History > 2006 > UK > Economy  (IV-VI)

House prices increased

by £45 a day in 2006

· Year's 10% rise is strongest showing since 2004
· Surprise lift increases risk of market crash

Friday December 29, 2006
Guardian
Ashley Seager

House price inflation has jumped into double digits for the first time in nearly two years, the Nationwide reported yesterday, showing the housing market kicking off 2007 in rude health. The mortgage lender said prices surged 1.2% in December, taking the annual increase for 2006 to 10.5%, the first time it has been over 10% since February last year and the strongest since December 2004.

The rise means the average house price increased by £45 every day in 2006 and is now £173,746, according to the Nationwide's database. Fionnula Earley, the Nationwide's chief economist, admitted that the housing market had risen a lot faster than the company expected. "Both housing market and weather forecasters were surprised by the warm climate this year. The temperate weather is likely to have played only a minor role, but the housing market clearly warmed up during the year. House prices increased three and a half times faster than last year."

Analysts say low interest rates, growing employment and a lack of housing supply contributed to a tripling of house prices over the last 10 years. Although the market ran out of steam during 2005, a combination of big City bonuses, high immigration and a fall in mortgage rates late that year contributed to a renewed surge of demand during 2006, as did a relaxation of lending criteria by banks.

The further rise of house prices has surprised many analysts who think the market looks dangerously stretched in relation to historical averages, increasing the possibility of a housing market crash, especially if unemployment continues to rise.

The Nationwide thinks the strength of the housing market will continue in the first half of 2007 but that the rate of increase will slow in the second part of the year as higher interest rates and diminished affordability crimp the market.

"There are still few signs that the rate of house price growth will moderate in the very short term. Evidence from estate agents continues to show that supply conditions are tight with fewer sellers coming to market," said Ms Earley.

"However, we expect worsening affordability and recent interest rate hikes to affect the levels of activity in the market in the coming months. This will feed into a slower rate of house price growth in the second half of next year." The number of estate agents reporting an increase in new buyer inquiries fell sharply in November - which could presage the start of a weakening in demand.

The Bank of England raised interest rates twice this year - in August and November - and City analysts are increasingly convinced that another rise lies ahead in February and possibly one more after that. The Bank's monetary policy committee says it does not target house prices but is concerned that high levels can boost consumer spending and debt levels. The Bank's figures show mortgage demand at record highs.

"The housing market clearly remains strong and double-digit inflation is something the bank will be concerned about," said George Buckley, economist at Deutsche Bank in London.

Analysts caution that the housing market strength is concentrated in London and the south-east, with other regions experiencing much slower demand and much longer times for properties to sell.

Ms Earley says those conditions are likely to spread to the capital and its region during 2007. "Increasingly poor affordability, the impact of higher mortgage rates and the likelihood that fewer parents will be willing or able to help their children out will cause the rate of house price growth to move back into single digits in the latter part of the year."

House prices increased by £45 a day in 2006, G, 29.12.2006, http://business.guardian.co.uk/story/0,,1979618,00.html

Slavery in the UK

This is the story of Somalatha,
who is from Sri Lanka.
It is not her real name
- you are about to find out why.
It is a story that most people will disbelieve
could occur in modern-day Britain.
Sadly, it is true. It happened very recently

Published: 27 December 2006
The Independent

Somalatha arrived in Britain when she was 29 with a family for whom she had been working in Jordan. Her job was to be a maid. She had to work 16 to 18 hours a day, for which she was paid £200 a month. In the first two years, she was not given one day off.

She was not allowed to eat with the family and had to wait for leftovers. If there were none, she was advised to eat onions and potatoes. If any food was missing, she was automatically blamed for it, or even punished.

Somalatha had to sleep on a sofa-bed in the sitting room, where she was disturbed by anyone who came in late. Friday nights were especially difficult since the teenage children would come home late at night and bring their friends, which would prevent her from sleeping.

Her employer deliberately let Somalatha's visa expire. Since she was without a visa, she could not run away. She kept asking for a letter from her employer so she could apply to renew her visa but this was refused.

Under current law, women like Somalatha have a way out. But the Government is about to close her escape route. Earlier this year it proposed changes to the law which will divide migrants to the UK into five tiers according to their perceived skills and the economic benefit they will bring to the country.

This system makes no mention of women like Somalatha. But immigration officials have told Anti-Slavery International - one of the three charities being supported by this year's Independent Christmas Appeal - that domestic workers like Somalatha will henceforth be tied to the employers with whom they entered the UK, with no right to change employers - no matter how abusive their treatment.

It is not the only area in which modern forms of slavery are on the rise in Britain. A law against trafficking for forced labour was introduced after 23 Chinese workers lost their lives as they harvested cockles against a rising tide in Morecambe Bay in 2004. But the trade in human exploitation continues.

Many of the migrant workers from eastern Europe entering the UK, legally, as part of EU enlargement conditions are being lured by gangmasters into debt-traps from which they find it almost impossible to escape. "The traffickers charge large fees," says Anti-Slavery's director, Aidan McQuade, "with the lure that these can be repaid with high wages earned in the UK. Fees can range from several hundred to thousands of pounds and the interest rates which are charged can be very high so that, in effect, they never get out of debt."

Somalatha was rescued by one of Anti-Slavery International's partner organisations, Kalayaan, which runs a community centre offering advice on immigration and employment law. But many others still suffer. A survey of Kalayaan's clients showed that 75 per cent reported psychological abuse and more than a third were physically abused.

Until now the law has offered some help to women like Somalatha, allowing them to change employers so long as they are in full-time employment as a domestic worker in a private household. But, under Labour's immigration crackdown, this is about to be changed so such workers lose the right to change their employer. Campaigners fear this will mean employers will keep workers on illegally, making them easier to exploit.

"It will mean they lose vital protection against violence, mistreatment and exploitation," says Kate Roberts, a community support worker at Kalayaan. "They will effectively lose basic protection under UK employment law - their entitlement to the national minimum wage, statutory holiday pay and a notice period - because, in practice, these women almost always live-in and won't take a legal case against their employer until they have, as they put it, 'run away'."

Kalayaan and Anti-Slavery International have begun a campaign to keep the law as it is - allowing such workers the right to leave their original employers while maintaining their immigration status as a domestic worker. It also allows them to apply for settlement rights after four years.

But the exploitation goes beyond domestic workers. A group of Polish workers working in a chicken-packing factory near Exeter was recently discovered by a trade union to be living in a house with no furniture. They were sleeping on bare mattresses and using an electric cooker with its wires stripped bare and pushed straight into the socket. Their gangmasters had threatened them with eviction and loss of two weeks' wages if they dared to tell anyone about their conditions.

The men and women had been recruited in Poland to come to England on legal work permits. Two men from an English recruitment agency went to a central Polish city to interview workers. They promised the minimum wage of £4.50 an hour, accommodation for £25 per person per week and lots of overtime. But the gangmasters exploit their victims' ignorance of the law and inability to speak English. They make exorbitant additional deductions from wages - for " worker registration" or "visa extensions". The Poles - several of whom were given the same national insurance number - had huge deductions made for tax, which were never paid to the Inland Revenue. They paid £40 rent each, although they were sleeping on the floor, and even though the legal maximum for rent for people on a minimum wage is just under £25.

Those who cannot be controlled by such means are threatened. Anti-Slavery came across two men from Vietnam who had had to pay £18,000 for their jobs in the UK. They came to Britain under a legal work permit scheme and were promised wages of £4.95 per hour. But when they arrived they had their passports taken from them and were made to work for two months without any pay. In protest, they tried to go on strike. Almost immediately, their families back in Vietnam received threats of physical violence

Such is the seamy underside of life for the workers we see in our motorway services, as casual labour in ports, working in restaurants, hotels and in nail parlours or doing our laundry.

Slavery, it seems, is alive if well hidden, in Britain, in the 21st century.

Labour's U-turn
 

* 1990s In opposition, the Labour Party pledged to legislate to end the exploitation of migrant domestic workers.

* 1998 One of Tony Blair's early steps in office was to pass a law allowing such workers to change their employer, renew their visa to stay and, after four years, apply to settle in the UK.

* 2004 In wake of deaths of cockle pickers in Morecambe Bay, Government passes the Gangmasters (Licensing) Act, a system for registering labour in the agricultural, shellfish and related packing and processing sectors.

* 2006 Under its consultation exercise Making Migration Work for Britain, Labour proposes to rescind the rights of migrant domestic workers. It refuses to sign the Council of Europe Convention on Action Against Trafficking in Human Beings.

    Slavery in the UK, I, 27.12.2006, http://news.independent.co.uk/uk/politics/article2106018.ece

Aidan McQuade:

Why do we punish

the victims of slavery?

Britain has created a legal framework
which makes it virtually impossible
to take action against trafficking

Published: 27 December 2006
The New York Times

There are slaves in Britain today. Impossible, most people would say. Not so. It is just that they are hidden away. It is a problem which both the police and the Home Office acknowledge, but which is kept out of the political spotlight because of contradictions between the Government's attitude to immigration - on which it seeks to placate populist opinion - and its avowed determination to crackdown on people trafficking.

What do we mean by slaves? Anyone who is forced to work through coercion or deception, for little or no pay, and who is controlled by an "employer", usually through mental or physical abuse or threats. The International Labour Organisation estimates that there are at least 360,000 people living in slavery in industrialised countries. Two-thirds have been coerced into forced labour by people traffickers in a worldwide industry worth at least $32bn a year. This is plainly big business.

No one knows how many of these people are in the UK. There are thought to be thousands of people in Britain who are slaves today. Most of them are caught in deliberately sprung debt traps. They have been tricked into taking a loan for as little as the cost of medicine for a sick child - or more commonly to buy passage into the UK.

To repay the debt, many are forced to work long hours, seven days a week, up to 365 days a year. They receive basic food and shelter as "payment" for their work, but may never pay off the loan. Such unfortunate people are to be found in agriculture, construction, cleaning and domestic work, food processing and packaging, care and nursing and the restaurant trade.

British politicians are happy to fulminate about the iniquities of people trafficking. But they have created a legal and political framework which makes it virtually impossible to take sustained and effective action against the criminal gangs who undertake the trade.

After the incident in which 23 Chinese cockle-pickers in the thrall of a gangmaster lost their lives in Morecambe Bay, the Government made trafficking for forced labour a criminal offence. A licensing system came into force this year. And the Government is setting up a UK Human Trafficking Centre with a mandate to pursue trafficking for both labour as well as sexual exploitation.

Yet despite these positive initiatives, there has not been a single successful prosecution for the offence since it was introduced in 2004. Nor is there any special assistance available to people who are trafficked for forced labour. Most mystifyingly, the Government still has not signed the Council of Europe Convention on Action Against Trafficking in Human Beings, which would ensure that people trafficked into forced labour are provided with minimum standards of protection and support. More than 30 other European countries have signed.

Why this lamentable failure? A central reason is that the investigation of trafficking is fatally hampered by the UK immigration policy and the "prism" of organised immigration crime, through which trafficking is seen at the policy level.

For the police to have any prospect of catching those who run international networks, they must have the co-operation of the victims. However, when the victims have irregular status in the country, there is limited incentive for them to co-operate with the police. The police cannot guarantee them protection, access to services or an opportunity to regularise their status. They can only try to negotiate protection for them with the Immigration Service, which often attempts to deport victims whom the police would regard as witnesses and expect to be treated as victims of crime.

This is because the Immigration Service works on a quota system of deportations. So for immigration officials, there is limited incentive to stop the deportation of victims of trafficking, even if it assists police enquiries. This situation is likely to get worse, not better.

Under the Government's latest proposals, the number of deportations will increase from next month. This will further hamper the pursuit of criminals, for the victims of trafficking are even less likely to co-operate with the police if they are immediately to be deported back to the very countries where those criminal gangs still hold sway.

The result is a system whose priorities are upside down. Instead of protecting the rights of victims, the system punishes them. Trafficked people can be detained, charged or prosecuted for immigration offences such as illegal entry or destroying their documents, although this is most likely to have happened as a result of coercion from the traffickers.

What all this means is that trafficking people to the UK remains a high-profit, low-risk business for those criminal gangs who organise it. In countries like Germany and Italy, which have signed the European Convention Against Trafficking - and where minimum standards of protection to the victims of human trafficking now exist - prosecutions have increased. In the UK there has still not been not been a single prosecution.

This situation has always been unacceptable from a human-rights perspective. What is clear now is that it is unjustifiable from a law-enforcement perspective as well.

The writer is director of Anti-Slavery International, one of the charities supported by the 'Independent' Christmas appeal

    Aidan McQuade: Why do we punish the victims of slavery?, I, 27.12.2006, http://comment.independent.co.uk/commentators/article2105971.ece

House price gains hit 21-month high

November 30, 2006
Times Online
Rhys Blakely

Annual house price gains surged to a 21-month high in November, the Nationwide reported today, providing more evidence that the housing market has shrugged off recent higher borrowing costs for homebuyers.

The prospect of recession in the world’s largest economy would be a high price for Britain’s struggling first-time buyers to pay to get a foot on the property ladder

A 9.6 per cent jump over the past year means the price of the average house has increased by £15,046 - or £41 a day - to stand at £172,185, the Nationwide said. The annual pace of house price gains increased from 8 per cent in October and 3 per cent at the end of 2005.

The annual jump came as house prices rose by 1.4 per cent in November from October. The figures were well above economists' forecasts for a monthly gain of 0.7 per cent and a year-on-year rise of about 8.3 per cent.

The strong Nationwide data follows figures from the Bank of England yesterday that showed mortgage approvals, seen as an indicator of future demand, hit a near three-year high in October.

Howard Archer, chief UK economist at Global Insight, said: "Ongoing strong mortgage activity and a shortage of supply in many areas (notably London and the South East) means that house prices are likely to remain buoyant in the near term at least as pricing power is currently significantly tilted towards the vendor."

Mr Archer added that the booming housing market could figure in the Bank's discussions on interest rates.

He said: "While the Bank of England has recently played down the role of house prices in its setting of interest rates, it will nevertheless be concerned about their ongoing strength."

This month the Bank lifted interest rates by 0.25 percentage points, to 5 per cent, the second such increase in three months.

    House price gains hit 21-month high, Ts, 11.1.2007, http://business.timesonline.co.uk/article/0,,16849-2479403,00.html
 

11am update

Pound hits 14-year high

Thursday November 30, 2006
Guardian Unlimited
Ashley Seager,
economics correspondent

The pound continued its advance towards the $2 level this morning, hitting fresh 14-year peaks on the back of a Nationwide housing survey which showed house prices are continuing to rise strongly.

Sterling hit a new peak of $1.958 in early morning trading, but later eased to around $1.967, still up a third of a cent.

This is the 10th consecutive day of gains for the pound, which have taken it to its highest level since Britain was forced to withdraw from the European Exchange Rate Mechanism in September 1992.

Dealers said the advance was fuelled not only by the weakness of the dollar but also by speculation that the Bank of England will push through further interest rate rises into next year.

Earlier this month the Bank raised rates by 0.25%, taking them to 5%, their highest level for five years.

But many economists think there could be further increases early next year, as the housing market continues to show strong growth.

The figures from the Nationwide show a 1.4% jump in house prices in November and put the annual increase at 9.6%, its fastest rate of growth since February 2005. Most currency traders are expecting sterling to reach the $2 level by the end of the year.

The greenback has lost 3% of its value on a trade weighted basis over the past week. It also hit a 20-month low this morning against the euro of just under $1.32.

Addressing a parliamentary committee, Bank of England Governor Mervyn King cautioned that on a trade-weighted basis, the pound has not risen nearly as far as it has against the dollar.

Mr King also said he felt the economy was continuing to rebalance with business investment strengthening while consumer spending growth has moderated from the red-hot pace of recent years.

"We are beginning to see some rebalancing and I think I would expect that to continue in future," he said.

Bank chief economist Charlie Bean said he expected the current slowdown in the US economy to be "relatively short lived".

    Pound hits 14-year high, G, 30.11.2006, http://business.guardian.co.uk/story/0,,1960479,00.html

BAE secret millions

linked to arms broker

Swiss bank accounts traced
as row over Eurofighter contract escalates

Wednesday November 29, 2006
Guardian
David Leigh and Rob Evans


Secret payments of millions of pounds from Britain's biggest arms company have been found in Swiss accounts linked to Wafic Said, a billionaire arms broker for the Saudi Royal family, according to legal sources.

Mr Said refused last night to speak about the allegations. But the discovery presents the biggest potential breakthrough yet achieved in the Serious Fraud Office's three year investigation into allegations that illegal commissions may have been paid to Saudi royals by BAE Systems.

Details from the accounts would help to establish whether money was channelled to members of the Saudi ruling clan, and the amounts involved. The development comes amid threats from the company and its chief executive, Mike Turner, that the SFO's ongoing inquiry threatens to damage the UK economy. He has claimed that the Saudi royal family may take a £6bn contract from BAE and give it to the French instead.

The company wants the SFO to abandon the investigation before the Saudis pull out of the deal for a new fleet of 72 Eurofighter Typhoons.

Speculation over the progress of the inquiry led to a dip in the company's share price earlier this week.

But the SFO appears determined to focus on the accounts and their links to 68-year-old Mr Said. A billionaire in his own right, he is a friend of Peter Mandelson and has been a donor to the Conservative party. A tax-resident in Monaco, Mr Said has built a huge Palladian mansion on his Oxfordshire estate.

Though he is not regarded himself as a target of the inquiry - BAE acknowledges that the inquiry is aimed at the company - Mr Said has been a business manager for the sons of Saudi crown prince Sultan.

He has previously conceded that he has been an intermediary on Saudi arms deals struck over 20 years. He is credited with playing a key role in launching the Al-Yamamah deal in 1985, which has brought £43bn of revenue to BAE and has been the focus of the SFO inquiry.

Mr Said has always denied receiving commissions from BAE.

Legal sources say the SFO is likely to want to inspect his accounts to see if they show whether BAE payments were passed to members of the Saudi royal family, and when. Officers have been looking at whether any payments were made after 2002, when they were outlawed.

According to City sources, Mr Said's link to the investigation emerged after official notification to the arms broker by the Swiss authorities that access was being sought to bank accounts of a company registered anonymously in Panama.

Both the Swiss legal authorities in Bern, and the SFO director, Robert Wardle, have been keeping their moves secret.

Swiss authorities said yesterday: "The office of the attorney general of Switzerland confirms being in charge of the execution of a request for mutual legal assistance in criminal matters from the UK serious fraud office relating to this case." They and the SFO refuse to give any further details. But after Mr Said and other account-holders were alerted by the Swiss, he hired the City law firm Clifford Chance to represent him.

A series of British newspapers were briefed that the latest Saudi contract to buy Eurofighters was in danger and that the SFO should "put up or shut up".

The MoD, which is negotiating the deal to sell Eurofighters, remained silent.

The only person with the power to halt joint SFO-MoD police inquiries is the attorney general, Lord Goldsmith. But Britain is party to an OECD agreement, under which national economic interests are not allowed to stand in the way of efforts to stamp out bribery. Britain criminalised overseas corruption in 2002, but has not yet brought a prosecution.

Lord Goldsmith has been scrupulous in not bringing political pressure to bear on investigators, Westminster sources say. To do so would cause political uproar. Yesterday, a Lib Dem frontbencher, Norman Lamb, said: "The idea that pressure from a foreign government can hinder a serious criminal investigation is abhorrent."

BAE said: "BAE Systems is not obstructing the investigation and continues to fully co-operate with the SFO." Their spokesman said: "We will not be commenting on any point of substance. This cannot be taken as any kind of admission."

    BAE secret millions linked to arms broker, G, 29.11.2006, http://www.guardian.co.uk/armstrade/story/0,,1959446,00.html

11am

Mortgage lending hits 3-year high

Wednesday November 29, 2006
Guardian Unlimited
Angela Balakrishnan

Mortgage lending jumped unexpectedly to a three-year high in October, figures from the Bank of England showed today, in yet another sign that August's interest rate rise has failed to dampen robust activity in the housing market.

Lending on secured dwellings soared by £9.8bn, the biggest rise since September 2003 and much higher than the £8.9bn rise in the previous month. Analysts had predicted a rise of £9bn.

Mortgage approvals, which covers loans agreed but not yet made, also pushed higher to 128,000 from 127,000, the highest for almost three years.

"This is a very strong set of mortgage data," said Howard Archer, economist at Global Insight. "(It) suggests that August's interest rate hike failed to have any immediate significant dampening impact on housing market activity, although it could be that some people were seeking to tie up mortgage deals before interest rates moved higher still in November."

Analysts said that the second quarter-point rate hike earlier this month to 5% would heighten affordability problems at a time when strong house prices were already squeezing many first-time buyers out of the market.

"With many people stretching themselves to the limit to get in, or move up in, the housing market, even a relatively small overall increase in interest rates could ultimately have a significant dampening impact on activity and, ultimately, prices," said Mr Archer.

However, with the Bank likely to be concerned over the current strength of the housing market, other economists suggested that a further rate rise may be on the cards to soften the market's buoyancy.

Meanwhile, unsecured lending rose by £1.1bn last month, a modest increase from the £959m rise in September. But this still took the annual rate of increase to 6.2%, the lowest since records began in 1994.

    Mortgage lending hits 3-year high, G, 29.11.2006, http://business.guardian.co.uk/story/0,,1959755,00.html

11.45am

Brown the evangelist

for globalisation

Tuesday November 28, 2006
Guardian Unlimited
Mark Milner, industrial editor

Chancellor Gordon Brown and US treasury secretary Hank Paulson today pledged to confront the growth of international protectionism and urged a swift resumption of stalled global trade talks.

Mr Brown called on Britain to become "an evangelist for globalisation", arguing free trade, open markets and flexibility were the preconditions of success in the global economy.

"I want globalisation's children - the coming generation - to enjoy the vastly increased opportunities it brings," Mr Brown told the CBI annual conference.

Mr Paulson said nothing would bring more benefit to the global economy than a successful outcome to the Doha trade negotiations.

"We need to be clear on what constitutes a Doha success," he said. "It can only be an outcome that generates meaningful new trade flows in agriculture, manufacturing and services.

"To succeed these negotiations need to produce benefits for all nations and all sectors."

Mr Brown took the opportunity to underline government support for business in the UK, pledging help in areas such as research and development, access to capital for innovation and new technology and protection for intellectual property.

He underlined the government's commitment to its new approach to regulation.

"The risk-based approach of the future that Britain is now pioneering is founded on a different view of the world - trust in the responsible company, the educated consumer and the informed employee.

"The goal should be a fraction of forms, a fraction of information requirements and a fraction of inspections needed."

    Brown the evangelist for globalisation, G, 28.11.2006, http://business.guardian.co.uk/story/0,,1958981,00.html

Victims of London's property boom

Thousands are trapped
between spiralling prices
and desperate lack of council housing

Friday November 24, 2006
Guardian
Larry Elliott

Vicky Walsh is a typical Islington resident. Typical but not stereotypical. The stereotypical Islington resident is a well-heeled trendy liberal who takes a surreptitious peek in the windows of estate agents on Upper Street, tut-tuts at dinner parties about the lunacy of the property market and picks up tips from television programmes providing owner-occupiers with advice on how to add value to their homes.

Ms Walsh does none of these things because she doesn't own her own home. Like more than 13,000 other families she is on Islington council's waiting list to be rehoused. She needs rehousing because she and her partner live with their two seven-month old twin boys in a one-bedroom flat that an estate agent would call compact and everybody else would call small.

For the past 25 years, debate about the housing market in the UK has focused almost exclusively on the 70%-plus of homes that are owned outright or being bought with a mortgage. The fact that house prices are going up by more than 8% a year or that some banks are offering mortgages of five times individual or joint incomes warrants far more attention than the remote possibility of Ms Walsh being rehoused soon. But Ms Walsh and tenants like her provide a stark contrast to Britain's booming housing market.

Many houses in Islington are sold for £1m or more. Affordable properties for rent are so scarce in the borough that the council has to use a points system to ration demand. Those on the waiting list get extra points if they have dependent children, if they have a medical condition, but need a minimum of 140 points to put in a bid for a new property. Ms Walsh and her partner have 150 points but to have a chance of successfully bidding for a two-bed flat they need 250.

"There is double of everything - two seats, two cots, two high chairs. It's getting me down. I can cope with the kids - it's just the living arrangements. I wake up in the morning and think that I have to come up with a way of getting more points off the council. It's like the lottery. You know you are going to lose but you have to keep trying."

Price vice

Ms Walsh, like thousands of other families in Islington, is caught in a vice between some of the highest property prices in the country and a desperate shortage of council housing.

Amyn Elsafty is a butcher who works in Highgate but like Ms Walsh lives on the Bemerton estate on the other side of York Way from the massive King's Cross development. The flats are smart and well appointed, but Mr Elsafty has to sleep on the sofa in the living room of his brother's flat. His brother and his brother's pregnant girlfriend share the only bedroom. Mr Elsafty has split up with his partner but sees his children three evenings a week. When they stay at weekends they sleep on a blow-up bed in the living room with their dad.

"It was supposed to be temporary but that was a year ago", says Mr Elsafty, 30. "My brother says stay here as long as you need, but how long can I keep sponging off him?"

There is no chance, he says, of affording a mortgage on his wages of £780 a month and he does not qualify for the government's scheme for key workers. "I'm just a humble butcher. It makes no difference to me. I'm stuck in limbo."

The local Labour MP, Emily Thornberry, says the caseload at her surgery is dominated by people desperate to be rehoused. "I think it's disgusting, truly shocking," she says. "I think it's the sort of thing that went out when Dickens died. I suspect that people in government don't realise just how bad it is."

Even if affordable housing is well below the radar for most of those in Islington's leafy lanes, it is a big political issue locally. Ms Thornberry says the Liberal Democrat-run council should be doing more, and in particular taking a tougher line with developers to ensure they build more affordable homes.

Until recently, the council had a policy that any development of 15 homes or more was required to contain 35% of affordable homes. Now 50% have to be affordable in any scheme of 10 or more properties. Developers are pretty smart, however. According to Ms Thornberry's analysis, of the nearly 1,200 planning applications between 2001 and 2006 only 172 were for 10 homes or more.

"We have to turn high land prices to our advantage," said Ms Thornberry. "We must insist that if the developers are going to make huge profits that half the properties will be social housing. We have got to be tough on people.

"I live in the leafy lanes but I was brought up in council accommodation. I have some perception of what it's like but I was never as overcrowded as these people. It's awful. It just hits you all the time."

Terry Stacey, the Liberal Democrat chair of housing on the council: "There's no doubt that there is a big shortage of housing in London. Unlike Ms Thornberry, who lives in her own £2.6m house, I'm a housing tenant myself."

Mr Stacey said that Islington was one of the smallest boroughs in London and had a dearth of land available for development. Even so, it had nobody living in temporary accommodation, had been providing for key workers in the public sector and had weighted the points scheme to people who had lived in the borough for a long time. But it was important, he added, that developers were given incentives to build rather than being scared off.

"I have total and utter sympathy for the people on the waiting list. The council is doing everything it possibly can. We would like to build more council houses ourselves but the government does not let us do it."

Backstory

The number of council homes has fallen sharply over the past 25 years. In 1981, there were 6,305,000 properties rented from local authorities; by 2005 the figure had dropped to 2,803,000. Over the same period, homes rented from social landlords increased from 473,000 to 2,154,000. Owner occupation rose by 50% - from 12,442,000 to 18,405,000. Government figures show that right-to-buy legislation led to a steady erosion of the stock of social housing from the early 1980s onwards. In Islington South, according to the Labour party, 7,500 new homes were built between 2000 and 2005, of which 1,581 were affordable. Of the 13,120 families on the waiting list, more than 4,500 have enough points to bid for re-housing.

    Victims of London's property boom, G, 24.11.2006, http://money.guardian.co.uk/houseprices/story/0,,1955988,00.html

Farepak victims could receive

only 4p in £1 compensation

Saturday November 18, 2006
Guardian
Lee Glendinning

Members of the failed Farepak Christmas savings club could receive only 4p out of every £1 they paid into the scheme - and they will not get anything at all until after the festive season.

About 150,000 people lost money when the Swindon-based company collapsed with losses of £35m last month. It emerged yesterday that customers who put £400 into the scheme could receive as little as £16 in compensation.

Administrators BDO Stoy Hayward confirmed yesterday that the money would not be available until the new year.

"We have always said from the outset that people would receive a very small amount, and it could be 4p or 5p in every £1," said BDO's Stoy Hayward. "That is based on our current estimates of the number of customers that are involved and the value of Farepak's assets to be shared out."

Another complication is that Farepak kept only the details of customer agents, and BDO has been left to trace those customers who have not come forward. If more subsequently come forward with legitimate claims, the returns could actually fall to less than 4p.

A relief fund is thought to have accrued more than £4m in donations from retailers and other organisations, including £2m from Halifax Bank of Scotland, the company's bankers.

Farepak victims who paid in between £100 and £30,000 using credit cards are protected in the UK under section 75 of the Consumer Credit Act 1974 and can also apply for a refund. Those who paid using debit cards must raise the matter with their bank.

Yesterday the Community union made a £10,000 donation to the relief fund after it was revealed that many of its members had suffered in the collapse.

"The collapse of Farepak and the losses suffered by tens of thousands of British families is a scandal," the union's general secretary, Michael Leahy, said. "Hard-working people who put their faith - and their money - in the hands of Farepak to deliver them Christmas cheer have been left devastated. Those responsible for this tragedy should be held to account. However, that will not help those who do not know how they will now pay for Christmas dinner for their families."

A former senior manager with the European Home Retail Group, Farepak's parent company, claimed last night that the board of the company used savers' money to buy unrelated businesses.

"All of a sudden ... the group went on an acquisition spree," the man, who was not named, told Channel 4 news.

    Farepak victims could receive only 4p in £1 compensation, G, 18.11.2006, http://money.guardian.co.uk/consumernews/story/0,,1951348,00.html

10am

October retail sales beat forecasts

Thursday November 16, 2006
Guardian Unlimited
Ashley Seager, economics correspondent

Retail sales grew unexpectedly strongly in October, official data revealed today, showing there is still life in the consumer in spite of August's interest rate rise, higher utility bills and modest wage growth.

The Office for National Statistics said sales volumes jumped 0.9% from September, the biggest increase for 11 months and three times the pace expected by City economists.

The surge more than made up for the 0.4% drop in sales the month before and left sales last month 3.9% higher than a year earlier.

Increases were reported for all sectors except for food stores, where sales decreased by 0.2%.

The largest increases were for non-specialised stores and non-store retailers, where sales in both sectors increased by 2.5%. Clothing stores sales grew 1.9% on the month, the highest since February 2006.

On a three-monthly basis, however, sales growth was more modest, rising 0.6% compared to the previous three months, down from growth of 0.7% in the three months to September.

Price pressures on the high street seemed to have eased in October, with the price deflator up just 0.1% on a year ago and down from September's upwardly revised 0.7% rise.

In its quarterly inflation report released on Wednesday, the Bank of England said that retail sales were volatile at the moment but the underlying picture was of more modest growth than in the earlier years of this decade.

    October retail sales beat forecasts, G, 16.11.2006, http://business.guardian.co.uk/story/0,,1949218,00.html

Christmas is cancelled:

300,000 families

may have lost savings

in Farepak crash

· Total losses 'probably double official estimates'
· Firm kept no record of customer names

Saturday November 11, 2006
Guardian
Severin Carrell and Rebecca Smithers

Customers of the collapsed Christmas savings company Farepak could have lost up to £120m, MPs claimed last night, increasing pressure on ministers for tighter regulation of the savings club industry.

Labour backbenchers believe the scale of the Farepak scandal is far more dramatic than realised, with more than 300,000 low-waged and unemployed families, and pensioners, losing their Christmas money - double the current estimates. Some families lost up to £1,400 when the Swindon-based savings company went into liquidation a month ago, and are now facing a miserable festive season. Most have been forced to borrow money from credit unions, take out loans, or scale down their plans for Christmas.

Jim Devine, Labour MP for Livingston in West Lothian, has been inundated with constituents who have been affected. About 100 people went to a public meeting in his constituency last week, who between them lost £100,000. Initial estimates suggest that between 100,000 to 175,000 people had lost between £37m to £46m when Farepak collapsed last month.

It used a network of 25,000 local agents to recruit savers, with those agents earning a commission of up to 2.5% or up to 25% off Christmas hampers. A pensioner with 57 grandchildren and great-grandchildren said she feared her family's Christmas would be ruined. Mother-of-12 Sylvia Futcher, 75, from Evercreech, Somerset, lost £1,500 when the company went under, including commission for working as an agent. The firm's administrators, at BDO Stoy Hayward, were stunned to discover that Farepak held no detailed records of how much money it held and confirmed yesterday that it had no list of customers' names. It is now trying to reconstruct Farepak's finances - partly by asking customers to lodge claims for repayment. But Mr Devine said he believed the true figures at stake were probably double the official estimates.

He believes the 25,000 agents actually recruited an average of between 10 to 15 friends, family members and neighbours, who then saved an average of between £400 and £500 each. He knew of one agent who had 31 customers and lost £12,500. "We could be looking at anything upwards of 300,000 people affected. That's much more accurate than the figures of 120,000 or 150,000, and it could be as high as half a million people. That would make their losses anything from £65m to £120m."

Frank Field, Labour MP for Birkenhead, said next week was "crunch time" for individuals if they are to receive their refunds by Christmas. Mr Field is among those strongly criticising the role of Halifax Royal Bank of Scotland (HBOS) in the company's collapse, and urged it to make up the shortfall needed to compensate families. He and other MPs believe the scale of the disaster could have been avoided, and blame its parent company's bank, HBOS, and its administrators for failing to act sooner. Fifty-five MPs have signed his early day motion "drawing attention to the pivotal role HBOS has played in the collapse of Farepak".

High street stores and banks such as Argos and Marks & Spencer, many of which sold vouchers through Farepak, have donated £4.25m to an appeal fund set up by the Department of Trade and Industry last week - including £2m from HBOS. The charity overseeing the appeal, Family Fund, has also received £11,500 in individual donations from the public. That money will be distributed to the worst-off Farepak customers this month. Financiers were first aware that its parent, European Home Retail (EHR) was in trouble last year. It was put into administration in April, yet Farepak was allowed to continue taking its customers' money until it went into administration on October 13.

MPs alleged in the Commons this week that EHR was "siphoning off" the money paid into Farepak to meet its own debts. Mr Devine said he believed the Serious Fraud Office should investigate, in addition to the Department of Trade and Industry's inquiry announced this week.

Concerns have also been raised about the millions of pounds in salaries and bonuses paid to the directors of EHR before its collapse. They include Sir Clive Thompson, 63, chairman of EHR and a former president of the Confederation of British Industry, described as "a modern-day Scrooge" by Labour MP Anne Snelgrove.

A spokeswoman for the administrators said early indications were that each agent only attracted an average of about £1,500 in customers' savings. "We're still receiving claims from customers - that's how we'll be able to get a better idea of the numbers."

    Christmas is cancelled: 300,000 families may have lost savings in Farepak crash, G, 11.11.2006, http://money.guardian.co.uk/saving/story/0,,1945390,00.html

Halifax announces mortgage rate rise

Friday November 10, 2006
Guardian Unlimited
Hilary Osborne and agencies

Customers of the UK's biggest lender will face higher mortgage costs from next month after it announced that it would be passing on yesterday's interest rate rise in full.

Halifax said its standard variable rate (SVR) would rise by 0.25% to 7.00% with effect from tomorrow for new customers. Existing borrowers will pay the extra rate from December 1.

A spokesman for Halifax said fewer than 10% of the bank's borrowers were paying the SVR, but around 30% of its customers are on discount rates linked to the SVR and will also see their payments increase.

He added that 50% of customers are on a fixed rate mortgage and would be unaffected by the change.

The move follows an announcement by the country's biggest building society, Nationwide, that it would be increasing the cost of its mortgage deals.

Nationwide said its base mortgage rate (BMR) would go up by 0.25% to 6.49% on December 1 - adding £18.64 to monthly bills on a £120,000 repayment mortgage.

Homeowners with a 25-year £120,000 repayment mortgage from Nationwide who are on the BMR will be pay £809.50 a month from December.

Lenders are repricing their mortgages following yesterday's decision by the Bank of England to raise interest rates from 4.75% to 5% - the highest level for five years.

Interest rates are now at their highest point since August 2001 and the latest increase comes as more households feel the strain of higher council tax bills and energy prices.

There are fears that the rise could deepen the UK's growing debt problem.

A record 27,644 people became insolvent during the summer, fuelling forecasts that more than 100,000 people could go bankrupt or take out individual voluntary arrangements (IVAs) over the course of the year.

Economists have suggested interest rates could climb again as early as February if inflation - currently at 2.4% - continues to exceed the Bank's 2% target.

HSBC economist John Butler said he expected figures next week to show that inflation rose to 2.6% in October.

"All of that rise can be explained by the sharp hike in tuition fees," said Mr Butler.

    Halifax announces mortgage rate rise, G, 10.11.2006, http://money.guardian.co.uk/property/mortgages/story/0,,1945027,00.html

Live now, pay later:

record numbers

opt for 'soft bankruptcy'

· Personal insolvencies rise at annual rate of 55%
· Home repossession actions at highest level since 1992

Saturday November 4, 2006
Guardian
Larry Elliott, economics editor

Labour was last night under fire for nurturing a "live-now-pay-later" society after the latest government figures showed personal insolvencies rising at an annual rate of 55% and on course to break through the 100,000 barrier for the first time.

The Conservatives and Liberal Democrats seized on data from the Department of Trade and Industry showing that dearer fuel bills, rising council tax and higher joblessness are forcing borrowers - some with credit card debts in excess of £50,000 - to go bankrupt or seek an individual voluntary agreement (IVA) with lenders.

In the three months to September, the number of people going broke rose almost 6% to 27,644 - 55.4% up on a year ago. Companies dealing with the problem said the trend was for more young people and more women to default on their debts.

Separate data from the Department of Constitutional Affairs showed more families having trouble meeting monthly repayments on mortgages. Lenders started 34,626 possession actions in the three months to September - the highest figure since the recession that led to the pound being ejected from the Exchange Rate Mechanism on Black Wednesday in 1992.

"An economy built on borrowed money is built on borrowed time," said George Osborne, the shadow chancellor. "There is a personal tragedy behind each of these insolvencies and this shows that many families are feeling the pressure of rising interest rates and rising fuel bills. Gordon Brown is doing nothing to help these families, with more and more stealth taxes and increasing council tax."

Vincent Cable, the Liberal Democrats Treasury spokesman, attacked both the government and the banks for failing to tackle the problem of personal debt. "There is currently a considerable degree of irresponsible lending and aggressive marketing to individuals," he said.

Mr Cable said the government should be working with the financial services industry to provide a national network of independent advice centres so people could have financial health checks before they got "into a crisis situation".

The one bright spot for the government was that the number of corporate bankruptcies in the third quarter fell by 4.9% to 3,265. A Treasury source said underlying trends were "positive and in 2006 the economy is strong and strengthening".

Industry experts said, however, that rising interest rates would add to the problem. Mike Gerrard, head of personal insolvency at Grant Thornton, said: "The seemingly never-ending rise in the number of UK personal insolvencies continues apace, sustained by the side-effects of the buy-now-pay-later generation.

"Individuals with credit card debts in excess of £50,000-£60,000 are not all uncommon, while the overall age of those affected appears to be on the decrease, with a larger proportion of women also noticeable," he said.

Case study: £140,000 in the red

David Jukes was a successful self-employed sales consultant for 18 years. But two years ago his debts started mounting when one of his biggest customers went into receivership, stripping his business of a hefty sum of money.

Including personal debts, the 39-year-old owed £140,000 and entered into an individual voluntary agreement with Thomas Charles, a debt consultancy, 18 months ago. After agreeing a repayment, he paid a lump sum and is due to have his debts signed off within a month. "I didn't want to go down the bankruptcy route, since I have a house and a family to support. I was in despair. The pressures were building up and I kept hearing horrible stories of what people had done to themselves to get out of debts.

"Debt can happen to anybody. We all have credit cards and take loans. Yes, part of it was my fault but I also think the people to blame are banks and credit card companies. They're desperate to loan and it leads to irresponsible lending.

"I was shocked by how quickly it could happen. Once you miss one or two payments, the banks are on to you like a pack of wolves. It can push you over the edge, every time the phone rings at home you know who it is, you know you owe the money, but if you don't have it then what can you do? It can seem like there is no way out."

Angela Balakrishnan

    Live now, pay later: record numbers opt for 'soft bankruptcy', G, 4.11.2006, http://money.guardian.co.uk/creditanddebt/story/0,,1939362,00.html

Minister rules out

further help for pension victims

Friday November 3, 2006
Guardian
David Hencke,
Westminster correspondent


The government ruled out any more state help yesterday for the 125,000 people who lost their retirement income when their private occupational pensions schemes collapsed after their employers went bust.

James Purnell, the pensions minister, made the announcement in a reply to a highly critical report from the all-party public administration committee, which backed the findings of Ann Abraham, the parliamentary ombudsman, that the government held some responsibility for the maladministration that meant the schemes were not adequately funded. His reply was issued on a day when the entire committee of MPs was out of the country on a visit to the United States.

His announcement was greeted with outrage by the Conservatives, the Ombudsman's office and Ros Altmann, a former government pensions adviser who acted for the complainants who had lost pension funds worth millions.

Mr Purnell said: "We have real sympathy for those who have lost their occupational pensions. However, we do not believe that the taxpayer should be expected to underwrite what were private company pension schemes."

He said the government had put aside £2bn in financial assistance schemes to help people and he promised that some 10,000 people could rejoin the state earnings-related pensions scheme at a reduced contribution rate.

Ms Altmann said: "The response is outrageous. When Robert Maxwell's pension scheme collapsed through fraud, the then government rescued everybody. In this case, it is not fraud but the government will not compensate them. The £2bn figure is misleading - it is nearer £540m - and so far, out of 10,000 people now above pension age and living on reduced state pensions, only 400 people have received any help."

The Conservative shadow work and pensions secretary, Philip Hammond, said: "More than nine years after these schemes first started winding up, the best response the government can muster is a reminder of an existing measure which has so far been of assistance to so few people that they won't even publish the figures.

"By the government's own admission 115,000 people out of the 125,000 who have lost pensions will not qualify for this help. It is disgrace that the government continues to defy the ombudsman and deny all responsibility for pensions that have been lost under their watch."

The ombudsman's office said that the government had not responded to the main findings in Ann Abraham's report.

    Minister rules out further help for pension victims, G, 3.11.2006, http://money.guardian.co.uk/pensions/story/0,,1938541,00.html

Insolvency misery

boosts profits for debt firms

· Turnover rises by 100% for Debt Free Direct
· 100,000 people predicted to go bust this year

Friday November 3, 2006
Guardian
Miles Brignall

Debt Free Direct became the second debt-management company in a week to announce a dramatic leap in turnover and profits yesterday as unease grows over the size of Britain's credit problems.

News of the boom in this specialist sector came ahead of figures to be published today by the Insolvency Service, which are expected to show record numbers of people filed for bankruptcy.

Debt Free Direct, which helps consumers laden with credit card debt and other outstanding bills come to arrangement with their creditors, said yesterday that it had seen a 101% rise in turnover compared with the same six months a year ago. Profits, it said, would be "significantly more than double" that of 2005.

Earlier this week, Accuma said its debt-management business had grown 250%. It reported a 10-fold rise in profits last year.

Both companies specialise in drafting individual voluntary arrangements (IVAs) between financial institutions and their debt-laden clients. IVAs are controversial because they allow debtors to freeze interest on debts and make affordable monthly repayments. Debt-management companies are usually able to negotiate with banks and credit card companies to accept a greatly reduced sum. Consumers in trouble typically pay back 50% of the total owed, although it can be just 25%.

Companies arranging IVAs usually charge £1,000 for their services, which is paid by the institutions owed the money.

Andrew Redmond, Debt Free Direct 's chief executive, said yesterday: "On all fronts, trading performance has improved significantly compared to the same period last year and in particular, we are delighted with our increased profitability."

Charles Howson, chief executive of Accuma, described 2006 this week as a "transformational year" as gross profits have risen from £600,000 to £4.5m.

News of both companies' profits will not be welcomed by the wider financial community. Banks increasingly believe there is widespread abuse of IVAs and blame misleading advertising for the rise in the number of IVAs issued this year.

In August, the Insolvency Service (IS) said more than 11,100 people filed IVAs in the second quarter of 2006 - up 4,386 on the year. Today the IS will publish the latest data and analysts expect record numbers. The financial services group KPMG predicts total insolvencies this year to top 100,000 - up from 5,000 in 2002.

Last month the internet bank Egg warned that it was likely to make an unexpected loss because customers were spending less on their credit cards and turning to debt-management companies to control their fast-rising personal loans.

Damon Gibbons, chair of the anti-poverty group Debt on Our Doorstep, said: "The big rise in the number of IVAs reflects the fact that more people are getting into debt problems. Lots of companies have entered this market attracted by the size of the fees but the lack of regulation of this area is a concern. In some cases, people are being pushed into IVAs when it might not be the most appropriate measure to take."

He added: "It's worth noting that the amount [banks] are losing as a result of them is still less than 0.5% of the total sums currently being loaned."

Yesterday critics rounded on Abbey after it said it would offer mortgages of five times salary. There are concerns that buyers are taking on debts that could quickly become unmanageable following a series of interest rate rises, especially if the property market declines. PricewaterhouseCoopers said there was a one in three chance of house prices falling by 2010.

    Insolvency misery boosts profits for debt firms, G, 3.11.2006, http://business.guardian.co.uk/story/0,,1938345,00.html

Average London house

price set to hit £400,000

Wednesday October 25, 2006
Guardian Unlimited
Sandra Haurant

London may be facing a property time bomb with the average house price in the capital forecast to reach £400,000 in five years' time, experts warned today.

The London Housing Federation, working with analysts Oxford Economic Forecasting, predicted that London house prices may rise by as much as 34%, reaching £400,000 by 2011, an increase of around 7% a year.

Meanwhile, salaries are expected to increase by 4.1% to 4.4% each year, bringing the average London wage to £41,000 in 2011.

The average property in London currently comes with a price tag of just under £300,000, almost nine times the average salary of £33,373. To get a mortgage on the average property, a would-be buyer would need a salary of more than £79,000.

The federation said the typical property in the capital had risen in price by 139% since 1997, while salaries had increased by just 34%.

The group warned that a predicted increase in population of 800,000 coupled with a shortage of available homes would help to push London prices up to almost 10 times income.

It added that there are already 300,000 people on the waiting list for affordable housing in the capital, and 63,000 households in temporary accommodation.

The government's efforts to fill the affordable housing gap were ineffective, the group said, as 11,549 affordable homes were sold through the right to buy scheme last year, but just over 6,000 were built.

Meanwhile, rented accommodation in the capital remains expensive, with the average privately rented one-bedroom flat in Haringey costing £176 a week, around half the average weekly income in the borough.

Berwyn Kinsey, head of the London Housing Federation, said: "Londoners are increasingly left with the choice of expensive rental accommodation, living in house shares or with parents, or leaving the capital altogether.

"Many thousands more are homeless or living in overcrowded conditions as demand for affordable housing outstrips supply."

Fionnula Earley, chief economist at Nationwide, agreed that supply problems were putting extra pressure on the London property market, but said a lack of affordability could act as a "staying point" in property price inflation, forcing people to opt out of buying property.

The London Housing Federation is called on the government to make housing a priority in the 2007 comprehensive spending review.

    Average London house price set to hit £400,000, G, 25.10.2006, http://money.guardian.co.uk/houseprices/story/0,,1931183,00.html

Warren Buffett rescues Lloyd's Names

· $7bn deal should allow 34,000 to 'sleep soundly'
· Wealthy who suffered losses may get payout

Saturday October 21, 2006
Guardian
Jill Treanor

Legendary investor Warren Buffett yesterday came to the rescue of 34,000 Lloyd's Names - individuals who formerly underwrote the insurance market's policies - through a groundbreaking deal that should allow them to "sleep soundly".

The $7bn (£3.8bn) deal with Mr Buffett's Berkshire Hathaway insurance vehicle is being structured in such a way as to end uncertainty faced by Names that they could have to pay out for future claims on the London market.

The Names - wealthy people, including celebrities, who suffered painful losses in the early 1990s - may even receive a payout as a result of the complex transaction with Equitas, the insurance vehicle set up as part of the Lloyd's rescue plan in 1996.

Scott Moser, chief executive of Equitas, said: "Over the last 10 years what Names have said most often is 'I just want to sleep easy'. We think we have just bought them the world's best mattress."

Hugh Stevenson, chairman of Equitas, added: "If, as we hope, the transfer of liabilities from the reinsured Names is achieved, they will no longer have any liability whatsoever under policies reinsured by Equitas. They have achieved finality and will be able to sleep soundly knowing that this chapter is closed".

Equitas and Lloyd's are paying £398m to buy a $7bn reinsurance policy from Berkshire Hathaway unit National Indemnity Company - the world's biggest reinsurance deal since the creation of Equitas.

Mr Buffett, dubbed the Sage of Omaha, said: "Putting Berkshire Hathaway's Gibraltar-like strength behind the remaining problems, which will take many decades to resolve, eliminates any remaining worries for all concerned."

Equitas was created to stop Lloyd's collapsing under a weight of claims on insurance policies in the late 1980s and early 1990s. But for the last 10 years there have been lingering concerns that Equitas would run out of money to pay the remaining claims, which could yet take 40 years to settle, on policies written before 1993 and that Names would once again have to put their hands in their pockets.

Of the 34,000 Names who signed up to Equitas 10 years ago, some 6,000 have died, passing on the liability to their estate. Some 175 Names are still being pursued by Lloyd's for their liability.

According to the Lloyd's Names Association, the average age of a Name is now 78. "People have been going to their graves with [the uncertainty]," said Christopher Stockwell, chairman of the Lloyd's Names Association. Mr Stockwell said the possibility of a payout as a result of the deal was "irrelevant" and added: "It's entirely good news assuming we can take this at face value. It's giving the Names the finality they have sought for years."

Michael Deeny, chairman of the Association of Lloyd's Members, the largest organisation of Lloyd's Names, also welcomed an end to the anxiety facing his members. "The problems of the 1990s continued to cast a shadow over Lloyd's. That shadow has now been removed."

The news had an immediate impact on the Lloyd's market. Ratings agency Standard & Poor's moved its outlook on its credit rating - which affects the price it can borrow at in the money markets - to "positive" from "stable" while the spread on its bonds in the money markets narrowed substantially.

Richard Ward, the new chief executive of Lloyd's, said: "Despite the outstanding performance of Equitas since its inception, the ratings agencies sometimes cite it as having a potentially negative impact on the market's ongoing financial strength. The successful completion of this transaction should end that once and for all."

The fact that Lloyd's is contributing to the cost of the transaction indicates the importance of ending the possible risk associated with Equitas, industry sources said.

FAQ: Reinsurance

What is Equitas?

It is an insurance vehicle set up in 1996 to save Lloyd's of London from collapse. It is the means by which Lloyd's Names - the 34,000 people who used to underwrite policies - were protected from the claims hitting the market in the early 1990s. The Piper Alpha oil rig fire and Exxon Valdez pollution spill put too much pressure on a market already struggling with other expensive claims, which forced the Names to dip into their own pockets. In many cases the Names found they did not have enough cash. Equitas holds all the liabilities that Lloyd's faced in 1992 and before.

Why the Berkshire Hathaway deal?

In the 10 years since it was created, Equitas's accounts have not been signed off by its auditors, but qualified because of the extent of the uncertainties about the claims that it could face. While few experts expected it to go bust the possibility that it might was causing some uncertainty for the credit rating of Lloyd's. Also, if the amount of claims had suddenly gone up, there was a risk that the Names would have to pay out again.

What are the outstanding claims facing Equitas?

Three-quarters of all potential claims are for asbestos, pollutants and health hazards while 90% of all its liabilities are in the US. Over 10 years, its liabilities have been shrinking. It started out facing claims of as much as £15bn with just £588m of surplus assets but as of March 31 this years its liabilities had shrunk to £4.5bn with a surplus of £458m.

What is Berkshire Hathaway and why does it want Equitas?

It is a conglomerate is run by Warren Buffett, the legendary investor based in Omaha, Nebraska. The Equitas deal is with one of its subsidiaries National Indemnity Company. He thinks he can make money. Equitas and Lloyd's are paying Berkshire Hathaway up to £398m for $7bn of reinsurance.
Jill Treanor

    Warren Buffett rescues Lloyd's Names, G, 21.10.2006, http://business.guardian.co.uk/story/0,,1927909,00.html

2.45pm update

Corus accepts Tata takeover

Friday October 20, 2006
Guardian Unlimited
Fiona Walsh, business editor

Anglo-Dutch steel-maker Corus this morning accepted terms of a £4.3bn takeover from India's Tata Steel in a deal that will create the world's fifth-largest steel-maker.

The formal announcement of the 455p a share terms today could unleash a bidding war for Corus, say some City analysts.

Corus shares touched 500p earlier this week on speculation that rival bidders are poised to top the Tata terms.

The terms have not impressed Standard Life Investments, Corus's biggest institutional shareholder with a 7.9% stake.

In a statement this afternoon, it said: "The 455p per share offer by Tata for Corus is lower than we would have expected the board of Corus to agree to and recommend."

It added that the Corus management team had done "an excellent job" in restructuring the group.

The statement continued: "The global steel business is undergoing a period of rapid consolidation, which leaves Corus in an interesting strategic position within the industry. We feel that the offer price does not fully reflect the value of that position.

"The acquisition of Corus brings many advantages to Tata, including elevating it into the top five of global steel producers and an as yet unquantified amount of synergy benefits.

"The 455p per share offer from Tata does not attribute significant value to Corus shareholders from achieving what we understand to be the substantial savings available from the joining of the two businesses."

By 1.30pm, however, the share price was down 4.5p as hopes of a rival offer were knocked following Corus chairman Jim Leng's revelation that the group had already held talks "with a number of parties from Brazil, Russia and India."

But, at 474p, Corus shares remain comfortably above Tata's offer terms. Potential buyers could include the Russian steel-makers, Novolipetsk and Severstal, the steel giant controlled by Alexei Mordashov, as well as the Brazilian steel group Companhia Siderurgica Nacional.

Corus and Tata said this morning the combination of their companies was "strategically compelling, creating a vertically integrated global steel group" with crude steel production of 23.5m tonnes in 2005.

Mr Leng said the offer reflected the "substantial value" created for Corus shareholders.

"In the middle of last year, my board agreed a strategic way forward for Corus to seek access to low cost production and high growth markets. Consistent with this, the Company held talks with a number of parties from Brazil, Russia and India. This transaction represents the culmination of these talks.

"This combination with Tata, for Corus shareholders and employees alike, represents the right partner at the right time at the right price and on the right terms. This creates a well balanced company, strategically well placed to compete in an increasingly competitive global environment."

For Tata, chairman Ratan Tata said: "This proposed acquisition represents a defining moment for Tata Steel and is entirely consistent with our strategy of growth through international expansion.

"Corus and Tata Steel are companies with long, proud histories. We have compatible cultures of commitment to stakeholders and complementary strengths in technology, efficiency, product mix and geographical spread.

"Together we will be even better equipped to remain at the leading edge of the fast changing steel industry."

Tata has said it has held "constructive and satisfactory" talks with Corus's two main UK pension schemes and has offered to fund the deficit by paying £126m into the scheme and to increase the contribution rate on the British Steel Pension Scheme from 10% to 12% until March 31 2009.

The Indian steel-maker later said there were "no short-term plans for any relocation of plants," but declined to be drawn on possible job losses at Corus.

    Corus accepts Tata takeover, G, 20.10.2006, http://business.guardian.co.uk/story/0,,1927222,00.html

Human rights concerns

fail to staunch flow of UK arms

China tops list with £70m of exports in one year
as military sales soar to blacklisted regimes

Sunday October 15, 2006
The Observer
Antony Barnett

The British government is exporting record levels of military equipment to 19 of the 20 states its own ministers and officials have just identified as 'major countries of concern' for human rights abuses.

The 20 countries were listed in the Foreign Office's annual Human Rights Report, which was launched by the Foreign Secretary, Margaret Beckett, last week. They include China, Burma, North Korea, Iran, Russia, Saudi Arabia and Zimbabwe.

But the government's arms export records reveal that concerns over human rights appear not to have prevented ministers from approving tens of millions of pounds of military sales to those same regimes.

For instance, on China the report stated: 'The Chinese authorities continue to violate a range of basic human rights. The use of the death penalty remains extensive and non-transparent; torture is widespread.' Yet, despite the existence of a European Union arms embargo, ministers approved strategic export licences - which are needed to sell military items abroad - for China worth almost £70m between July 2005 and June 2006.

According to the UK government's own record of export licences, between January and March this year ministers approved the sale to China of military aero-engines, military communciations equipment and 'technology to build combat aircraft'. It also sold Beijing gun mountings and components for military vehicles, and 'components for nuclear reactors'.

The EU embargo prohibits countries from selling 'whole' weapons such as missile and aircraft, although it does allow the sale of parts.

Other countries whose human rights records concern the Foreign Office, but which still receive arms exports from the UK, include Colombia, Saudi Arabia and Russia, where more than £40m of military equipment was exported last year. On Russia, the Foreign Office report stated: 'Human rights defenders continue to be gravely concerned by actions taken by authorities... The North Caucasus... remains one of Europe's most serious human rights issues.' Yet last year ministers authorised export licences to Russia worth £10m. These included military cargo and utility vehicles, sniper rifles, gun silencers, shotguns, and components for military aircraft navigation equipment.

The analysis of military exports was carried out by Saferworld, the human rights campaign group. Claire Hickson, Saferworld's head of communications, said: 'This once again highlights the incoherence of UK policy which could result in British military equipment being used to commit human rights abuses abroad.'

At the launch of the Human Rights Report, Beckett said: 'This report would set down what we were doing to promote human rights and fundamental freedoms around the world. And it would be something by which the public, the NGO community and the media could hold us as a government to account.'

But Saferworld responded: 'The UK government does little to check what happens to arms exports once they leave the country. There is little way of knowing whether the arms find their way to other users, such as criminal gangs, pariah states, terrorists, paramilitaries or warlords or other rebel forces. A number of these states have reputations as conduits of arms to other irresponsible parties.'

A spokesman for the Foreign Office said that all military exports were rigorously scrutinised on a 'case by case basis' and the British government needs to be reassured that such sales would not be used for internal repression or external aggression.

The Human Rights Report was first published in 1998 by former Foreign Secretary Robin Cook, who wanted to promote human rights overseas in line with the new Labour government's 'ethical foreign policy'.

    Human rights concerns fail to staunch flow of UK arms, O, 15.10.2006, http://observer.guardian.co.uk/world/story/0,,1922775,00.html

Gazumping returns

as City boom inflates house prices

Thursday October 12, 2006
Guardian
Rupert Jones

Gazumping has made a comeback in some London property hotspots as it emerged that the capital's house prices are rising at their fastest rate for almost seven years.

In its latest monthly report, the Royal Institution of Chartered Surveyors said the strength of the housing market was being fuelled by a "booming" City economy. Many bankers and traders are buying properties in anticipation of the bonuses they will receive in the new year.

Rics said in some of the more desirable areas there was evidence of a return of gazumping, when a seller ditches an agreed buyer in favour of a higher offer.

Charles Puxley, at Chelsea estate agent Carter Jonas, said: "Prices are surging because demand far outstrips supply. This is encouraging gazumping, unfortunately, and many agents are grossly overvaluing properties in order to get instructions."

James Scott-Lee, at Anscombe & Ringland in Highgate, north London, said some properties were selling for "fantastic" amounts. "Every property tends to gain two or three buyers which subsequently goes to sealed bids."

Another London agency, Bective Leslie Marsh, said "hugely inflated prices" were being achieved at the top end of the market. However, agents in some London areas said the market had slowed down.

Prices in London are rising at their fastest rate since January 2000, said Rics. Elsewhere, a "ripple effect" was taking place across the country, with house prices in the north-west and East Anglia picking up sharply, while Wales, Yorkshire and Humberside also recorded rises.

Across the country as a whole, property values rose for the 11th consecutive month in September, at the fastest pace for four years. New instructions to sell homes fell for the fourth month in a row.

Rics spokesman Jeremy Leaf said that with stocks of property low and buyer inquiries increasing, sellers remained in a position to benefit in the short term.

"Continuing house price rises will make it difficult for the Bank of England to leave the base rate at 4.75%, unless the economy shows unexpected weakness," he said.

    Gazumping returns as City boom inflates house prices, G, 12.10.2006, http://money.guardian.co.uk/houseprices/story/0,,1920186,00.html

Half of graduates under 40

unable to buy a home

Friday October 6, 2006
Guardian
Rebecca Smithers,
consumer affairs correspondent

More than half of university graduates are now unable to get on to the property ladder, with one in 10 believing they will never buy their first home, according to a survey out today.

Research undertaken by Scottish Widows Bank says the overall outlook for university leavers is gloomy, with 53% of today's graduates aged under 40 frozen out of the property market.

Home ownership is such an "unrealistic dream" that one in 10 say they cannot ever imagine buying, and almost half of them think it could be between two and 10 years before they buy their first home, the survey claims.

Even among those graduates who have succeeded in getting on to the property ladder, almost two-thirds had to rely on buying with a partner and 68% said they would not be able to buy them out if they were to split up.

Most graduates (64%) cite unaffordable house prices for preventing them from getting on to the ladder. Almost a third say they cannot save for a deposit, and 60% believe they do not earn enough to get them on the housing ladder. One in seven believe they are not ready to make the commitment.

The research also reveals that the average graduate first-time buyer deposit is £16,219, rising to £30,185 in London.

The average property price for graduate first-time buyers is £107,070, rising to £168,447 in London. One in six graduate first-time buyers say they had to live with their parents rent-free following university in order to get on to the property ladder.

Debt is also an issue, the report finds. The average student loan debt was recorded at £9,246, with one in eight graduates believing this would stop them getting a house. Debt is such a barrier for some graduates that in hindsight one in six say they would not have taken out a student loan while at university.

Of the graduates not yet on the housing ladder, 14% said that lenders considering future earnings potential rather than their current salary would have most helped them to buy somewhere, while 15% cited not needing a deposit.

The report is the third annual survey by Scottish Widows. Murdo McHardy, its head of product development and marketing, said: "Our report has yet again revealed that graduates are not finding it easy to get on the property ladder, with house prices continuing to rise and first-time buyers being unable to save for that deposit.

"Even for those graduates who are able to get on the property ladder, many are relying on buying with partners and are then not in the position to buy them out if problems arise.

"This leaves graduates in a catch-22 situation - do they wait until they can buy on their own or buy with a partner when they are not quite ready?"

    Half of graduates under 40 unable to buy a home, G, 6.10.2006, http://money.guardian.co.uk/houseprices/story/0,,1888671,00.html

U.K. Gambling Shares

Fall on U.S. Move

October 2, 2006
By THE ASSOCIATED PRESS
Filed at 8:27 a.m. ET
The New York Times

LONDON (AP) -- Shares in British online gambling companies, including Sportingbet PLC and PartyGaming PLC, dived Monday after the U.S. Congress passed legislation prohibiting the use of credit cards, checks and electronic fund transfers for online gaming.

PartyGaming, the world's biggest online gambling company, said it would pull out of the United States if President Bush signs the legislation into law.

888 Holdings PLC said it is suspending online betting operations in the United States as a result, and Sportingbet PLC said it called off takeover talks with World Gaming PLC.

The legislation was part of a port securities bill passed by the House and Senate on Saturday.

The companies hit hardest by the ruling are those that offer betting markets denominated in U.S. dollars, and usually operate from bases in the Caribbean or Central America. Most of the big British and Irish sites, by contrast, keep their operations in Europe and take deposits only off credit cards denominated in pounds and euros.

Investec Private Bank said it was difficult to assess the value of online betting companies with heavy exposure in the United States, because the allocation of costs is unclear.

Sportingbet, which does more than 60 percent of its business in the United States, said the impact of the legislation was unclear. However, the company called off talks about a potential bid for World Gaming.

Shares in PartyGaming plunged 60 percent to 43 pence (81 U.S. cents), and shares in 888 sank 48 percent to 76 pence ($1.42). Sportingbet shares dropped 67 percent to 60 pence ($1.12).

''The precise effect of the legislation is unclear,'' 888 Holdings said in a statement. ''However, this legislation indicates Congressional intent to treat Internet gaming, whether sports-related or not, as illegal.''

The legislation, if enacted, ''will make it practically impossible to provide U.S. residents with access to its real money poker and other real money gaming sites,'' PartyGaming said. ''If the president signs the act into law, the company will suspend all real money gaming business with U.S. residents.''

Austrian-based Bwin.com Interactive Entertainment AG, which gets 22 percent of its revenue from the United States, said it was reviewing its options.

''It's a difficult situation right now, and we need to have our lawyers take a close look, review the situation and what it could mean to us,'' Bwin spokeswoman Karin Klein said in Vienna.

Bwin shares were down 17 percent at 17.19 euros ($21.80).

The company betinternet.com PLC, which does 60 percent of its business in Asia, said it was suspending its business in the United States; U.S. business accounts for 0.2 percent of its active customers.

William Hill PLC, one of Britain's biggest bookmakers, announced on Sept. 27 that it would cease accepting casino and poker business from clients with a U.S. address or a credit card issued in the United States.

Paddy Power, the Irish bookmaker, gets about half its revenue from online betting but ''we have made every effort to block U.S. play,'' said spokesman Breon Corcoran.

''We would be excited about bringing an Irish brand to the States, but given the climate there, it's unlikely to happen,'' Corcoran said.

On the Net:

http://www.888holdingsplc.com

http://www.sportingbetplc.com

http://www.partygaming.com

http://www.neteller.com

    U.K. Gambling Shares Fall on U.S. Move, NYT, 2.10.2006, http://www.nytimes.com/aponline/business/AP-Britain-Internet-Gambling.html

Glass ceiling still blocks

women from executive floor

Monday October 2, 2006
Guardian
David Teather

The number of women in Britain's boardrooms has fallen sharply, wiping out the small but steady gains made over the past few years.

At the end of the most recent financial year there were only 12 women holding executive director roles at FTSE 100 companies, compared with 20 a year ago. Women occupied 112 non-executive seats in the boardroom this year, dropping from 122 in the previous survey.

It is so far unclear whether the figures are an aberration after a cluster of high-profile departures or a reversal of long-term trends. In the Guardian's annual survey in 2003, there were 15 female executive directors, rising to 17 in 2004 and 20 last year.

Jenny Watson, chairwoman of the Equal Opportunities Commission, said previous data had suggested that with the slow pace of change it would take 40 years to get as many women into Britain's boardrooms as there were men. "These figures show that possibly things are stalling," she said. "There is an argument that there are more women going to university and working and that they will come through but this says to me that argument isn't holding water."

Ms Watson said that while some employers were improving attitudes to flexible working, they tended not to apply the same principles to very senior jobs.

A broader survey of the FTSE 350 published today by the accountancy firm Deloitte supports the gloomy view of women's progress in the boardroom. Deloitte said the number of executive director jobs held by women had stuck at only 3% last year.

Only 10 companies in the FTSE 100 had a female executive director at the end of the financial year. Lloyds TSB, which has since also hired Terri Dial, and Pearson each had two women executives. Legal and General, Shell, BAA, Liberty International, Royal & SunAlliance, Severn Trent, Wm Morrison and Alliance Unichem each had just one woman in their boardrooms.

Twenty seven companies ended the year without a single female director - executive or non-executive. ITV, Tate & Lyle and GUS each lost their only female board member during the course of the year.

Among the top 10 earners in Britain this year, women did at least manage to negotiate decent pay rises. Dame Marjorie Scardino, the Pearson chief executive, received an 18% increase, banking more than £1.8m; a bonus helped Linda Cook from Shell to earn 157% more than she did in the previous year - almost £1.7m. Rona Fairhead, the chief financial officer at Pearson, joined the club of women earning more than £1m, with her rewards lifted 15% to £1.04m.

Helen Weir, finance director at Lloyds TSB, was awarded a 47% pay increase, taking her total salary package to £963,000.

Of the women on the list, 18 held multiple non-executive directorships. The busiest was Alison Carnworth, who sits on the board of Man Group, Friends Provident, Gallagher and Land Securities. Baroness Hogg chairs 3i and is a non-executive at two other firms, Carnival and BG. Susan Murray serves on the board of Enterprise Inns, Imperial and Wm Morrison.

A government report almost four years ago blasted the under-representation of women in the boardroom and vowed to make a change but appears to have had little impact.

Americans on top

Dame Marjorie Scardino, chief executive of Pearson, has kept her place as the most highly paid female executive at a FTSE 100 company. She is one of only two women running a FTSE company: the other is Dorothy Thompson of the Drax Group, but the power generator joined the FTSE 100 after the cut-off date for our survey. Pearson, which publishes the Financial Times and owns Penguin books, paid Dame Marjorie £1.8m last year, including a £1m bonus. Her total pay grew by 18% in a year when the Pearson share price rose by 8.6%. The 59-year-old Texan has been chief executive since 1997. She previously practised as a lawyer and was chief executive of the Economist Group. She is also a non-executive at mobile phone maker Nokia.

Booming profits from oil and gas meanwhile have catapulted Linda Cook, head of Shell's gas and power interests, to the second most highly paid woman in the FTSE 100. The 48-year-old American was paid £1.7m. Shell also paid her cash benefits of £404,381, including a payment to cover her children's school fees. Ms Cook was raised in Kansas, one of five girls. Her interest in the oil industry started when she worked as a teenager at a filling station attached to the family dairy business. She joined Shell Oil in 1980 as an engineer in Texas. She is also a director of aircraft manufacturer Boeing.

Charlotte Moore

    Glass ceiling still blocks women from executive floor, G, 2.10.2006, http://business.guardian.co.uk/story/0,,1885252,00.html

Britain's soaring

boardroom pay revealed

Monday October 2, 2006
Guardian
Julia Finch and Jill Treanor

Directors' pay at Britain's top companies soared by 28% last year, more than seven times the rate of average pay and 11 times the current rate of inflation.

The Guardian's annual survey of executive pay, conducted in association with pay consultancy Reward Technology Forum, reveals that the 2005 rise in boardroom earnings is the biggest in a series of substantial increases. The previous year directors' pay rose 16%, following rises of 13% and 23%. Average earnings are rising at 3.7% a year, with inflation at 2.5%.

Topping the league of highest paid chief executives is Mick Davis of Xstrata, an Anglo-Swiss mining group with global interests in copper, coal, gold and zinc. He earned nearly £15m last year.

Mr Davis is one of a number of mining bosses at the top of the pay league this year. They have made bumper gains on share plans as a result of the boom in metals prices on the world markets.

But they are not alone in enjoying a massively rewarding year. The average pay for a chief executive is £2.4m, while the going rate for a finance director is £1.1m.

Eight chief executives have basic salaries - before bonuses or other rewards - of more than £1m, or nearly £20,000 a week. They include Tesco chief Sir Terry Leahy, BP's Lord Browne and Charles Allen, the chief executive of underperforming ITV, who is stepping down after pressure from disgruntled shareholders.

Part-time chairmen, who generally work no more than two days a week, earn an average of £270,000 plus expenses. However, the highest paid non-executive chairmen earn substantially more: Sir John Sunderland at Cadbury-Schweppes gained £3.5m last year, boosted by share option gains of more than £2m.

The survey shows more than 200 directors receiving over £1m last year, in line with last year's total.

Directors' pay was calculated by adding basic pay, cash bonuses and gains from long-term incentives, together with the value of benefits in kind such as cars, health insurance and assistance with school fees. The pay report also reveals that women are making no progress in winning seats in the boardrooms of Britain's top com- panies. There are just 12 women executive directors in the top 100 companies, working for just 10 companies. Last year there were 20, but there have been several high-profile casualties of boardroom reshuffles.

The best paid woman was Dame Marjorie Scardino, chief executive of the Pearson group, which publishes the Financial Times and owns Penguin books. She received £1.8m including a bonus of more than £1m. Two other woman received more than £1m: Linda Cook, head of gas and power at oil group Shell, and Pearson's Rona Fairhead, a key lieutenant of Dame Marjorie.

The Guardian/RTF survey also highlights the pensions awaiting some of the UK's most senior businessmen. BP's Lord Browne is in line to receive £991,000 a year after he retires from the oil group in 2008.

The best paid boardroom was at Xstrata. Its 12-strong board earned a total of £21m. The company, however, is far from among the FTSE 100's biggest. It is valued at £16bn, while the UK's biggest company, BP, has a stock market value of more than £116bn.

At the other end of the scale the least highly paid board of directors was at British Energy, which operates nuclear power stations including Heysham, Sizewell B and Dungeness. Its 13-strong board earned a total £3.1m.

The pay survey also reveals the best and worst paid employees. The best-paid workers are at London-based financial groups. Top of the pile is venture capital specialist 3i which paid its staff an average of £174,625 each last year - up 60% from a year earlier.

At the other end of the scale is Kazakh copper mining company Kazakhmys, now listed in London, where the average salary of its 64,000 miners is just over £2,000 a year. The British company with the worst-paid employees is retail chain Next, whose staff - many of whom are part-time - earned an average £10,306.

    Britain's soaring boardroom pay revealed, G, 2.10.2006, http://business.guardian.co.uk/story/0,,1885272,00.html