FSCS pays out £21bn in 6 months to UK savers

UK savers suffering from a spate of bank collapses received more than £21
billion in compensation in just six months as the banking crisis deepened.

The Financial Services Compensation Scheme (FSCS), which pays out up to
£50,000 to savers if a bank goes under, said in its annual report this
evening that it paid out the astronomical sum in the six months following
the collapse of US investment bank Lehman Brothers in September, as the
global financial crisis started to hit UK savers. It had to compensate a
total of 3.5 million bank accounts.

In the previous seven years, the scheme, which is run by the Financial
Services Authority, had paid out just £1 billion.

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Skype could be cut off for good over dispute

Skype might have to shut down because of a dispute over the core technology
used to make the internet telephone system work.

EBay, which paid $2.6 billion (£1.6 billion) for the voice-over-the-internet
system in 2005, is facing a court battle with the original founders of the
company who retained the rights to the technology at the heart of the
system.

EBay admitted in a regulatory filing that it might have to close down the
company. It said it was trying to develop alternative software but if that
did not work, or if eBay lost the right to the original software: “Skype
would be severely and adversely affected and the continued operation of
Skype’s business as currently conducted would likely not be possible.”

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US ‘cash for clunkers’ plan burns through $1bn$

The US Government’s “cash-for-clunkers” programme, which
offers drivers an incentive to trade in gas-guzzlers for fuel-efficient
vehicles, has burned through $1 billion (£604 million)in a week, forcing the
Obama administration into a desperate search for more funding.

The Government expected the $1 billion to last from the programme’s launch on
July 24 to its closure on November 1 but the auto sales stimulus plan proved
so popular that Government officials on Thursday night started negotiating
with Congress to extend more funding.

Under the plan, drivers could claim up to $4,500 for trading an old car with a
fuel economy rating of 18 miles-per-gallon for a new one with a rating that
was at least four miles-per-gallon better.

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US Government settles tax secrecy with UBS

The US Government has agreed to settle its case with UBS over claims that the
Swiss bank helped up to 52,000 rich Americans evade tax on money held in
secret bank accounts.

In a conference call this morning to update Judge Alan Gold on negotiations
between the bank and the Governments of Switzerland and the US, Stuart
Gibson, an attorney for the Department of Justice (DoJ), said that a
settlement had been reached but gave no further details.

Mr Gibson said: “The parties have reached an agreement in principle on
the major issues. There are some other issues that need to get resolved and
we expect to be able to resolve them during the coming week”.

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Recession eases grip on US as GDP decline slows

US gross domestic product (GDP) shrank by less-than-expected between April and
June, indicating that the recession is easing its grip on the world’s
largest economy.

Preliminary estimates for second quarter GDP — the key measure of a country’s
output of goods and services — fell at an annual pace of 1 per cent, a more
modest decline than the 1.5 per cent expected by economists.

New figures today also revealed that GDP fell by a higher-than-estimated 6.4
per cent in the first three months of the year — the most savage drop since
1982. Official figures had previously shown a fall of 5.5 per cent.

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Recession ‘could force unemployment toll to 4m’

By
Daily Mail Reporter
Last updated at 8:53 AM on 31st July 2009

Unemployment could reach 3.8millon while national debt may soar to £2trillion, a think-tank has warned
The unemployment rate could hit almost 4million by the end of the recession - far worse than the post-war peak under Margaret Thatcher. A doomsday scenario by the Centre for Economics and Business Research think-tank says unemployment could rise to 3.8million from its current level of around 2.4million. At the same time national debt could soar to £2trillion. Labour taunted the Tories relentlessly during the 1980s when unemployment hit three million. But now the study by the CEBR and the Taxpayers’ Alliance shows that the worldwide economic slowdown combined with Labour’s handling of the economy could see even more people out of a job. The authors conclude: ‘The Treasury must come clean about the risks they are running with the future of the economy and the public finances.’ The CEBR looked at various scenarios on how the economy might develop in the coming years, including ‘pessimistic’ and ‘moderate’ scenarios. Treasury projections imply unemployment of 2.8million by 2011, but the CEBR’s pessimistic modelling finds that the number could reach 3.8million two years later. Even on the moderate scenario, it would be 3.2million. The CEBR’s report also found that public spending will have to be slashed if the Treasury is to meet its target that Government debt should begin to decline by 2017/18.

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Motorists facing £250 parking space tax under new Government scheme

By
Sophie Borland
Last updated at 2:43 PM on 31st July 2009

Commuters who drive to work face paying a new ‘parking tax‘ of up to £350 a year, Ministers announced today.They are backing a new ‘workforce parking levy’ which will come into force in Nottingham in 2012 - and is likely to be adopted across the country.The pilot scheme will see firms with more than 10 parking places for staff charged £250 a year for each, rising to £350 in two years.And employers would be free to pass on the charge to their staff - meaning it would effectively be a tax on commuters.
Penalised: Those who drive to work and park in company bays could be charged up to £250 per spaceMinisters say the money will be spent on transport improvements, but
critics say it is nothing more than a blatant way for councils to raise
money.
Some 10million Britons drive to work each day, and businesses are
likely to vociferously oppose the new charge, which could top £3billion
if rolled out nationwide.
Already some firms in Nottingham have threatened to leave the city, where some 40,000 commuters use their car to get to work.
A spokesman for the AA said the scheme was nothing more than a ‘tax
on jobs‘. ‘It is very unfair - discriminating against those employers
who have parking spaces, which gets vehicles off the street,’ he said.
‘These tariffs apply around the clock, which is especially unfair on
shift workers who rely on their cars because public transport is not
available.
‘This is more about generating a revenue scheme than reducing congestion and will require snooping to enforce it properly.’
John Franklin of the RAC said: ‘This is yet another tax on
hard-working, hard-pressed people. Improving public transport for
commuters is always welcome, but not at the expense of further taxes on
motorists.
‘It’s debatable if this sort of scheme will really improve congestion, or whether it’s just a way to cover a financial pothole.’
Transport Minister Sadiq Khan gave the plan the Whitehall seal of
approval yesterday during a visit to Nottingham. The council says the
levy will raise £100million over 10 years - one fifth of the cost of a
new tram scheme for the city.
Milton Keynes, Exeter, Cambridge and Oxford councils have already
expressed interest in joining the scheme. Birmingham, Manchester,
Bristol, Leeds, Liverpool, Newcastle and Sheffield are also interested.
The British Chambers of Commerce say it would cost £3.4billion a year if extended to every English council.
Conservative transport spokeswoman Theresa Villiers said the tax
would have a devastating impact on businesses struggling to cope with
the recession.
‘At a time when jobs are under threat and businesses are under huge
pressure, it is wrong to hit enterprise in Nottingham with a workplace
parking levy,’ she said. ‘These new charges will be a real blow to the
city and we oppose them.’
But Richard Hebditch, of the Campaign for Better Transport, said the levy would raise money to invest in better transport.
‘It has the added benefit of tackling unnecessary commuter journeys,
one of the main causes of congestion,’ he said. ‘Failing to deal with
the causes of congestion is simply not an option.
‘We put forward the idea of workplace parking levies as a fairer way
to raise money to invest in the future of local transport services. We
are pleased that the people of Nottingham will be the first to benefit.’
A spokesman for the Department for Transport said: ‘It is entirely
for local authorities to decide what measures are appropriate for
improving transport and tackling congestion in their area and
Nottingham City Council is the only authority to have submitted an
application for a workplace levy order.
‘Workplace levy schemes may only be introduced if they will
contribute to the achievement of local transport policies, with all
revenues reinvested in local transport, and must first be approved by
the Department for Transport.’

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U.S. banks paid out $32.6 billion in bonuses as government spent $175 billion bailing them out

By
Mail Foreign Service
Last updated at 5:00 PM on 31st July 2009

Citigroup, Merrill Lynch and seven other American banks banks paid more than $32.6 billion in bonuses in 2008 while receiving $175 billion in taxpayer funds, according to New York Attorney General Andrew Cuomo. Crippled Wall Street giant and major City employer Merrill Lynch led the way by paying 14 of its bankers more than $10 million (£6 million) last year despite racking up losses of nearly $28 billion. Some 53 high-flyers at Merrill trousered more than $5 million as it paid a total of $3.6 billion in bonuses to its 59,000 staff worldwide, including thousands in London. The lavish payments, mirrored at banks across Wall Street and the City, came after Merrill lost $27.6 billion last year and was forced into the hands of Bank of America in an emergency takeover to save it from collapse.

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Darling’s banking reforms are a ‘muddle’ and ‘largely cosmetic’, report finds

By
Daily Mail Reporter
Last updated at 8:59 AM on 31st July 2009

MPs have attacked Chancellor Alistair Darling’s plans for banking reform, saying they lack clarity
MPs have launched a stinging attack on government plans for reforming regulation of the banks claiming they are cosmetic and lacking in clarity.The Treasury Select Committee said the reforms were muddled and that the Financial Services Authority had failed in its job of supervising banks.MPs were criticising government has plans to introduce rbanking regulation and reforms which are designed to prevent a repeat of the current financial crisis. In a report on the banking crisis, MPs in the committee criticised recent changes announced to the overseeing Tripartite Authority
- the Financial Services Authority, Bank of England and Treasury.It said a ban on risky trading activities by large banks could be needed to stop them taking advantage of Government support.MPs also added that bank profiteering on lucrative trading activities would be
‘intolerable’ if taxpayers took the lion’s share of the risk to protect
savings deposits.The Tripartite was also attacked over its handling of the Northern Rock crisis where final responsibility for decision and actions lay remained ‘a muddle’.MPs welcomed proposals by the FSA to impose much higher capital requirements on ‘casino’ banking but said the watchdog must not rule out a complete bar on such activities.

‘A ban may not be necessary if firms are given sufficient incentive to separate their trading units from their retail banking activities of their own accord, but… should not be ruled out by the FSA as an option at this early stage,’ its report said.’Those banks which are too big to fail must no longer be able to take advantage of that fact for private gain.’ The committee said the real test of the watchdog’s more invasive approach to banking supervision to prevent a repeat of the banking crisis will be when the boom years return.Chairman John McFall said: ‘All this is very fashionable now; the FSA must develop sufficient teeth in order to be able to go against the tide in the future and take unpopular decisions.’Plans to rebrand the Tripartite’s standing committee with a Financial Stability Committee (FSC) announced in a White Paper earlier this month would ‘achieve little by itself’, when an improvement in cooperation and clarification of responsibilities was required.’When the dust eventually settles on a new system, the question that we, and others, will ask is ‘Who gets fired?’ if and when the next crisis occurs. It is a blunt question, but one which is necessary,’ the report said.Governor Mervyn King fuelled rumours of a rift between the Bank of England and the Treasury before the White Paper was published when he stunned MPs by admitting he had ‘no idea’ what was going to be in it.The committee said it was ‘extremely perturbed’ at the lack of communication revealed by Mr King.The report added: ‘The Chancellor must set out why consultation papers on financial reform are now no longer jointly published, or even shared, with his Tripartite colleagues.’Failure to do so will only add further cause for concern to those worried about the state of the crucial relationships between the Tripartite principals.’

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British Airways grounds 22 planes after posting first ever pre-holiday season loss

By
Daily Mail Reporter
Last updated at 4:17 PM on 31st July 2009

Struggling: British Airways has lost £148million in three monthsBritish Airways is axing seven routes and grounding 22 of its biggest planes as it cuts costs to help survive the worst downturn in air travel for decades.The airline revealed the depth of the slump as it reported its first ever peak travel season loss, plunging £148m into the red in the April to June quarter.The reverse is even more significant because the three month period is usually one of the busiest, when BA would be expected to record large profits. Even last year, when hard pressed holidaymakers were already tightening their belts, BA made a profit of £37m in the quarter.BA chief Willie Walsh said conditions remain ‘very challenging’ and there were ‘no visible signs of improvement’.He added: ‘The industry continues to face very difficult trading conditions, with considerable uncertainty over the likely timeframe of the recovery from the global economic downturn.’Mr Walsh has previously admitted BA is in a ‘fight for survival’ and he is delving into every corner of the business to search for new cost cutting opportunities.This week, it axed free meals on its short-haul flights and scrapped canapes in its business class cabin in an effort to shave £22m from overheads annually.And now Mr Walsh says it will be grounding ground 22 of its long-haul aircraft - Boeing 747s and 757s - through the harsh winter season. This will take about 8,000 passenger seats out of service.Overall capacity is being cut by 3.5 per cent this summer, and by 5 per cent this winter, as the airline hacks back flights to save cash. It is cutting seven routes from Gatwick - to New York, Alicante, Barcelona, Krakow, Madrid, Malta and Palma.
British Airways prides itself on offering a
pleasurable travelling appearance, but soon passengers on short haul
flights will not be given free mealsWhile the company will continue to search for cost-cutting opportunities, perhaps the most important money saving measure is the ongoing negotiations it is having with its 14,000 cabin crew about its plan to cut 4,000 jobs, reduce pay, and introduce more flexible working conditions. Cabin crew are playing hardball and have rejected the plan, threatening to strike and wreck BA’s peak summer flight programme. Talks between BA management and the Unite union - overseen by industrial marriage guidance service ACAS - have stalled and the two sides are midway through a 14-day ‘cooling off’ period. Mr Walsh said he was confident a deal could be struck with the unions representing cabin crew, baggage handlers and check-in staff.BA has already cut 1,450 jobs since March and said around 7,000 staff have supported its cost-saving plan, including 800 who have agreed to work for nothing for a month.The first quarter results revealed a 12.5pc drop in passenger revenue as lucrative long-haul business passengers travelled less and traded down to cheaper tickets.BA is boosting revenues through sales of so-called ‘ancillary products’ via its website, such as car hire and hotels, which have doubled since last year.The airline made a loss of £401m last year, and City experts forecast it will plunge even deeper into the red this year.

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