial public offering, a judge has ruled.

Mark Zuckerberg and dozens of banks are accused of misleading investors about the social media company's financial condition before its $16bn IPO in May 2012.

In a decision made public on Wednesday, US District Judge Robert Sweet said investors could pursue claims that Facebook omitted material information from its registration statement.

The investors had alleged, among other things, that Facebook should have disclosed internal projections on how increased mobile usage and product decisions might reduce future revenue.

On Monday, Judge Sweet ruled that investors could also pursue claims accusing Nasdaq OMX Group Inc of concealing technology problems that resulted in difficulties in processing trades on Facebook's first day of trading.

More follows...

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