Lloyds Boss Praises Coalition On Economy

The chief executive of Lloyds Banking Group has told Sky News that Government action in support of first-time home buyers is already proving a "game changer for the British economy".

The boss of Britain's largest mortgage lender, Antonio Horta-Osorio, dismissed suggestions of a looming house price bubble arising from the Help-to-Buy and Funding for Lending Scheme initiatives.

He backed Government support for the UK residential market because, he said, until three months ago house price rises remained significantly below the level of inflation.

"This is a temporary scheme to correct a market anomaly," he said. 

Mr Horta-Osorio, told business presenter Jeff Randall that such schemes were helping instil confidence in a fragile economy.

Antonio Horta-Osorio was interviewed at the bank's HQ by Sky's Jeff Randall

He also expressed his view that the Government should not be a shareholder in UK banks.

Lloyds Banking Group, which also owns Halifax and Bank of Scotland, required a massive Government bailout in 2009 following the takeover of HBOS.

It remains 39% taxpayer-owned.

"It was an exceptional thing which should not happen again," he said

Shares were on Tuesday trading near the average price the taxpayer paid

"It's up to the Government to decide when and how to sell the shares." But he said: "We've done our bit" by restructuring the bank.

"Selling Lloyds shares is the right thing to do," he insisted.

The group had already announced half-year profits this summer of more than £2bn and Mr Horta-Osorio said the share price had now risen to a point where taxpayers could have their money back at a profit.

The bank has been beset by a number of embarrassing scandals.

Compensation for the mis-selling of payment protection insurance (PPI) has cost Lloyds Banking Group £7.3bn so far.

Mr Horta-Osorio described that sum as a "monumental bill" but maintained it was important to "break with the past".

Next week, 631 Lloyds branches are to be hived off to form TSB Bank.

It follows the collapse in May of a plan to sell the branches to the Co-operative Group.

Mr Horta-Osorio dismissed the suggestion that the decision had been a grisly blunder but insisted it was the "best alternative" at the time.

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Balcombe Fracking Operations Suspended

Cuadrilla has withdrawn an application seeking a six-month extension of its oil exploration operations in a Sussex village which has become the centre of protests against fracking.

The company said it has decided to submit a new planning application to cover the flow testing of the horizontal oil exploration well at its site in Lower Stumble, Balcombe, but it would not include additional drilling or any hydraulic fracturing.

"The new application will cover the same well testing that is in the currently permitted activity but will include revised planning boundary lines showing the extent of the horizontal well being tested," a statement said.

"Our original planning application was approved in 2010 with a boundary delineation covering the surface drilling site area.

Many were arrested for aggravated trespass and obstruction

"Our decision to make a new application for the well testing activity, rather than an extension of previously approved activity, is to resolve any potential legal ambiguity around how the planning boundary should be drawn for a subsurface horizontal well.

"As this is a new planning application, the county council will consult with interested third parties and we will have the opportunity for further engagement with Balcombe residents about our well testing plans.

"We will continue doing all we can to conclude our exploration work in a safe, responsible and timely manner."

Some blockaded the London offices of Cuadrilla PR firm Bell Pottinger

Greenpeace energy campaigner Leila Deen said Cuadrilla's plans for Balcombe were a "dog's dinner", adding: "They only recently submitted an application to extend the drilling window, now they've already withdrawn it and admitted they're reassessing the programme.

"It's not yet clear if this is a shift of direction or if the company merely got its sums wrong. Either way, the local council has the opportunity to revisit its previous highly controversial decision to give Cuadrilla the green light in Balcombe.

"The poster-boy for fracking looks like it's in trouble again."

Dame Vivienne Westwood and MP Caroilne Lucas joined the protests

A meeting of West Sussex County Council's planning committee on September 19 has been cancelled following the withdrawal of the application.

Any new application will not go to the planning committee until next year.

Anti-fracking protesters have been camping by the roadside near the test oil drilling site for weeks.

Any new application to conduct fracking at the site must wait until 2014

They said they were concerned "the problem has not gone away".

Balcombe resident Louisa Delpy, a member of the No Fracking in Balcombe Socieity (NoFIBs), said: "We are now in limbo and ask West Sussex County Council urgently to explain the reasons why Cuadrilla must resubmit the planning application and whether testing and flaring has been carried out on the vertical well section.

"We also want to know the current direction and length of the horizontal section of the well, how they can test drill into oil without a flare and how they can operate and test right now without their permit to extract radioactive substances, about which the Environment Agency has maintained a curious silence since public consultation ended."

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Treasury Mulls Plan For £30bn RBS Bad Bank

By By Mark Kleinman, City Editor

The Treasury is examining proposals for a 'bad bank' at Royal Bank of Scotland (RBS) that would contain just £30bn of toxic loans, less than one-third of the sum originally envisaged by ministers seeking to bolster its role in reviving the British economy.

Sky News understands that the idea is among a range of asset pools currently under consideration as part of the review that was commissioned by George Osborne, the Chancellor, in June, and which is due to report its findings later this month.

The fact that such a comparatively modest portfolio is being seriously considered as the basis of an RBS 'bad bank' has surprised some of those involved in the project and has led some analysts to question whether such an initiative could be worthwhile.

It also highlights the quandary confronting Mr Osborne as he comes under pressure from MPs to commit to a break-up of RBS, which was rescued by UK taxpayers in 2008 at a cost of £45.5bn.

Some parliamentarians, as well as Sir Mervyn King, former Governor of the Bank of England, have been pushing for the creation of a state-owned bad bank because of their conviction that it would allow the cleaner part of RBS to step up its lending to UK businesses.

People close to the review say that the £30bn bad bank proposal would consist primarily of assets from Ulster Bank, RBS's Irish subsidiary, and the Global Restructuring Group that houses many of the loans to British companies that turned sour during the financial crisis.

It would, however, contain few assets from RBS's non-core division, which has already been radically slimmed down since 2008.

One person familiar with the deliberations said it would be "virtually impossible" for such a small carve-out to achieve Mr Osborne's objectives, which he outlined during his Mansion House speech earlier in the summer.

"We'll look at a broad range of RBS's assets, but particularly assets in Ulster Bank and UK commercial real estate. We're not prepared to put more taxpayer capital into RBS as part of this process," he said.

"We will establish a Bad Bank if it meets our three objectives: if it supports the British economy; if it's in the interests of taxpayers – and if it accelerates the return to private ownership. But if the review reveals that it would not achieve these things, then we won't do it."

Even if Mr Osborne does back the idea of a bad bank, however, the decision would rest with RBS's independent shareholders because UK Financial Investments, which manages the Treasury's stake, would be excluded from voting on the separation.

The other asset pools being considered by the Treasury and its external advisers at Rothschild and BlackRock are considerably larger, but even the largest contains only a fraction of the £325bn of loans insured by RBS in the Asset Protection Scheme until last year.

A 'no' vote would leave the Treasury at odds with the Parliamentary Commission on Banking Standards, whose chairman, Andrew Tyrie, called last month for the bad bank review to be both independent and rigorous.

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20% Of Workers Earn 'Below Living Wage'

One in five British workers now earns below the so-called living wage, it has been claimed.

According to the Resolution Foundation 25% of women and 15% of men were paid below the living wage in April last year, when the wage benchmark was calculated as £7.20 an hour outside London and £8.30 in the capital.

The think tank said it meant that a total of 4.8 million Britons, 20% of employees, were paid at a level below the rate deemed necessary for a basic standard of living, an increase from 3.4 million in 2009.

Unlike the minimum wage, it is up to employers to decide whether their staff are paid the living wage, which is currently £7.45 an hour or £8.55 in London.

The report found 77% of employees aged under 20 earned less than the living wage, with 67% of restaurant and hotel workers paid below the benchmark.

The report's author Matthew Whittaker, who is senior economist at the Resolution Foundation, said: "For most of the working population real wages have been flat or declining for many years and as a result more and more people have dipped below the level of the living wage.

"This means an increasing struggle to keep up with the cost of living.

"Britain has a sorry story to tell on low pay. Only a handful of our close competitors do worse and the large majority have much lower rates of low pay - sometimes half as much.

"The challenge for all parties is to find ways of boosting rates of pay, especially for those who earn less, without putting economic growth at risk."

A Government spokesman responded: "We encourage employers to pay above the national minimum wage when they are profitable and when it's not at the expense of jobs, which is what the Low Pay Commission takes into consideration when it sets the national minimum wage.

"Despite being in tough times, this Government is doing absolutely everything it can to help people on low pay with the cost of living.

"That's why we're taking two million people out of tax altogether, cutting income tax for those on low incomes and freezing council tax."

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Olympus Cash Scandal: UK Launches Prosecution

The Serious Fraud Office (SFO) is to prosecute Olympus and its UK subsidiary in connection with an accounting scandal at the Japanese camera and medical equipment maker.

The news was confirmed two months after a Japanese court handed suspended jail sentences to three former Olympus executives for engineering a scheme to hide about $1.7bn (£1.1bn) in losses.

The actions - dating back to the 1990s - were uncovered in 2011 by the company's-then new chief executive Michael Woodford who blew the whistle and was subsequently sacked in an affair that was to shake Japan's corporate governance infrastructure.

An Olympus statement said: "Having completed its investigation, the SFO has decided to bring a prosecution against the company and Gyrus Group Limited, a UK subsidiary.

"We will decide our response after carefully reviewing the content of the charges."

The whistleblower: former chief executive Michael Woodford

The SFO said: "Gyrus Group Ltd and Olympus have been charged with offences of making a statement to an auditor which was misleading, false or deceptive, contrary to section 501 Companies Act 2006.

"Gyrus Group faces four charges and Olympus faces one charge."

Olympus was fined £4.4m by the district court in Tokyo over its actions while Japanese regulatory penalties and other charges, including back tax demands, reportedly top £32m.

Olympus said the allegations against it in Britain related to the fiscal years 2009 and 2010.

Its statement added: "After a hearing date before the Magistrates' Court, it is expected that the matter will be transferred to the Crown Court for the future steps of the proceedings."

The company added that it was difficult to estimate the level of fines in Britain, should the prosecution result in a guilty verdict.

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Ryanair To Cut Flights Amid Profit Turbulence

Ryanair is to reduce flying schedules this winter after seeing its profit hopes dented by growing headwinds including weaker summer demand.

Shares in the no-frills carrier plunged by 14% soon after it issued the profit warning, just a month after chief executive Michael O'Leary had said that the heatwave in northern Europe in July had put people off travelling abroad to seek summer sunshine.

The airline said on Wednesday that a weaker pound, increased competition and Europe's continued economic problems were also having an impact on fares and the amount of money it makes per passenger.

Michael O'Leary wants to cut costs

It planned to respond to its weaker outlook by selectively reducing its winter season capacity and rolling out lower fares and "aggressive" seat promotions in markets including the UK.

The strategy will cut its annual traffic forecast by 500,000 to 81 million while profits will be at the lower end of its previous forecast of between £483m and £508m.

The announcement prompted share slides across the airline sector in early trading, with rival easyJet losing 7%.

Thomson Holidays owner TUI Travel and British Airways parent firm International Airlines Group were both 4% lower.

Airlines across Europe have been struggling with weak economies, high fuel prices and costly fleet upgrades.

Ryanair announced in July that it was raising charges for hold baggage as part of its campaign to eradicate the suitcase from its flights in a bid to save costs.

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Economy: Recovery 'Better Than Forecast'

The cautious outlook for UK economic growth is being challenged as closely-watched indicators show a burst of activity.

A rush of new business last month drove the service sector, which makes up 75% of UK output, to its fastest growth rate for more than six years, according to the Markit/CIPS purchasing managers' index (PMI).

The reading was at its highest since December 2006 - beating economic forecasts.

Earlier PMI surveys this week covering the construction and manufacturing sectors also came in above expectations.

The services survey found order books at companies ranging from banks to restaurants filled at the fastest pace since May 1997, the month Tony Blair became prime minister.

Markit: Britain's factories are booming again

A separate report by Visa Europe backed up the findings.

Its UK Expenditure Index showed that last month saw the strongest monthly increase in consumer spending for nearly a year, benefiting retailers on the high-street - with year-on-year spending also rising in August both online and on the high street.

Like the previous month, the PMI showed British businesses were at the forefront of Europe's nascent economic recovery, outpacing major eurozone peers that are still grappling for momentum.

On Tuesday, the OECD raised its 2013 growth forecast for Britain from 0.8% to 1.5% - more than double the rate expected from Germany.

Responding to the PMI data, the chief UK economist at Deutsche Bank George Buckley said: "I wouldn't be surprised to see growth double what the Bank of England is expecting for (this) quarter, because they're currently forecasting 0.6%."

While such a prediction would be welcome news for the Government after roughly three years of stagnation, the data may give Bank governor Mark Carney pause for thought.

He has stressed the economy may need more help from the central bank to nurse it back to health, and the bank does not plan to raise the base rate of interest until unemployment falls to 7%.

It means that under the bank's forward guidance initiative, it does not currently forecast the base rate rising for another three years.

The services PMI added weight to the bank's expectations on the unemployment rate when it found that firms' hiring slowed to its weakest pace so far this year.

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