History > 2007 > UK > Economy (II)

A divided country:

study reveals

growing UK wealth segregation

Tuesday July 17, 2007
Guardian
Lucy Ward,
social affairs correspondent


Poor and wealthy households in Britain are becoming more and more segregated from the rest of society as the UK faces the highest inequality levels for 40 years, according to a study published today.

A report by the Joseph Rowntree Foundation provides a groundbreaking geographical analysis of changes in the distribution of wealth over time, and reveals an increasingly divided nation.

It shows that already rich areas - particularly the south-east of England - have become disproportionately wealthier over four decades, while in areas of some cities more than half of all households are now "breadline poor", on a level of relative poverty with enough to live on but without access to opportunities enjoyed by the rest of society, yet above the level of absolute poverty, or "core poor".

"Poor, rich and average households became less and less likely to live next door to one another between 1970 and 2000," says the study, Poverty, Wealth and Place in Britain, 1968 to 2005.

Urban "clustering" of poverty has increased, while wealthy households have concentrated in city outskirts. Meanwhile, the number of average households - those categorised as neither poor nor wealthy - has been shrinking.

The 1990s saw the two poverty measures diverge, with the number of households identified as breadline poor continuing to rise, and the core poor falling from a peak of about 14% of households to around 11%. During this period, the personal wealth held by the richest 1% of the population grew as a proportion of national share, rising from 17% in 1991 to 24% in 2002.

Public frustration at such a divide is also running high, a linked Rowntree study establishes. Almost three-quarters of people in a 2004 British Social Attitudes survey think the gap is too large.

The scale of the challenge facing Gordon Brown's government as it attempts to tackle inequality is underlined by the study's conclusion that the picture since 2000 is extremely mixed.

The employment minister, Caroline Flint, said: "Our commitment to ensuring everyone shares the nation's increasing wealth has resulted in the rising trend of inequality recently stabilising. Since 1997, 600,000 children and over 1 million pensioners have been lifted out of poverty."

A divided country: study reveals growing UK wealth segregation, G, 17.7.2007, http://society.guardian.co.uk/socialexclusion/story/0,,2128034,00.html

Interest rate

raised to highest for six years

Published: 05 July 2007
By Holly Williams, PA
The Independent

Homeowners faced another hike in mortgage costs today after the Bank of England raised interest rates by a further 0.25 per cent to 5.75 per cent.

The Bank's base rate is now at its highest level since March 2001, following five increases in less than a year.

Today's move was widely expected as inflationary pressures have remained strong and borrowers came within a whisker of a hike last month.

The Bank said in a statement that it remained concerned about hitting its 2 per cent target for inflation.

It said: "The committee judged that, relative to the 2 per cent target, the balance of risks to the outlook for inflation in the medium term continued to lie to the upside.

"Against that background, it further judged that an increase in Bank rate of 0.25 per cent to 5.75 per cent was necessary to meet the 2 per cent target for CPI inflation in the medium term."

Today's increase is certain to be passed on by lenders, meaning borrowers will fork out an extra £16 a month on average on a typical mortgage of £100,000.

The four hikes in interest rates since last August have already added around £64 to the £100,000 home loan, fuelling concerns that more families could be tipped over the edge financially.

Citizens Advice said this week that its network of bureaux had already seen a surge in people seeking help over mortgage arrears. Some economists have warned that rates could rise again later this year, to peak at 6 per cent.

Businesses and manufacturers will also feel the pinch from the MPC's decision.

David Kern, economic adviser at the British Chambers of Commerce, warned "relentless" rate rises could harm Britain's businesses.

He said: "We are very concerned over the long-term effects on British business of the increasingly aggressive policy stance that appears to be emerging.

"British business has shown resilience so far in the face of higher interest rates, but the pain is set to increase rapidly from now onwards."

Manufacturing organisation EEF also raised concerns over the impact on its members, saying the rise was "a step too far" and risked slowing the economy unnecessarily.

The MPC has been upping rates to keep a lid on inflation and bring it back to the Government's 2 per cent target after a peak earlier this year that saw the Consumer Prices Index hit its highest level since the Bank took charge of setting rates 10 years ago.

But the rise in the cost of living is showing signs of slowing down, with CPI - used as the official measure of inflation - dropping back to 2.5 per cent in May.

Recent data also suggests that the spate of rate rises is seeing consumers rein in their spending and putting pressure on firms to control pay and price increases.

Recent figures from the CBI showed that retail sales in June grew at a slower than expected rate for the second month in a row and high street stores have been reporting a drop off in trading.

Housing data from the Halifax earlier this week also signalled a marginal decline in property prices, with the 0.4 per cent increase during June marking the second month in a row that prices had risen by less than 0.5 per cent.

Homeowners in some parts of the country also saw falls in the value of property, notably Wales, where prices dropped by 2.8 per cent last month.

But Malcolm Barr, economist at JP Morgan, said it was unclear if the rise to 5.75 per cent was the last that borrowers will see this year.

"In increasing the rate in July rather than August on the back of a move in May, the MPC has stepped up the pace of moving up interest rates," he said.

"It remains to be seen if it's a one-off adjustment or reflective of an MPC that feels it has more to do.

"My suspicion is that the latter is true and as a result we are likely to see rates move up to 6 per cent in the next few months."

Interest rate raised to highest for six years, I, 5.7.2007, http://news.independent.co.uk/business/news/article2737878.ece

BAE faces criminal inquiry in US

over £1bn payments

Justice department alarmed
at claims over MoD's role

Thursday June 14, 2007
Guardian
David Leigh and Rob Evans

The US department of justice is preparing to open a corruption investigation into the arms company BAE, the Guardian has learned. It would cover the alleged £1bn arms deal payments to Prince Bandar of Saudi Arabia.

Washington sources familiar with the thinking of senior officials at the justice department said yesterday it was "99% certain" that a criminal inquiry would be opened under the Foreign Corrupt Practices Act (FCPA). Such an investigation would have potentially seismic consequences for BAE, which is trying to take over US arms companies and make the Pentagon its biggest customer.

The sources say US officials were particularly concerned by the allegations in the Guardian that UK Ministry of Defence officials actively colluded in the payments. One said: "The image of all these Bob Cratchits in Whitehall sitting at their high stools processing invoices from Bandar has been a startling one to us."

The Guardian has revealed allegations that BAE used the US banking system to transfer quarterly payments to accounts controlled by Prince Bandar at Riggs Bank in Washington. Another senior US source said this brought the payments within the ambit of the FCPA. "Prosecutors have previously taken the view that the FCPA does reach that far," the source said.

Any decision to investigate BAE would be taken by assistant attorney general Alice Fisher, who heads the criminal division. An investigation would most likely be handled by the chief prosecutor of FCPA cases, Mark Mendelsohn, deputy chief of the justice department's fraud section.

The department does not officially announce investigations, Washington sources say, but the company could be expected to make public announcements to the stock market if it happened. In past cases, US companies have often agreed to cooperate with criminal investigations rather than embark on litigation to defend themselves. Last night, BAE spokesman John Neilson repeated the company's denials of any impropriety. He added: "This question is one which should be addressed to the US department of justice". Prince Bandar has issued a statement denying any wrongdoing. He says the payments represented official Saudi government funds and were used for purposes approved by the Saudi ministry of defence.

Details of the US move came as Tony Blair told the Commons he took full responsibility for the decision to halt the Serious Fraud Office inquiry into corruption allegations against BAE and to withhold details of the £1bn payments to Prince Bandar from the anti-corruption watchdog, the Organisation for Economic Cooperation and Development.

Menzies Campbell, the Liberal Democrat leader, asked: "Which minister is answerable ... for the decision to withhold information from that inquiry in relation to payments made by the Ministry of Defence to Prince Bandar?"

The prime minister replied: "If he wants to blame anyone for this he can blame me, and I'm perfectly happy to take responsibility for it."

Mr Blair did not say whether the Bandar payments were continuing. He went on: "It would lead to the complete wreckage of a relationship that is of fundamental importance of the security of this country ... That's why I took the decision; I don't regret it then and I don't regret it now."

There is a history of rancour between British officials and US prosecutors over BAE bribery allegations. Released documents show that the former FCPA prosecutor Peter Clark clashed with Sir Kevin Tebbit, former MoD permanent secretary, over the UK's refusal to pursue allegations of corruption in the Czech Republic and in Qatar.

In the Qatar case, £7m was discovered to have been paid by BAE to the foreign minister of the Middle East oil state, and deposited in offshore accounts in Jersey. One source said: "We said to Sir Kevin, 'There's a roomful of documents in Jersey indicating bribery'. But he told us he had got a letter sent after the event from the ruler of Qatar saying he had no objections to the payment. We didn't regard that as altering the legal situation."

In London, the chairman of the OECD's bribery panel, Swiss lawyer Mark Pieth, told a legal conference that under the terms of the anti-bribery treaty, to which the UK is a signatory, Britain could only flout it on national security grounds "in an extreme case of necessity". That had yet to be proved. He said his personal view was that a British court should have the opportunity to decide whether the alleged payment to Prince Bandar had been legal or illegal. He hoped a judicial review would be allowed on the decision to halt the police investigation.

    BAE faces criminal inquiry in US over £1bn payments, G, 14.6.2007, http://www.guardian.co.uk/baefiles/story/0,,2102558,00.html

Attorney-general

knew of BAE and the £1bn.

Then concealed it

Goldsmith hid secret money transfers
from international anti-corruption organisation

Friday June 8, 2007
Guardian
David Leigh and Rob Evans

British investigators were ordered by the attorney-general Lord Goldsmith to conceal from international anti-bribery watchdogs the existence of payments totalling more than £1bn to a Saudi prince, the Guardian can disclose.

The money was paid into bank accounts controlled by Prince Bandar for his role in setting up BAE Systems with Britain's biggest ever arms deal. Details of the transfers to accounts in the US were discovered by officers from the Serious Fraud Office during its long-running investigation into BAE. But its inquiry was halted suddenly last December.

The Guardian has established that the attorney-general warned colleagues last year that "government complicity" in the payment of the sums was in danger of being revealed if the SFO probe was allowed to continue.

The abandonment of the inquiry caused an outcry which provoked the world's anti-corruption watchdog, the OECD, to launch its own investigation into the circumstances behind the decision.

But when OECD representatives sought to learn more about the background to the move at private meetings in January and March they were not given full disclosure by British officials, according to sources.

One insider with knowledge of the discussions said :"When the British officials gave their briefing they gave some details of the allegations, but it now transpires, not all of them."

A source close to the OECD added: "We suspected that the British were holding some secret back."

Sources close to the US justice department, whose members help to police the international anti-corruption treaty to which Britain is a signatory, confirmed that UK officials had not disclosed to the group that huge payments had gone to the prince in connection with the al-Yamamah arms deal.

In those confidential briefings at the OECD headquarters in Paris earlier this year, the UK said "national security" reasons were behind the decision to halt the SFO investigation into the case.

They claimed the SFO probe focused largely on old allegations of a slush fund operated by the BAE to provide treats for junior Saudi officials. Last night, a spokesman for Lord Goldsmith said full evidence had not been given to international panel members of the OECD anti-bribery working party at their meetings in order to protect "national security". He said: "The risk of causing such damage to national security had a bearing on the information voluntarily provided to the OECD".

He added: "We have not revealed information which could itself jeopardise our national security. For these purposes the OECD was effectively a public forum, as is illustrated by the fact that you claim to know what [the government] told them."

The Guardian's disclosure of British government complicity in the alleged payment of £1bn to Prince Bandar caused international concern yesterday, with Tony Blair taking a bullish position when questioned at the G8.

Standing beside George Bush, a close family friend of former US ambassador Prince Bandar, Mr Blair said it would have "wrecked" the relationship with Saudi Arabia if he had allowed investigations to go on. "This investigation, if it had gone ahead, would have involved the most serious allegations and investigation being made of the Saudi royal family," he said.

"My job is to give advice as to whether that is a sensible thing in circumstances where I don't believe the investigation would have led to anywhere except to the complete wreckage of a vital interest to our country."

Neither Mr Blair nor the Ministry of Defence made any attempt to deny the allegations revealed by the Guardian.

Prince Bandar last night issued a statement through his lawyers categorically denying that payments made to Riggs Bank in Washington "represented improper secret commissions or 'backhanders'".

He said the payments were made to Saudi ministry of defence and aviation (MODA) accounts of which he was a signatory. "Any monies paid out of those accounts were exclusively for purposes approved by MODA."

He said the accounts were regularly audited by the Saudi ministry of finance and BAE payments were "pursuant to the al-Yamamah contracts". He added: "At no stage have MODA or the Saudi Arabian ministry of finance identified any irregularities in the conduct of the accounts."

BAE last night issued a statement claiming there was full government complicity in any payments it had made with regard to the al-Yamamah deal, which was signed in 1985. The company said transactions were made with the "express approval" of the British government.

"All such payments made under those agreements were made with the express approval of both the Saudi and UK governments".

The fallout from yesterday's allegations may affect BAE's planned expansion in the US.

According to a source in Washington, BAE's $4.1bn (£2bn) proposed takeover of a major US defence company could be in jeopardy because of the disclosures.

The source, assessing the damage yesterday, predicted it will also be harder for BAE to pursue other plans for moves into the US defence market.

BAE could come under scrutiny from a number of US investigatory bodies, including the treasury, the justice department and congressional committees.

    Attorney-general knew of BAE and the £1bn. Then concealed it, G, 8.6.2007, http://www.guardian.co.uk/baefiles/story/0,,2098232,00.html

Higher interest rates

expected to widen house price divide

May 12, 2007
From The Times
Anne Ashworth and Judith Heywood

The latest rise in interest rates is likely to accentuate the divide between house prices outside the capital and those in the most sought-after of London postcodes.

The haves (people who are merely rich) and the have-yachts (people who are rich beyond the dreams of avarice) are forecast to continue to drive up prices in Central London, the world’s most expensive residential zone, for the rest of the year.

Growth in Central London could be as high as 20 per cent this year, but elsewhere prices may falter as rate rises begin to bite. Only properties right at the top end of the market will retain their value, according to Yolande Barnes, of Savills, who said that the direction of the market was now all about which rung of the ladder you are on.

The seven-figure country house sector remains immune to more expensive borrowing as those who have already acquired a mansion in Mayfair or Belgravia still want their grand rural retreat.

Michael Fiddes, of Strutt & Parker, said: “There is an imbalance between the supply and demand, so buyers are still paying a premium for the right property.”

Outside the metropolis and country estate hotspots, however, the market’s temperature had already begun to cool before the base rate went up from 5.25 per cent to 5.50 per cent this week. A scarcity of property for sale and strong demand had been the driving forces behind the 10 per cent nationwide average price increase over the past 12 months, but demand was already slackening under affordability pressures. Larger mortgage bills are expected to test the market further.

Some observers believed that the supply problem would have been solved by owners rushing to offer their homes before the introduction of home information packs (Hips). These become compulsory for all sellers in two weeks, unless an eleventh-hour Conservative attempt to halt the scheme succeeds next week. Hips will cost from £300 upwards. Only a few of the agents contacted yesterday by The Times were, however, receiving extra instructions to sell.

Although there is some evidence of burgeoning interest among buyers in towns where values are flat, this enthusiasm will be tested by larger mortgage bills. Some lenders hoisted their standard variable mortgage rates to 7.59 per cent yesterday, causing some aspiring owner-occupiers of modest means to abandon their dream.

The base rate increase is putting the budgets of millions of households under strain; although four out of five recent borrowers have sought the protection of fixed-rate deals, more than half of all homebuy-ers have a variable rate mortgage. Martin Ellis, chief economist at the Halifax, said: “People are now not as well off in real terms, as inflation is in excess of earnings growth.”

The latest survey from Halifax shows that prices rose by only 1.1 per cent in April, the slowest increase this year. Data from Hometrack, the housing statistics group, indicates that prices were unchanged or only slightly higher in more than half of locations in England and Wales.

Richard Donnell, director of research at Hometrack, said: “The average time to sell in Yorkshire and the Humber, for instance, is nine to ten weeks, while in London it is two or three weeks.” He added that the new higher cost of borrowing was even inducing caution among some buyers in London: “People are willing to buy, but they are thinking twice about prices.”

No commentator, however, detected any sign of a severe downturn. Ed Stansfield of Capital Economics said: “There is just a change of tone and mood.”

Seller’s pack

Properties marketed for sale from June 1 must come with a home information pack (Hip) supplied free to potential buyers

Those already for sale can be marketed without the mandatory pack until January next year

Hips must include an energy performance certificate, index, sale statement, evidence of title, local searches and, where appropriate, leasehold information

The cost of the pack will vary, but should cost several hundred pounds; Hip providers set their own prices but some agents have said that they will offer no-sale no-fee Hips

Agents or private sellers who do not provide a full Hip face a £200 fine

For details about the packs, see www.homeinformation-packs.gov    

Source: Times database

    Higher interest rates expected to widen house price divide, Ts, 12.4.2007, http://property.timesonline.co.uk/tol/life_and_style/property/article1780069.ece

Analysis

The second worst kept secret of the week

Thursday May 10, 2007
Guardian Unlimited
Larry Elliott, economics editor


The second worst kept secret of the week was made public at noon when the Bank of England announced that it was raising interest rates to 5.5% - the highest level for six years.

At the very moment that Tony Blair was announcing he was stepping down as prime minister, the statement from Threadneedle Street and the three pieces of data released today spoke volumes about the underlying weaknesses of the economy that will be inherited by Gordon Brown.


First, there was the news from the Halifax that house prices - despite the three previous quarter-point hikes in the bank rate - are still booming.


The average cost of a home is up by almost 11% on a year ago and is now nudging £200,000. According to the Royal Institution of Chartered Surveyors, the body that represents estate agents, house prices have risen 170% in the Blair years - fine if you want to borrow money against the rising value of your property, not so clever if you are struggling to get a foot on the housing ladder.


Why have house prices boomed? Partly because Britain is a small island with tough planning laws and a tax regime that encourages home ownership. Partly because there has been a very rapid increase in migration. And partly because there has been far too much easy money sloshing around the economy, allowing individuals to borrow more than they can really afford.


If we have been living beyond our means as individuals, the same goes for us as a nation.


The second piece of economic data revealed that Britain had a monthly trade deficit of £7bn in March - the worst figure for almost a year and the third highest on record. Consumer spending, underpinned by the buoyant housing market, has been the driving force behind economic growth, and year in and year out under Labour Britain has been importing far more than it has been exporting.


Not once in the past 10 years has the UK's current account balance been in the black, despite the surpluses racked up by the City.


The explanation for this lies in the third piece of economic data out today - for industrial production. For a party that has its roots in Britain's manufacturing heartlands, Labour's record has been miserable when it comes to making things. More than a million jobs have been lost in manufacturing and, despite a rebound in production in March, output has flatlined over the past decade.


Blair and Brown rarely mention the inflation-prone housing market, the trade deficit or the stagnation of manufacturing when they laud their own economic successes. Unsurprisingly, they tend to concentrate on 10 years of uninterrupted growth, claimant count unemployment below a million and (until recently) inflation that has remained close enough to its target.


This, Labour's high command boasts, is evidence of economic stability. It is nothing of the sort, since the alleged stability rests on the shakiest of foundations.


Strong consumer spending is needed to keep the economy growing, and that requires plenty of cheap money to keep the housing market afloat. A strong pound is required to ensure that all the imports flooding into the country are nice and cheap - with baleful consequences for UK manufacturers trying to export.


The current account deficit is only kept to manageable proportions because the speculators in the City have been able to make more out of their investments abroad than foreign speculators have been able to make out of their investments in the UK.


Ironically, while UK industry has been running to stand still under Blair, the City has never had it so good. The gap between rich and poor is wider now than it was when John Major walked out of 10 Downing Street for the last time on May 2 1997.


Major, of course, never recovered from the humiliation of Black Wednesday in September 1992, when George Soros masterminded the pound's departure from the Exchange Rate Mechanism.


Blair has been the first Labour prime minister not to be hobbled by a devaluation or a severe run on the pound; one key factor behind his three election wins.


But it would absurd to conclude from the lack of a good old-fashioned sterling crisis that the prime minister will hand over an economy of near-perfection to his successor in a few weeks' time.


Between them Brown and Blair have contrived a live-now-pay-later economy characterised by dangerous levels of excess at every level - personal debt, record trade deficits, and an ever-larger carbon footprint. There will be a reckoning for the Blair years; all that's in question is when it will be.

    The second worst kept secret of the week, G, 10.5.2007, http://politics.guardian.co.uk/tonyblair/story/0,,2076728,00.html

Record numbers

become insolvent

as personal debt soars

Saturday May 5, 2007
Guardian
Ashley Seager

Record numbers of people declared themselves insolvent in the first three months of the year as they buckled under the weight of their debts, government data showed yesterday.

The Insolvency Service said a total of 30,075 people went bankrupt or took out an individual voluntary arrangement (IVA) between January and March - the first time that a quarterly total has broken the 30,000 mark. That marked an increase of 1.2% over the previous quarter and a hefty 24% from the same period last year.

The figures showed that 16,842 people went bankrupt while 13,233 opted for an IVA. The growth was mainly in IVAs which were up almost 50% on the year while bankruptcies rose 10% on the year. The Liberal Democrat shadow chancellor, Vince Cable, said: "This increase in personal insolvencies to a staggering quarterly record, alongside the equally dramatic rise in home repossession claims, demonstrates the severity of Britain's personal debt crisis.

"These figures equate to more than 300 people being declared insolvent every day. But these are not freak figures. Sadly, they are likely to get even worse, especially ... when interest rates almost certainly rise next week."

The Tory chancellor, George Osborne, blamed the government. "Each of these insolvencies involves a personal tragedy and collectively they are very worrying for the economy. They tell us a lot about Gordon Brown's poor management of Britain's finances. An economy built on debt is not an economy built to last."

Steve Treharne, head of personal insolvency at KPMG, said the high level of overall insolvencies could continue throughout the year. "I expect to see the figures remain high, certainly throughout this year and probably into next," he said. There were more than 100,000 people who became insolvent last year and experts say that number will be easily exceeded this year.

Total personal debt levels in Britain are around £1.3 trillion, equivalent to a full year's economic output. Of that, about £1.1 trillion is mortgage debt while £200bn is "unsecured" - bank loans, credit cards, etc. But this form of lending has stopped growing.

Liz Bingham at Ernst & Young said: "These insolvency figures reveal that the number of people entering personal insolvency continues at a staggering rate. Debt, it seems, has never been more fashionable."

She said the expected interest rate rise to 5.5% next week would increase pressure on indebted households.

    Record numbers become insolvent as personal debt soars, G, 5.5.2007, http://money.guardian.co.uk/creditanddebt/story/0,,2072976,00.html

Super-rich treble wealth

in last 10 years

April 29, 2007
From The Sunday Times
Richard Woods

THE WEALTH of the richest 1,000 people in Britain has more than trebled in the decade since Tony Blair came to power promising greater fairness, according to The Sunday Times Rich List, published today.

The 260% rise in the wealth of Britain’s richest contrasts with a 120% average wealth increase for the population as a whole. Britons have benefited from the booming housing market but, unlike the super-rich, have done less well with their financial investments.

As the prime minister prepares to leave Downing Street, one legacy is a nation that has become a haven for the international super-rich. The number of billionaires living in Britain has surged to 68, up from 54 last year. About a third are from overseas and only three of the wealthiest 10 billionaires were born here.

The richest are Lakshmi Mittal, the Indian-born steel magnate now worth £19.25 billion, and Roman Abramovich, the Russian oil tycoon valued at £10.8 billion.

“They have come for the tax, the social circles and the security,” said Philip Beresford, the compiler of the list. “At first they were concentrated in London but now they are snapping up country estates.”

Complex rules on residency and domicile status mean the super-rich from overseas can, as one accountancy expert put it, “avoid paying virtually any tax in Britain apart from council tax”. Beresford added: “There’s the cluster effect. Russians have followed Abramovich, Indians are following the Mittals and Swedes are following the Rausings.”

The richest Briton is the Duke of Westminster, whose property holdings keep rising in value.

He is worth £7 billion. Next come Sir Philip and Lady Green, owners of Bhs, Topshop and other retail chains, who are worth £4.9 billion. They are based in Monaco.

More than half of the buyers of homes in the capital costing more than £2m come from overseas, according to Knight Frank, the estate agent. “The middle classes used to live in Chelsea and they have already been forced out to Battersea,” said Liam Bailey of Knight Frank. “Now the same thing is happening to the British rich.”

However, many insist the mix of foreign incomers with homegrown entrepreneurial flair has been good for Britain. Mike Warburton, a tax expert with Grant Thornton, the accountancy firm, said: “In many ways we are a tax haven for nationals from overseas. But there is no doubt the UK has benefited enormously.

“It has attracted talent, wealth and enterprise. It has made London the financial centre of the world. The super-rich from overseas can quite legitimately avoid tax — but it doesn’t mean they don’t spend.”

The most surprising entries in the top 10 are David Khalili, an Iranian Jew, and Jim Ratcliffe, a little-known British deal maker who has built the third-largest chemical company in the world.

Khalili, 61, is based in London but was born in Iran. After national service he completed his education in America where he was fascinated by the great art collections. He began buying undervalued Islamic art, Spanish metalwork and Indian textiles. His collections may be worth £4.5 billion and with other assets, including property, he is valued at £5.8 billion.

Khalili said that he wanted to exhibit his art to promote inter-faith understanding.

Ratcliffe has risen almost without trace to become Britain’s 10th richest person. A former venture capitalist, he has made a £3.3 billion fortune by snapping up undervalued chemical companies. In 1998 he was 880th in the Rich List with a mere £20m.

His Ineos group now employs more than 15,000 people in 14 countries. Ratcliffe guards his privacy and last week declined to answer questions about his own life. “He’s a very personal man,” said a spokesman.

    Super-rich treble wealth in last 10 years, STs, 29.4.2007, http://www.timesonline.co.uk/tol/news/uk/article1719880.ece

12.45pm update

Pound hits $2 on record inflation

Tuesday April 17, 2007
Guardian Unlimited
Katie Allen


British inflation jumped to a record high in March, surprise figures out this morning showed, lifting the pound to above $2 for the first time since 1992.


Strong rises in food and drink prices, particularly milk, pushed the headline measure of inflation to 3.1% in March, way ahead of analysts' consensus forecast for it to remain at 2.8%.


The jump over 3% forced the Bank of England governor Mervyn King to explain himself to the government in an unprecedented open letter. He blamed high household bills last summer, dearer food caused by supply shortages and the fact that companies have been pasing on their rising costs to spendthrift consumers.


Analysts had expected a strong number today but none had put inflation as high as 3.1%, a record in the 10-year history of the consumer prices index. The news made traders scale up the expectations of another interest hike next month, which in turn helped the pound strengthen against the dollar.


Sterling had already hit a multi-year high on Monday and pushed even higher after the inflation numbers to touch $2.0034 at one point, vindicating those currency experts who had predicted this was the week the pound would make the magic $2-level.


Interest rates are now at 5.25% and many analysts see them rising to at least 5.50% in May.


"We consider that a 25 basis points rate hike in May, which was likely before today's data, has now likely become a done deal," said economists at Bank of America.


The inflation data combined with recent surveys showing strong house price rises and robust business activity and has even sparked talk that the Bank could raise interest rates by 50 basis points in one go in May.


Simon Hayes, a UK economist at Barclays Capital said that was something clients were asking about. But he expects BoE governor Mr King would oppose such a move, particularly judging from his insistence that letter writing is seen as a normal part of the monetary policy process.


"From this perspective, we think he will be very much against a larger-than-normal interest rate move," said Mr Hayes.


The inflation data showed overall prices were pushed up by a combination of dearer food and milk, a jump in furniture prices and the fact that computer games and theatre tickets rose this March against falls a year ago. Petrol also contributed by rising by nearly 2.5p a litre in March.


The monthly increase in prices for furniture and furnishings in March was a record at around 10% as retailers got in some price hikes ahead of special offers over the Easter weekend in April.


Mr King sought to reassure the government in his letter that inflation was likely to fall back "within a matter of months", partly thanks to the recently announced cuts in household energy bills starting to take effect.


Gordon Brown responded to the letter by saying the government would continue to "support the Monetary Policy Committee in the forward-looking decisions it takes in the future".


The chancellor vowed that for its part the government would continue to be "vigilant and disciplined in the fight against inflation", He flagged up March's decision to peg pay increases for more than one million public sector workers to below 2% this year, a move that was met with anger from union leaders.


The Transport and General Workers Union stressed this morning that the news of rising high street, grocery and energy prices, meant it was more vital than ever to give "ordinary working people" pay rises to allow them proper living standards.


"The UK wealth gap between rich and poor continues to widen, with pay awards lagging well behind the rewards of society's fat cats," said general secretary Tony Woodley. "T&G members are angry that they are expected to continue to contribute productivity improvements while absorbing the increasing cost of basics like food and fuel."

    Pound hits $2 on record inflation, G, 17.4.2007, http://business.guardian.co.uk/story/0,,2059015,00.html

Families

Package to lift 200,000 children out of poverty

is welcomed but more investment is vital,

say family groups

Thursday March 22, 2007
Guardian
Jill Papworth

The budget's package of measures for families and children has been welcomed as a important step towards the government's 2010 target of halving child poverty. But more investment is vital if that target is to be met, say anti-poverty groups.

The package will mean 200,000 fewer children in poverty, according to the government. Households with children will be, on average, £200 a year better off, while those in the poorest fifth of the population will be, on average, £350 a year better off.

In April 2008, there will be an increase in the element of child tax credit (CTC) that is targeted at the poorest families. The child element of CTC, a benefit paid to the main carer for which nine out of 10 families qualify, will go up by £150 a year above earnings indexation to £2,080 a year.

Changes will also be made to working tax credit (WTC), the other main benefit paid to top up the earnings of low-income working households and help with the cost of childcare. From April 2008, the WTC income threshold, above which recipients start to have their tax credit withdrawn, will go up by £1,200 to £6,420. The rate at which tax credits are clawed back will go up from 37p to 39p in the £1. The combined effect of these two changes will make WTC more generous to all recipient families with children, says the government.

Child benefit, the universal payment to all parents regardless of income, will go up to £20 a week for the eldest child by April 2010. "This is good news because child benefit reaches all children, has a very high take-up and provides a stable income that parents can rely on whether they are in or out of work," said Kate Bell, head of policy and research at charity One Parent Families.

Child Poverty Action Group's chief executive, Kate Green, welcomed the increase in benefit for the oldest child but said: "Larger families that are at greater risk of poverty will be helped less, so future investment [in child benefit] must focus on the younger children in a family, who currently receive £6 less than the oldest child."

The chancellor also said the £40 per week in-work credit paid for 12 months to lone parents going back to work would be extended until June 2008 and would go up to £60 a week in London. This tax-free credit, paid on top of wages and other tax credits, is worth just over £2,000 in the year an eligible lone parent returns to work and will be worth £3,120 in London, where 40% of jobless lone parents live.

The budget also pledged to provide free childcare places for up to 50,000 out-of-work parents undertaking training courses, to enable more parents to move back to work, and confirmed a previous pledge to increase the hours of free nursery provision for 3- and 4-year-olds .

Chris Pond, chief executive of One Parent Families, said: "Lone parents will warmly welcome a child-friendly budget which puts tackling poverty at its heart. Increases in the level of child benefit and child tax credit are vital steps that will be of real help to the 48% of children in lone parent families who are still poor. Lone parents will also welcome the extra support to help them stay in work, and the recognition of the additional challenges in London."

Case studies

Across the age divide

Sue Moses Manager of childcare charity in south London

Increases in child benefit were welcomed yesterday at Croydon Playcare, a childcare charity in south London, but the lone parents who use the centre said they remain baffled by changes to child tax credit.

The chancellor pledged to increase child benefit for the first child to £20 by April 2010, and increase the child tax credit by £150 more than earnings indexation in 2008.

Croydon Playcare offers full-time and after-school care for 200 children, mostly from lone parent families. But Sue Moses, 50, who manages the centre, says she and most of the mothers are befuddled by the childcare and working tax credits and would like to see it simplified.

"I and the mums that come to this centre have given up trying to understand it," she says.

"Because it's so hard to understand, you are never sure whether you are getting the right amount or the wrong amount and that means that later on you can be asked for the money back. It really needs to be simplified."

Ideally, she'd like to see tax credits given on a universal, flat rate as child benefit.

She earns around £30,000 a year and thinks people on much higher incomes are not paying enough tax. She'd like to see the National Insurance cap removed completely. Case studies Across the age divide

Sue Moses Manager of childcare charity in south London

Increases in child benefit were welcomed yesterday at Croydon Playcare, a childcare charity in south London, but the lone parents who use the centre said they remain baffled by changes to child tax credit.

The chancellor pledged to increase child benefit for the first child to £20 by April 2010, and increase the child tax credit by £150 more than earnings indexation in 2008.

Croydon Playcare offers full-time and after-school care for 200 children, mostly from lone parent families. But Sue Moses, 50, who manages the centre, says she and most of the mothers are befuddled by the childcare and working tax credits and would like to see it simplified.

"I and the mums that come to this centre have given up trying to understand it," she says.

"Because it's so hard to understand, you are never sure whether you are getting the right amount or the wrong amount and that means that later on you can be asked for the money back. It really needs to be simplified."

Ideally, she'd like to see tax credits given on a universal, flat rate as child benefit.

She earns around £30,000 a year and thinks people on much higher incomes are not paying enough tax. She'd like to see the National Insurance cap removed completely.

Patrick Collinson

    Package to lift 200,000 children out of poverty is welcomed but more investment is vital, say family groups, G, 22.3.2007, http://business.guardian.co.uk/budget2007/story/0,,2039555,00.html

2.30pm update

Brown springs budget surprise

Wednesday March 21, 2007
Guardian Unlimited
Matthew Tempest, political correspondent

Gordon Brown pulled a big surprise today in probably his final budget as chancellor, cutting the basic rate of income tax by two pence from next April.

Delivering a budget that he said would "expand prosperity and fairness for British families", the chancellor also announced big increases in education spending and higher tax rates for the most polluting cars.

The biggest surprise in his 48-minute speech was a cut in the basic rate of income tax next year to 20p - the lowest basic rate for 75 years - while the biggest winners were business, pensioners and children.

Mr Brown announced the tax cut with a flourish in the dying seconds of his speech.

But the chancellor also abolished the 10p bottom rate of income tax, reducing the net gains for many workers, economists predicted.

Tax thresholds will also change, with the top rate of 40% kicking in at £43,000 from April 2009. It was previously £38,000.

For business, corporation taxes were also cut by 2%, to 28%.

Of the so-called "sin taxes", from Sunday a pint of beer goes up 1p and wine 5p a bottle, but tax on spirits is frozen, while cigarettes go up by 11p from 5pm tonight. VAT on nicotine replacement therapies, however, will be cut from 17.5% to 5%.

Perhaps conscious of his reputation as dour and controlling, Mr Brown's demeanour throughout was cheerful, and he cracked several jokes, at one point calling colleagues "comrades" in a self-deprecating reference to this week's accusation of his "Stalinist" tendencies.

The Conservative leader, David Cameron, taken aback by the tax cut, accused Mr Brown of copying the Tory mantra of "sharing the proceeds of growth".

The Liberal Democrat leader, Sir Menzies Campbell, attacked the abolition of the starter rate of 10p on income tax, saying: "We are asking the poor to subsidise the rich."

On the macroeconomic side, inflation will fall further this year to 2% and will be on target in 2008 and 2009, Mr Brown predicted. In 2008 growth will be between 2.5% and 3%, with the same rate of growth in 2009 he told MPs.

The other headline announcements of the budget were:

· Education spending to rise by £14bn to £74bn by 2010

· Child benefit will go up to £20 a week by 2010

· The pensioner credit guarantee to rise to £130 a week, also by 2010

· A cut in vehicle excise duty from £50 to £35 for the least polluting cars, while the worst offenders will be charged £400 next year

· Fuel duty goes up by 2p - but postponed until October

The FTSE showed an immediate 60-point rise on the news of the cut in corporation tax.

A spate of recent corporate tax cuts across Europe meant that the UK had fallen from fourth lowest to seventh highest in the EU, sparking both business and Tory demands for the cut in corporation tax.

But the tax rate on small companies will be raised in three stages from 20p this year to 22p in 2009.

Mr Brown said he would meet his own economic "golden rule" - of balancing receipts and payments over the economic cycle - with £11bn to spare.

As predicted, the chancellor announced the selling off of the student loans debt, raising £6bn for the Treasury over 2008-11, and bringing future asset sales up to £36bn - double the estimate in last year's pre-budget report.

Mr Brown rejected a Tory proposal for married couple's tax allowances, saying that it would penalise three million widows.

He also lambasted Mr Cameron's plan for a levy on domestic air flights, saying it would be ineffective, as businesses could reclaim it in any case.

This budget is particularly significant, because as well as providing Mr Brown with a hoped-for springboard into No 10, it also prefigures the government's spending regime for the most likely time of the next general election.

This summer's comprehensive spending review will set departmental spending for the years 2008-11 - setting the manifesto battlefield for a likely election showdown between Mr Brown and Mr Cameron expected for around 2009.

In a sign of trouble to come, a 2% pay offer for public sector workers such as cleaners, librarians and refuse collectors was today rejected by the GMB union.

An announcement that "risk-based" regulation would now be introduced for employment tribunals is also likely to upset unions.

Mr Brown's budget comes in the context of Labour trailing badly in the polls behind the newly rejuvenated Tories under Mr Cameron. Surveys have given the opposition anything between a five- and 15-point lead.

In a reference to this summer's coming leadership vacancy, Mr Brown began by joking that only William Gladstone had delivered more budgets - 12 - and then only because he combined being chancellor with prime minister, something Mr Brown jokingly ruled out.

Today's set-piece parliamentary affair was Mr Brown's 11th budget, rather than tenth, because the chancellor put forward a one-off budget after coming to power in May 1997.

    Brown springs budget surprise, G, 21.3.2007, http://business.guardian.co.uk/budget2007/story/0,,2039269,00.html

2.15pm

Brown gives education spending

a £14bn boost

Key points for education at a glance

Wednesday March 21, 2007
EducationGuardian.co.uk

Gordon Brown promised to increase spending on education by 5% each year for the next three years in his budget speech today, boosting funding from £60bn this year to £74bn by 2010.

The investment means that since Labour came to power in 1997, the amount of money spent on each school pupil has risen from £2,500 to £6,600, narrowing the gap which exists with pupils in independent schools, the chancellor said in his speech to the Commons.

The extra £14bn investment in education, he said, would go towards providing more one-to-one tuition for 600,000 schoolchildren and would help double the number of apprentices to 500,000.

It would help increase the number of students in higher education to 1.2 million and would contribute towards the costs of every state school becoming an extended community school, the chancellor said.

Mr Brown also used his budget speech to reveal that he was increasing the number of free nursery school hours from 12.5 to 15 hours a week.

There will also be a target of six children's centres in every constituency creating an overall number of 3,500, he told MPs.

There was surprisingly little in the budget for academy schools - despite the chancellor's promise earlier this week that he would have some exciting announcements to make about the education reform which has been seen as a flagship policy of Tony Blair's premiership.

He said that in future, academies will have to open their sports facilities to the local community. At the same time, he announced that he was removing VAT from community sport.

There was help in the budget for 16 and 17-year-olds who commit themselves to developing new skills and sign up to activity and learning agreements.

Mr Brown promised that the government would pay these estimated 50,000 students a training wage and at the same time, any small business that commits itself to train an employee in basic skills would receive £2,000 or £3,000.

He also said that the government is, for the first time in the country's history, making education a right for every young person up until the age of 18.

The details of how the government intends to reach this historic education landmark will be revealed tomorrow by the education secretary, Alan Johnson, when he publishes his green paper entitled Raising Expectations: staying in education and training post-16.

There was also extra money in the budget for science as part of the chancellor's commitment to boost the UK business and development opportunities in the global market.

Over the next four years there will be a 25% increase in the money coming from the Treasury for science, rising from £5bn this year to £6.3bn by 2010-11.

At the same time, the chancellor announced £100m in funding for a competition so that Britain can take a lead in innovation.

He said that he wanted to challenge universities and business to come together to "convert British scientific breakthroughs into British commercial success and jobs".

There was little else in the budget specifically for higher education, although the chancellor did announce that he would raise £6bn for the public purse by selling off the student loans debt - much lower than the £16bn expected.

    Brown gives education spending a £14bn boost, G, 21.3.2007, http://education.guardian.co.uk/policy/story/0,,2039297,00.html

Brown raises Isa allowance

Wednesday March 21, 2007
Guardian Unlimited
Hilary Osborne

Savers who want to shelter their cash from the taxman received a boost today as the chancellor announced an increase in the amount they can hold in a tax-efficient individual savings account (Isa).

The new rules, which will not come into effect until April 2008, will see the maximum investment level for Isas rise from £7,000 to £7,200 a year, with the maximum that can be held in a cash Isa increased from £3,000 to £3,600.

The new limits are more easily divisible by 12 - something the Pep and Isa Managers' Association (Pima) had been lobbying the Treasury for, to make it easier for savers who want to spread their investment throughout the year.

The Treasury said the increases would benefit around 5 million people who are currently using their full Isa allowances.

This is the first time the annual allowance has been increased since the chancellor introduced Isas in his 1999 budget as a replacement for Peps and Tessas.

More than 17 million people now hold an Isa, with almost £220bn invested in them, according to the Treasury.

The change, which the chancellor said was designed to encourage further savings, will be introduced at the same time as an overhaul in the Isa rules that is designed to make the savings account easier to understand.

This will do away with the distinction between mini and maxi Isas and allow savers to move money from a previous year's cash Isa to a stocks and shares Isa.

Missed opportunity

The financial services industry had been calling for the cash Isa limit to be increased to £5,000 and the overall Isa limit to £10,000.

Jason Hollands, spokesman for fund management group F&C, said it was disappointing that Isas had not risen in line with inflation like other allowances.

"Instead, we are given a rise in the amount of the allowance that can be invested in cash from £3,000 to £3,600," he said.

"Cash isn't of course the most appropriate place to park your money for the long term, and one suspects this upwards revision in the cash allowance will largely result in people simply shifting from one type of savings account to a cash Isa where it will be tax free.

"In other words, it isn't cut and dry that this will actually encourage new savings - the goal to which Mr Brown professes to support."

The Building Societies' Association said the increase in the cash Isa limit was good news for savers.

"Cash Isas have been hugely successful and the increase in the limit will build on that success," said spokeswoman Rachel le Brocq.

"We just want to make sure that this increase is not eroded over time by inflation."

    Brown raises Isa allowance, G, 21.3.2007, http://money.guardian.co.uk/budget2007/story/0,,2039277,00.html

Overview

Budget 2007: key points at a glance

The main changes in the 2007 budget

Wednesday March 21, 2007
Guardian Unlimited

The headline announcements · Basic rate of income tax to be cut from 22p to 20p in April next year but 10p lowest rate to be scrapped
· Reduction in mainstream corporation tax from 30p to 28p from April 2008
· Highest polluting vehicles to pay £400 vehicle duty next year
· Fuel duty up 2p a litre this year - deferred until October - then up 2p next year and 1.8p in 2009
· 1p rise on pints of beer and cider; 5p increase on wine; 7p on sparkling wine; freeze on duty for spirits
· Packet of 20 cigarettes to increase by 11p
· Threshold for higher rate income tax to increase from £38,000 to £43,000 in April 2009
· Inheritance tax allowance to rise from £285,000 to £350,000 by 2010
· Education spending in England to rise from £60bn this year to £64bn, £67bn, £70bn and £74bn in successive years: education to be a right for every young person to the age of 18
· NHS will receive £10bn more - biggest cash increase ever: 7% increase in real terms
· UK expected to meet golden rule in next economic cycle despite sharply falling North Sea oil tax revenues

British economy

· British economy is growing faster than all other G7 economies
· Inflation will fall further this year to 2% and will be on target in 2008 and 2009
· Business investment to increase by 6% this year
· Productivity gap closed with Japan and Germany; nearly closed with US
· Growth in 2008 and 2009 will be highest in G7 countries at 2.5% to 3%
· £11bn surplus in current economic cycle - we have met the golden rule
· UK expected to meet golden rule in next economic cycle despite sharply falling North Sea oil tax revenues
· Student loan book to be sold for £6bn as part of asset sales that will raise £36bn in next three years
· Capital investment to rise to £48bn next year, and in successive years to £51bn, £55bn, £57bn and £60bn

Security and defence

· £86m extra for intelligence and counter-terrorism services
· Overall budget for securtity and intelligence in 2007-2008 is £2.25bn
· Armed forces will receive an extra £400m

Health and education

· Overall spending to be 'broadly neutral' for public finances overall
· Education spending in England to rise from £60bn this year to £64bn, £67bn, £70bn and £74bn in successive years: education to be a right for every young person to the age of 18
· NHS will receive £8bn more - biggest cash increase ever: 7% increase in real terms
· Remove VAT restrictions on academies so they will be able to make their sports facilities available to local communities

Business

· Reduction in mainstream corporation tax from 30p to 28p from April 2008
· Corporation tax on small corporations to rise from 20p to 22p by 2009
· Public investment in science will rise from £5bn this year to £6.3bn by 2010/11
· Details of new Northern Ireland innovation fund for industry and jobs to be announced tomorrow

Environment

· £50m fund to preserve African rainforests
· £300 - £4,000 grants for pensioners to install insulation and central heating
· Increase microgeneration grants for homes by 50%
· Until 2012, homes wothe less than £500,000 with zero carbon rating will be exempt from stamp duty
· Higher tax rates for landfill and quarrying
· Reduced duties on biofuels and biogas extended

Motoring

· Lowest emission cars stay at zero tax
· Band B cars 30% cut in road tax from £50 to £35
· 30% increase for top band vehicles to £300 this year, £400 next year
· Fuel duty up 2p a litre this year - deferred until October - then up 2p next year and 1.8p in 2009

Duty on alcohol and cigarettes

· 1p rise on pints of beer; 1p rise on a litre of cider; 5p increase on wine; 7p on sparkling wine
· Freeze on duty for spirits
· Packet of 20 cigarettes to increase by 11p
· VAT on products to help quit smoking to be cut to lowest rate possible - 5p

Family finance

· Basic rate of income tax to be cut from 22p to 20p in April next year but 10p lowest rate to be scrapped
· Threshold for higher rate income tax to increase from £38,000 to £43,000 in April 2009
· Fund for workers who lost their pensions after companies collapsed to increase from £2bn to £8bn
· New £80m fund for charitable efforts in local communities
· Capital gains allowance rises to £9,200 - £18,400 for married couples
· Child benefit to increase in stages to £20 a week by 2010
· Isa tax free limit to go up from £3,000 to £3,600 in April 2008
· 600,000 pensioners to be lifted out of paying income tax
· Income tax allowance for over 75s will be £10,000 by 2011

    Budget 2007: key points at a glance, G, 21.3.2007, http://business.guardian.co.uk/budget2007/story/0,,2039286,00.html

Revenge of the banks:

Stealth charges imposed

after two million customers

join revolt over unfair payments

Published: 10 March 2007
The Independent
By Martin Hickman,
Consumer Affairs Correspondent
 

Banks have begun introducing a range of "stealth" charges that will make them millions of pounds as they recover from the financial sting of the mass revolt against penalty fees.

Within months, thousands of current account customers will find that they have been switched from free accounts to ones with annual fees. Credit card users are being levied new one-off payments and paying higher rates for withdrawing money from cash machines. Institutions have also been hiking the cost of loans, even though the Bank of England has kept its base rate stable for two months.

Banking experts warn more charges are likely this year as soon as banks digest the looming verdict of the Office of Fair Trading (OFT) on fee levels. They suggest customers scan their bank statements for any "sneaky" new fees.

Since The Independent began its campaign three weeks ago, the rebellion against illegal bank charges has gathered pace and two million template letters have been downloaded from campaign websites.

The new charges introduced by Lloyds TSB and other high street banks will help make up the millions they are losing because of the over-charging scandal that has sullied the industry's reputation.

Penalty fees of about £35 for unauthorised overdrafts and bounced cheques, charged for years, are now widely regarded as illegal and customers who threaten court action are obtaining refunds.

Credit card customers can also claim money back after an OFT ruling that late payment fees should not exceed £12. Demands may also be made for repayment of mortgage exit fees if they exceed costs, reckoned to be about £65.

Banks and building societies are already estimated to have paid out £50m to disgruntled customers.

Although not publicly linked with the fees revolt, high street banks and credit card companies have been increasing fees and charges in recent weeks.

Eight lenders have increased rates on personal loans in the past fortnight, by about one to two percentage points and, in one case, by 7 per cent. They include Alliance and Leicester, the Halifax's IF, Lloyds TSB, Mint and MBNA.

Among the new charges, Lloyds is charging credit card customers a one-off fee of £35 this month for putting too little on plastic. It is estimated the bank will make £1.7m from the one-off fee, which will affect 51,000 customers.

Consumer experts fear the charge will "open the floodgates" to other providers to penalise prudent but unlucrative borrowers.

Citibank is moving current account customers from a free service to a new one charging a fee, even though it is also introducing a new free account.

The bank - which has one million customers in the UK - has given 60 days notice of the £10 monthly fee from 1 May.

Nick White, director of financial services at uswitch.com, feared other finance houses might follow the move. He said: "Our message is that people need to remain one step ahead of the banks as this is one of many pre-emptive moves we will see the banking industry make prior to the OFT's impending current account investigation."

People with a mortgage, savings and current account, a loan and a credit card are now subject to about 110 different charges, according to one survey.

Andrew Hagger, of Moneyfacts, said that more fees were likely to be introduced in coming months. "Because you are going to take a revenue stream away from the banks they are not just going to sit and take it. They're going to react and try to fill that gap," he said.

The people-power campaign has shed light on the controversial practices of many banks. Institutions have been accused of trying to avoid full refunds by delaying, offering partial settlement and closing accounts. Hundreds have complained to the Information Commissioner's office about the response to requests going back six years - the claims period.

Meanwhile, the profits of the leading nine high street banks have surged by 33 per cent to £40bn, according to recent financial results.

MPs on the Treasury Select Committee this week announced an investigation into banking. Professor Philip Molyneux, professor of banking at Bangor Business School, predicted free banking could end in the next few months. "I think it's quite likely," he said. "It's not 'free' of course because they are getting your money in a current account and earning interest but I think in the longer term almost certainly they will charge."

Stuart Glendinning, managing director of moneysupermarket.com, said: "Providers are desperately raising fees. It's accelerating."

Clawing it back

* LLOYDS TSB

Introduces charge of £35 for people who use credit card infrequently. Personal loan rate up half a per cent

* ALLIANCE & LEICESTER

Jump of 0.4 per cent in loan rates in past two weeks

* BRITANNIA BUILDING SOCIETY

Mortgage exit fee up from £75 to £110 in January

* CITIBANK

Charging £120 a year for current accounts from 1 May

* MINT

Loads up to 1 per cent on to interest for personal loans

* NORTHERN ROCK

Loan rate rises 0.3 per cent to 6.1 per cent in January

* MORGAN STANLEY

Raising fee for foreign purchases on credit cards from 2.75 per cent to 3 per cent from April

* MBNA

Introduces charge of £10 for credit card users in credit last month. A 7 per cent rise in interest rates for personal lending, from 7.9 per cent to 14.9 per cent.

SOURCE: MONEYSUPERMARKET/ MONEYFACTS

    Revenge of the banks: Stealth charges imposed after two million customers join revolt over unfair payments, I, 10.3.2007, http://news.independent.co.uk/business/news/article2344763.ece

David Prosser:

An industry with a record of duplicity

Published: 10 March 2007
The Independent

No one should be surprised that banks continue to find new ways to make more money from their customers. This is an industry with a rap-sheet of duplicity that is far longer than the average bank statement.

Caught red-handed charging excessive unauthorised overdraft fees, the banks have simply come up with a Plan B they hope will not fall foul of the law.

No one knows exactly how much the banks have been making from the charges, because the industry has repeatedly refused to provide full details.

Which?, the consumer group, believes these charges raise up to £4.7bn of revenue a year. The banks claim the figure is much lower. Either way, the sums at stake explain why the banks are so upset with the Office of Fair Trading's view that the charges are unfairly high. Their argument is that the money handed over by customers who don't run their accounts properly enables them to offer free banking to everyone else.

Since The Independent began its campaign against unauthorised borrowing fees, the banks have raised the spectre of an end to free banking to intimidate customers. In truth, that was never likely; the sector is just too competitive.

Much better, if you're a bank director, to crow about maintaining free banking while simultaneously introducing sneaky new charges. Shifting all customers into a fee-paying account, unless they specifically opt out, as Citibank is doing, is one option. Penalising customers who rarely use their credit cards is the ruse that Lloyds TSB has come up with.

It would actually be more honest to abolish free banking, but in truth there is no more justification for doing so than there is for the crafty use of back-door charges. This, after all, is a sector that has just announced more than £40bn in profits last year. These are hardly companies on their uppers.

In any case, the industry's dogged insistence that its free current accounts mean British account-holders get a better deal than anywhere else is utterly misleading.

It is true that most current account holders pay no charges as long as they remain in credit. But that doesn't mean the banks earn no money. The typical current account pays you just 0.25 per cent interest a year when you're in the black. The Bank of England base rate is 5.25 per cent.

In other words, every day you're in credit, your bank makes a huge turn - and it can invest your money at no risk and earn 20 times more than the rate it pays you

    David Prosser: An industry with a record of duplicity, I, 10.3.2007, http://comment.independent.co.uk/commentators/article2344810.ece

Minimum wage to increase by 17p

Wednesday March 7, 2007
Guardian Unlimited
Staff and agencies

The minimum wage will increase by 17p an hour to £5.52, the government announced today.

The rate will come into force in October and will mean an increase in pay for more than one million workers, of which two-thirds are low-paid women.

Separate rates for young employees will continue, but hourly pay for 18- to 21-year-olds will rise 15p to £4.60, while 16 and 17-year-olds will receive 10p more per hour at £3.40.

The trade and industry secretary, Alistair Darling, said he had accepted recommendations from the Low Pay Commission for the improved rates, but rejected a recommendation that 21-year-olds should receive the adult rate.

He claimed the employment rate of that age group was more closely aligned to 20-year-olds than older people, and said moving them on to the adult rate would risk damaging their employment prospects.

Mr Darling said the minimum wage had now gone up by almost 30% more than inflation since 1999. "Just 10 years ago home workers could be paid as little as 35p an hour, cleaners £1.30 an hour and security guards £2.25 an hour, which was bad for families and just plain wrong," he said.

"I am proud of the minimum wage, proud of how it is helping families and proud of the role it plays in the modern economy we are delivering," he added.

The government also announced it would be targeting industries employing large groups of migrant workers to make sure they are being paid the proper rate.

Enforcement for thousands

Since 1999 more than £22m in unpaid wages has been recovered on behalf of tens of thousands of workers paid below the minimum wage.

The hairdressing and childcare sectors have come under the spotlight for enforcement, and the government said it would be concentrating on hotels and hospitality.

However, the public services union Unison said the increase represented a "missed opportunity" that did little to close the gap between rich and poor.

General secretary, Dave Prentis, said: "We are deeply disappointed at the proposal to raise the minimum wage by just 17p."

He added: "When the national minimum wage was introduced in 1999 the doom and gloom merchants predicted jobs would go and people would be worse off. That has not happened. Nine years on we continue to need a bold approach from the Low Pay Commission because too many lives are still blighted by low pay.

"Having three separate minimum wage rates does not make sense. It is time to have a single minimum wage rate and pay young workers the proper rate for the job. These workers are doing increasingly more responsible jobs and need to be rewarded on their competence, not paid less because of their age."

Minimum wage to increase by 17p, G, 7.3.2007,
https://www.theguardian.com/business/2007/mar/07/
money.politics