History > 2008 > UK > Economy (V)

Gerald Scarfe cartoon

Sunday Times

November 23, 2008

http://www.timesonline.co.uk/tol/comment/article5213955.ece

http://www.geraldscarfe.com/

Background > http://www.timesonline.co.uk/tol/news/politics/article5228632.ece

L to R:

Prime Minister Gordon Brown,

Chancellor Alistair Darling

Darling:

'I haven't done enough yet

to save economy'

Sunday November 30 2008
The Observer
00.01 GMT
Toby Helm and Heather Stewart
This article appeared in the Observer
on Sunday November 30 2008 on p1 of the News section.
It was last updated at 00.06 on November 30 2008.

Alistair Darling has admitted that he will 'almost certainly' have to deliver a second dose of financial life-support to Britain's ailing economy as soon as next spring if his unprecedented £20bn tax-and-spending package fails to contain the recession. In an exclusive interview with The Observer, the Chancellor conceded that his pre-Christmas VAT cut might not be enough.

An Ipsos-Mori poll for today's Observer confirms public scepticism. Conducted after last Monday's pre-Budget report, it shows no dramatic political benefit for Labour from Darling's move, with the Tories holding on to a solid 11 per cent lead over Labour. The survey found most people were unconvinced that the Chancellor's measures would improve their economic prospects or make them spend more.

In his interview, Darling said: 'You'd be very foolish indeed to say, "Well, that's the job done". You know this is something that needs constant attention. We've got the Budget next year, we've got the pre-Budget report in 12 months' time, the Budget after that. I put more money into the reserve on Monday precisely because I know we're almost certainly going to be doing additional things. The people expect you to do that.'

The admission was immediately seized on by the Tories as evidence that the government realises its plans to trigger a spending boost have failed. George Osborne, the shadow Chancellor, said: 'Just six days after the PBR and Alistair Darling has to accept it hasn't worked. The rest of the country figured it wouldn't the moment they saw that reducing VAT when prices are already falling is simply going to add to the trillion-pound national debt, and means damaging VAT rises and national insurance hikes on middle incomes just as the economy starts to recover.'

Darling also revealed that Wednesday's Queen's Speech will include plans for the government to take new powers to force banks to treat their customers fairly. He insisted that, in the short term, he was 'totally focused' on finding ways to force reluctant banks - which had survived only due to public support - to lend to small and medium businesses.

The Chancellor said the only answer was to end self-regulation, and introduce a statutory code of conduct to replace the current voluntary code. He said no one was expecting the banks to hand out money 'willy-nilly', but the seriousness of the economic situation made it essential to ensure that they lived up to their promises. 'In normal times we might not do this, but these are not normal times,' he added.

'You know they [the banks] are getting something from the government. They have to realise that the taxpayer's going to get something in return.'

Amid signs of public scepticism about the 'fiscal stimulus', the Ipsos-Mori poll for today's Observer showed the Tories on 43 per cent, compared with Labour at 32 per cent and the Liberal Democrats on 15 per cent. Only 14 per cent of people questioned thought their personal finances would get better over the next 12 months. Some 67 per cent believed the PBR would make no difference to their spending habits, while 26 per cent thought it would make them spend a little or much less.

Darling stood by the economic forecasts in his PBR, which many experts claim are too optimistic, saying they were reasonable and he dismissed suggestions that the government would be unable to deliver an extra £5bn of efficiency savings by 2011.

The Chancellor, who is said to have resisted pressure from Number Ten to introduce an even bolder fiscal stimulus on Monday, denied having had rows with Gordon Brown. But he admitted they had had exchanges of alternative views. 'Look if you had two people, Chancellor and Prime Minister, who never ever had any discussion and simply sat there and agreed with each other it would make for a pretty grim outcome I would think.

'Both of us have strongly held views on a number of subjects. But we've known each other for a quarter of century and we've never fallen out and we never will.'

Yesterday, the Prime Minister, looking ahead to the Queen's speech, which will include measures to greatly expand the role of the private sector in getting the unemployed to work and new measures to curb alcohol-fuelled crime, said that now was the time to speed up the pace of reform as Britain faced the global economic crisis.

He attacked the Conservatives for being stuck in the past and labelled them the 'do nothing, uncaring party'.

'Doing nothing is not an option,' he told Labour members at the annual Progress conference in London.

'This is the biggest New Labour project of all: to give people confidence and hope that we can build through this downturn into a better economy and society.

'It will mean not a slowing down of reform but only a stepping up in the pace of reform.'

Brown said the government was working 'very closely with Barack Obama's economic team'. There were 'huge similarities between what we are doing and what the Obama government is preparing to do in America'.

Darling: 'I haven't done enough yet to save economy', O, 30.11.2008, http://www.guardian.co.uk/politics/2008/nov/30/economy-alistair-darling-pre-budget

Mile of London Tunnels for Sale,

History Included

November 28, 2008
The New York Times
By JULIA WERDIGIER

LONDON — For sale: a vast tunnel complex in central London. Former tenants include Britain’s secret service, the famous hot line between America and the Soviet Union during the cold war and 400 tons of government documents. The asking price is $7.4 million.

After years of lying unused beneath the traffic-jammed streets of the city, the tunnel complex — one mile of underground corridors and adjacent rooms — is now for sale by the BT Group, Britain’s largest phone company. BT hopes the site’s special features will attract buyers even as the property market above ground is going through its biggest downturn in decades.

Appearing more like the set of a James Bond movie than prime real estate, the complex still has a bar and two canteens, not in use, and a billiard room, not to mention functioning water and electricity supplies.

The tunnels were built during World War II as bomb shelters for about 8,000 people and were designed to allow them to survive for five weeks shut off from the outside world.

An eclectic range of would-be buyers has asked about the space, including an overseas billionaire seeking a spot to hold his board meetings. Others who have expressed interest include those looking for a location for a wine collection, London’s police and local electricity companies, said Niall Gallagher, the realty agent at Farebrother Chartered Surveyors in charge of finding a suitable buyer.

“It’s a weird and wonderful space,” Mr. Gallagher said. “It really captured people’s imagination. There were many inquiries, and we received one or two interesting offers.”

The tunnels were built in 1940 during the blitz, when Britain came under sustained air attacks from Nazi Germany. The government decided to create eight underground bomb shelters in London, as the city’s subway stations were not big enough to accommodate all those seeking refuge.

But the BT tunnels, and one other, were never used by the public because the government needed them for its own operations. The BT tunnels soon became a temporary base for troops before D-Day while another tunnel was turned into the European headquarters of Gen. Dwight D. Eisenhower.

In 1944, the tunnels became a base from which the Allies helped resistance movements in Nazi-occupied countries. Members of the secret service, in offices equipped with telephones and teleprinters hidden beneath the war-torn streets, helped coordinate as many as 10,000 men and women gathering support against the Nazi regime across Europe.

After the war, the tunnel network became an important operations center for the company once known as British Telecommunications. In recent years, though, BT has used the space mostly for storage. The company decided to put the tunnels up for sale a few weeks ago.

Though some may fantasize about buying the space and living a secret life in a cavernous underground world filled with gadgets suitable for the Bat Cave, the reality would most likely be harsher.

The air is dry, hot and stale. The constant rattling of London Underground trains rushing through a separate tunnel system a few feet above and the sound of giant ventilation fans make the tunnels a noisy environment.

Turning the tunnels into a nightclub or hotel is out of the question because only two elevators link them to the outside world; even a small fire would be difficult to contain.

The tunnels are closed to the public, but the people who still work there, mostly for maintenance, enter through an inconspicuous iron door on Furnival Street, a quiet path behind busy Chancery Lane, close to the Royal Courts of Justice and not far from the River Thames. Apart from an old industrial crane attached to the facade of the windowless building, nothing hints at the vast underground labyrinth below it.

The tunnels’ history gives them an aura of mystery, kept alive by the handful of BT employees still working there.

David Hay, a BT historian, said legend had it that the government wanted to keep the location of the tunnels so secret that it hired foreign workers with no knowledge of the London streets to build them. BT staff members are still under strict orders not to reveal the exact location of the system, though incomplete maps have surfaced on the Internet.

“We just don’t know what the future owner will want to use it for, so we can’t disclose more information,” David Hembra, one of the maintenance workers who now visits the tunnels several times a week to check for gas leaks and other problems, said.

When Mr. Hembra started to work in the tunnels 10 years ago, their pivotal years were behind them, and little remained from the turbulent days of World War II. The offices were removed after the war ended, when new tenants moved in. Britain’s public records office needed the space to store more than 400 tons of documents.

But it was not long before the documents had to be moved again to make room for a secure international telephone center that the government deemed necessary as relations between Washington and Moscow grew tense. During the cold war, the British government instructed its telephone department, which later became BT, to set up a secret communications system based on the latest technology that would be able to survive a nuclear attack.

It was the beginning of the busiest period for the tunnels, with almost 200 workers spending their days and nights underground to route up to two million calls a week across the 6,600 phone lines. In 1963, the hot line established between Moscow and Washington after the Cuban missile crisis ran through the London tunnels.

The buzzing complex soon became known as “underground town,” with its own recreation room complete with dartboards and billiard tables, a movie theater and two dining halls. Workers often spent the night in sleeping rooms.

By the early 1980s, technology had advanced so much that the tunnels’ telephone center became obsolete, and BT’s technicians moved back above ground.

Today, anyone wandering the vast corridors is still reminded of their place in history as a bank of telephone cables stands next to colossal electricity generators from the 1960s. Remnants of that life are visible amid the brown-and-orange wall decoration in the old bar, color photographs of the world above in the restaurant and a canteen kitchen equipped with potato-peeling machine, dishwasher and a menu board offering sausages and peas.

“In the winter months, if you didn’t come up at lunchtime, you never saw the light of day,” John Warrick, a former worker, wrote on the Web site Subterranea Britannica, remembering his days in the tunnels. “Life down there was a little like living in a submarine.”

    Mile of London Tunnels for Sale, History Included, NYT, 28.11.2008, http://www.nytimes.com/2008/11/28/business/worldbusiness/28tunnel.html

http://digital.guardian.co.uk/guardian/2008/11/25/pdfs/gdn_081125_ber_1_21300455.pdf

http://www.guardian.co.uk/business/2008/nov/25/alistair-darling-pre-budget-report

Darling hopes VAT cut

will boost Christmas sales

• Tax 'holiday' to encourage consumers
• Cuts could last up to two years

Sunday November 23 2008
11.12 GMT
Guardian.co.uk
Toby Helm and Heather Stewart
This article was first published on guardian.co.uk
on Sunday November 23 2008.
It was last updated
at 11.20 on November 23 2008.

Alistair Darling will make a high-risk bid to lead Britain out of recession tomorrow, when he is expected to cut VAT and entice the British people to go on a pre-Christmas spending spree.

The move by the Chancellor and Gordon Brown won the support last night of Charles Clarke, one of the Prime Minister's most high-profile critics, a sign that the economic crisis is at last uniting Labour and focusing minds on the battle against the Tories. With high-street stores slashing prices to attract customers, Darling will offer help with his pre-Christmas price cut in an attempt to limit the collateral damage from the global financial crisis.

The cut is expected to see the rate drop from its current level of 17.5 per cent for at least a year - and possibly for as long as two years.

However in an interview this morning, the Tory leader, David Cameron, warned public borrowing could top £100bn to pay for Brown's "fiscal stimulus" package to rescue the ailing economy.

'I think people are going to be shocked tomorrow when they see the extent of government borrowing,'' he told BBC1's Andrew Marr show.

'Maybe £80bn this year, before the recession's even properly started, and possibly over £100bn next year. And next year, that is over £4,000 extra for every family in the country.'

Lord Mandelson, the business secretary, acknowledged this morning that the government could not know whether the planned changes would persuade people to spend more. 'We don't, but that's not a reason for inaction,' he said.

Asked when there would be tax rises, he added: "In the medium term, the chancellor has said, and he's absolutely right to say this and he'll do so again tomorrow, that we have to get our public finances on to a sustainable basis.

'He's got to explain how he's going to do that and he will.'

Last night, as Darling put the finishing touches to the most important financial statement of Labour's 11 years in government, there was speculation that he might slash the rate to 15 per cent, a move that would cost the government about £12.5bn a year.

Such a move, certain to be interpreted as evidence that Brown is preparing for a possible election next year, is seen by the Prime Minister as essential to help the economy ride out the severest economic downturn for generations.

Darling is also expected to announce an extension of the £2.7bn giveaway announced in the summer to buy off Labour rebels opposed to the abolition of the 10p income tax rate. The original rebate, worth £120 a year to basic rate taxpayers, was due to come to an end next April, but the Chancellor is likely to carry it over for at least another year. There could also be wider changes in personal tax allowances to take many low earners out of paying tax at all, as well as plans to speed up infrastructure projects to help salvage jobs in construction.

In an interview with the Sunday Mirror, Darling today promises help for 'every household' so people can 'get through the difficult period'. He also promises support for householders with mortgages and those facing redundancy. 'Worried mortgage holders will get help and I shall do what I can to help those who lose their jobs.'

The public sector, he says, will be asked to spend less. 'In these difficult times the public sector will, like the rest of the country, be tightening its belt.'

There was also speculation that Darling could help motorists by postponing plans to increase vehicle excise duty on the most polluting cars.

With the financial markets nervously waiting to see how Brown and Darling intend to pay for the measures, the Prime Minister received a significant boost last night when Clarke, a former Home Secretary, finally buried the hatchet and lavished praise on his former political enemy over his handling of the economic crisis.

Ending one of the bitterest feuds at the top of the Labour party, and in a sign of how it is now united behind its leader, Clarke, who only in September called for Brown to shape up or quit, told The Observer that the Prime Minister had shown 'genuine economic and political leadership at a time when it was both desperately needed and difficult to do'. He said: 'It's been a real surprise to me but Gordon's economic self-confidence has made him more decisive on the political front.' The PM had listened to his critics and had 'earned the right to support'.

'I think that, since the Labour party conference, he has done really well in meeting the challenges of the world financial and economic crisis,' said Clarke. As a result, he said he felt Brown could lead Labour to a fourth consecutive general election victory.
'Winning the election, particularly in the marginal seats in the south east, remains a really tough call, but Labour is obviously back in the race and can do it.'

City economists said a VAT cut was 'psychologically attractive', as it would encourage people to spend when times were hard and could easily be withdrawn later.

The government's deficit will balloon to way above £100bn next year, but the Treasury hopes to reassure the City about the long-term health of the government's finances by announcing detailed plans to increase taxes and squeeze public spending, once the recession is over.
Britain's approach of plunging deeper into the red to pay for a short-term economic support package was echoed in the United States, when President-elect Barack Obama promised to save 2.5 million jobs with a two-year stimulus plan.

'There are no quick nor easy fixes for this crisis, which has been many years in the making, and it's likely to get worse before it gets better,' said Obama. 'But 20 January is our chance to begin anew, with a new direction, new ideas and new reforms that will create jobs and fuel long-term economic growth.'

In a speech to the CBI annual conference tomorrow, Brown will defend his own 'fiscal stimulus' plan, insisting that a 'new approach is now needed if we are to get through this unprecedented global financial recession with the least damage to Britain's long-term economic prospects'.

This weekend, the Conservative party launches a nationwide campaign aimed at highlighting its view that Brown's '£100bn borrowing binge' will mean higher taxes in the long run. Poster vans warning of a 'tax bombshell' - the same phrase the Tories successfully deployed against Labour in the 1992 general election campaign - are being used in London and in busy shopping areas across the country.

George Osborne, the shadow Chancellor, last night accused the Prime Minister of conning the electorate with tax cuts that would have to be paid back. 'Only the Tories will deliver lower taxes that last,' he said.

    Darling hopes VAT cut will boost Christmas sales, G, 23.11.2008, http://www.guardian.co.uk/politics/2008/nov/23/economy-taxandspending

http://digital.guardian.co.uk/guardian/2008/11/20/pdfs/gdn_081120_ber_1_21256180.pdf

http://www.guardian.co.uk/business/2008/nov/20/woolworths-retail-high-street-christmas

High street sales rise

defies gloomy outlook

November 20, 2008
From Times Online
Grainne Gilmore

Retail sales fell by just 0.1 per cent in October, much less than the forecast 0.9 per cent decline, official figures revealed today.

The statistics from the Office for National Statistics (ONS) fly in the face of recent grim data on British retail revenues as well as frantic efforts by the likes of Marks & Spencer (M&S) to capture cash-strapped shoppers with today’s "20 per cent off" sale.

Earlier this week, the British Retail Consortium (BRC) said that the total value of retail sales in the UK fell for the first time in three years.

The BRC sales monitor for October showed that like-for-like sales were down 2.2 per cent and total sales fell 0.1 per cent, marking the first annual drop since April 2005.

However, the ONS said today annual sales rose 1.9 per cent compared to October last year, after a 1.7 per cent annual rise in September.

Better-than-expected mortgage lending figures also emerged today. The Council of Mortgage Lenders (CML) said that gross lending rose nearly 7 per cent to £18.7 billion in October compared to the previous month.

Although the CML said September was "admittedly weak" and warned of an outlook of "continuing weakness" in the market.

Shoppers appear to be reining in their spending on non-essential items. According to the ONS, non-food sales dropped by 1.1 per cent, with clothes trade down 1.5 per cent.

However, household goods, especially electricals, took the biggest hit, dropping by 3.4 per cent. There was bad news for department stores too, with sales falling by 1 per cent. But spending on food was relatively robust, as sales rose 1 per cent in October.

The ONS conceded today that monthly figures are volatile, and said that the three monthly figures, which show no change in the three months to October compared to the previous three months, are a more accurate reflection of retail trends.

The ONS has already come under fire for its retail statistics, after they showed a record rise in sales in May and a record 4.3 per cent fall in June.

Alan Clarke, UK economist at BNP Paribas, said the ONS was “living up to its reputation as being a random number generator”.

He said: “Surveys are weak, consumer confidence is at rock bottom, unemployment is shooting up and yet retail sales manages to post a contraction of 0.1per cent, much higher than the near 1 per cent contraction expected."

The ONS data was published as some of Britain’s biggest retailers embarked on a brutal pre-Christmas price war today.

As well as M&S, Sir Philip Green’s Arcadia Group is also holding a 20 per cent-off campaign and Debenhams will go on the offensive with a three-day “spectacular” sell-off.

Analysts said that the price cuts could lead to a vicious circle of margins eroding and sales declining as shoppers delay their Christmas purchases in the hope of last-minute discounts.

Sir Philip’s Arcadia Group announced sales at Dorothy Perkins, Wallis, Evans and Burtons yesterday.

On Monday, Wm Morrison introduced aggressive promotions on foods, including buy-one-get-two-free offers. J Sainsbury and Tesco are cutting prices of Christmas gifts and clothes

More than a third of consumers have cut their monthly spending by an average of £160, totalling £2.7 billion a month, according to a survey by the Post Office.

    High street sales rise defies gloomy outlook, Ts, 20.11.2008, http://business.timesonline.co.uk/tol/business/economics/article5196112.ece

http://digital.guardian.co.uk/guardian/2008/11/13/pdfs/gdn_081113_ber_1_21198472.pdf

http://www.guardian.co.uk/business/2008/nov/13/inflation-deflation-interest-rates-recession

Home sales plummet to new low

as Nationwide says lending has dropped 70%


November 11, 2008
From The Times
Gráinne Gilmore and Patrick Hosking

Britain's housing market was hit by a fresh blow yesterday when it emerged that home sales plunged to a new low last month and the Nationwide Building Society said that its net mortgage lending had fallen by 70 per cent over the past six months.

The latest survey from the Royal Institution of Chartered Surveyors (RICS) showed that estate agents in England and Wales had sold an average of only 10.9 properties per firm in the 12 weeks to the beginning of November, with agents in London struggling to sell one house a fortnight. That is the lowest level of sales since the series began in 1978.

Nationwide, Britain's biggest building society, gave warning that, while its market share was slipping, the entire mortgage lending market would fall by 80 per cent this year.

Net new mortgage lending by Nationwide fell from £3.6billion to £1billion in the six months to September. Its share of the mortgage market slipped from 6.2 per cent to 5.6per cent.

Graham Beale, Nationwide's chief executive, challenged the Treasury claim that the society, along with the other seven banks taking part in the Government bailout plan, was obliged to maintain mortgage availability at 2007 levels. “There isn't a condition that says ‘Thou shalt lend at 2007 levels',” he said.

Hope is rising that the Bank of England's 1.5 point cut in the base rate last week may help to boost buyers' confidence. Experts said that “vulture buyers” - new buyers who settle only for a cut-price home - have already been tempted back to the fray.

A spokesman for RICS said: “Distressed sales are becoming a factor now. People are having to sell their homes because they cannot afford their mortgage or for other financial reasons and they are getting real about the price they can achieve.”

Home sales have been falling for more than a year as banks and building societies reduce mortgage lending to protect their margins during the credit crunch. Borrowers with a small deposit or a less than perfect credit record now struggle to get a home loan.

Many homebuyers are attending auctions in the hope of snapping up a bargain-basement property that has been repossessed by a bank. The number of reposessions is expected to rise by 50 per cent this year to 45,000.

About 20 per cent more estate agents now expect sales to increase, rather than decrease, in coming months as a result of more repossessed properties coming on to the market, RICS said.

A rise in sales would be a boost for estate agencies, which have been hit hard by the housing market downturn. Last week Standard & Poor's, the credit ratings agency, downgraded the rating of Countrywide, the UK's biggest estate agency, over fears that it could run out of cash in the next 12 months.

However, rising transactions will not soften the blow to homeowners. House prices, which have fallen 15per cent in the past year, are set to tumble further. Mr Beale forecast that prices would keep falling by 1 to 1.5 per cent a month well into 2009. He said that souring sentiment, particularly fears about job security, and a lack of credit would continue to depress prices but at some point falling capital values and lower loan costs would lead prices to bottom out. Some economists expect prices to fall 35 per cent before rebounding.

The mortgage market's seizure was highlighted yesterday as lenders continued to withdraw mortgage deals in spite of last week's base rate cut. There are now 2,989 deals available, down a fifth from 3,747 last week, according to Moneysupermarket.com.

There were more than 30,000 home loans on offer before the credit crunch began last summer.

    Home sales plummet to new low as Nationwide says lending has dropped 70%, Ts, 11.11.2008, http://www.timesonline.co.uk/tol/money/property_and_mortgages/article5126997.ece

Shock as Bank of England

slashes rates to 3%

Building Societies Association
expects many lenders not to pass
on the full rate cut to borrowers

Thursday November 6 2008 12.30 GMT
Guardian.co.uk
Ashley Seager, Julia Finch and Jill Treanor

The Bank of England shocked the country today by slashing 1.5 percentage points off interest rates today - the largest cut it has made since it was granted independence in 1997 - as it tries to ward off a deep recession.

The Bank's monetary policy committee cut to 3% from 4.5%, the lowest since the early 1950s as it responded to huge pressure from industry and unions to make a deep cut in borrowing costs.

The Building Societies Association immediately began to prepare the ground for the deep cut in the cost of borrowing not to be passed on in full to customers and would-be homebuyers.

Adrian Coles, director general of the BSA, said: "This reduction in the bank rate will provide some support to the housing market and especially borrowers on tracker rates. However, borrowers looking for new fixed rate deals or homeowners with mortgages linked to money market rates will not necessarily find their mortgage rate decreasing".

Cole said there were a number of reasons why the rate cut may not be passed on, including the need for building societies to fund the cost of the bail-out of the Bradford & Bingley and Icelandic banks, the need to maintain profits, the need to keep savings rates high and competition in the martgage market.

Andy Bond, chief executive of the Asda supermarket chain, said lenders had a responsibility to pass the rate cut on in full: "It is essential that banks and building societies pass on this saving to their customers. Everyone has to play their part and financial institutions are not exempt."

Cheltenham & Gloucester, the mortgage arm of Lloyds TSB, was the first lender to declare its intentions. The lender, which will soon be 43% owned by the government, is passing on the rate cut in full - despite comments by chief executive Eric Daniels earlier this week that suggested they may not do so.

HSBC, Nationwide, Barclays and Royal Bank of Scotland said they were reviewing the situation. There was no immediate comment from HBoS, the country's biggest mortgage lender, but together with RBS, it will be under huge pressure to pass on the full effect of the rate cut.

Today's move adds to the emergency half-point cut it made last month in concert with other central banks around the world in the midst of last month's banking system turmoil.

Pressure had been mounting on the MPC all week from a run of poor figures from the manufacturing, construction and services sectors which showed one of the sharpest overall declines on record, suggesting the economy is weakening at a pace not seen since the recession of the early 1990s.

And earlier today the Halifax reported that house prices slumped 2.2% last month from September, the sharpest drop since May, and one which took the annual rate of change down to -15%, the worst since the series began in 1983 and lower than at any time during the house price crash of the early 1990s.

"Housing market conditions remain challenging in the face of the significant pressures on householders' incomes and the reduction in the availability of mortgage finance since last summer," said Halifax chief economist Martin Ellis.

"But housing affordability is improving significantly. The house price to average earnings ratio has fallen below 5.0 for the first time for four-and-a-half years. We expect a further improvement in the ratio over the coming months."

Its announcement was followed by official data showing new construction orders tumbled by 19% in the three months to September from a year earlier, as orders for new houses more than halved. And the Society of Motor Manufacturers and Traders said new car sales were down a hefty 23% in the year to October, suggesting consumer and fleet spending is falling sharply.

"Sharply deteriorating private car sales is a further clear sign that consumers are now sharply cutting back on their spending," said Howard Archer, economist at IHS Global Insight. "While consumers are increasingly cutting back on their spending out of necessity, but it is also evident that many consumers are also retrenching out of choice, reflecting their heightened concerns about the economy and jobs."

Marks & Spencer on Tuesday reported its profits had slumped by nearly half in the six months to September as shoppers stopped buying expensive food treats and reined back their spending on clothing and homeware.

Gordon Brown yesterday urged banks to pass the rate cuts on to their mortgage holders amid reports that some banks were not planning to do so. Several banks have announced this week that they are raising their tracker margins over base rate for new customers, although existing customers with trackers will benefit from the rate cut while savers will undoubtedly see their savings rates cut. The cut should save £135 on a typical £150,000 mortgage.

Few in the City expect it to stop here - most are expecting rates to be cut to 2% or less in the coming months. Consultancy Capital Economics is pencilling in rates at just 1% by the end of next year.

Howard Archer, chief economist of Global Insight, said: "This has gone further than we thought, but it is fairly justifiable and shows just how worried the Bank of England is about the economy and the possibility of a deep and long lasting recession. It also reflects concerns about the real prospect of deflation."

    Shock as Bank of England slashes rates to 3%, G, 6.11.2008, http://www.guardian.co.uk/business/2008/nov/06/interestrates-interestrates2

Gordon Brown in the Middle East

Brown hopeful of Saudi cash for IMF

Sunday November 02 2008 15.30 GMT
Guardian.co.uk
Allegra Stratton in Riyadh
This article was first published
on guardian.co.uk on Sunday November 02 2008.
It was last updated
at 15.30 on November 02 2008.

Gordon Brown said today he was hopeful of success in his attempts to persuade dollar-rich Gulf states to prop up ailing national economies through a massive injection of capital into the International Monetary Fund (IMF).

The prime minister spent three hours in one-to-one talks with Saudi Arabia's King Abdullah, trying to persuade the monarch to invest in a revamped IMF.

On the first leg of a four-day visit to the Middle East, and aiming to secure hundreds of billions of dollars for the fund, Brown called off a planned dinner with business leaders accompanying him so as to allow maximum negotiating time with the Saudi king.

The IMF currently has around $250bn in its emergency reserves but there are fears that, with Hungary, Iceland and Ukraine having already sought assistance and more nations expected to follow, the sum might not be sufficient.

Brown hopes to persuade Gulf leaders to use some of the estimated $1tn they have made from high oil prices in the last few years to boost the reserves, indicating that he would like to see the current sum increased by "hundreds of billions" of dollars.

The prime minister said following the talks that he was hopeful of having secured Saudi backing.

Speaking on the BBC television's Sunday AM programme, Brown said: "I think people want to invest both in helping the world get through this very difficult period of time but I also think people want to work with us so we are less dependent on oil and have more stability in oil prices."

He added: "The Saudis will, I think, contribute, so we can have a bigger fund worldwide."

However, a senior government source party to the negotiations said the Saudis were very sensitive about being regarded as a "cash cow" and that the country, in which two thirds of the population are below the age of 25, would prioritise domestic investment if necessary.

The business secretary, Peter Mandelson, accompanying Brown on the trip, echoed this caution. He played down expectations, indicating that the government was unlikely to learn whether the Saudis would contribute towards the IMF fund until a meeting of 20 countries in Washington on November 15. Mandelson told reporters that talks with the Saudis were a "process not an event".

Both Brown and Mandelson indicated that the Saudis would only buy into the scheme if significant reform of the global institutions was achieved to bring on board rising powers such as Saudi Arabia, India and Brazil.

Business leaders on the trip - described by Brown as the "highest profile group of business leaders ever to accompany a delegation overseas" - said the prime minister was receiving something of a "hero's welcome" for his part in the global response to the recent economic downturn, and that this was softening his dealings with Saudis.

Brown arrived later in the afternoon in Doha, Qatar for the second leg of his tour.

    Brown hopeful of Saudi cash for IMF, G, 2.11.2008, http://www.guardian.co.uk/world/2008/nov/02/saudiarabia-creditcrunch

Brown Expects Saudi Financial Help

November 2, 2008
Filed at 10:38 a.m. ET
The New York Times
By THE ASSOCIATED PRESS

DOHA, Qatar (AP) -- British Prime Minister Gordon Brown said Sunday he is confident that Saudi Arabia will contribute to the International Monetary Fund's bailout reserves after he promised business leaders in the Gulf that they would have a say in any future new world economic order.

Brown is using a four-day tour of the Gulf to call on oil-rich Middle Eastern countries to be among the biggest donors to the IMF's coffers to rescue failing nations, which at $250 billion have already been depleted by emergency cash calls from Iceland, Hungary and the Ukraine totaling some $30 billion.

''The Saudis will I think contribute so we can have a bigger fund worldwide,'' he said after a meeting with Saudi Arabia's King Abdullah late Saturday and business leaders early Sunday.

The British leader told reporters traveling with him that he wants ''hundreds of billions'' of extra dollars pledged to the IMF fund, noting that the Middle East and Asia, particularly China, have significant foreign exchange reserves.

But analysts have argued that Gulf states will feel little impetus to bolster the IMF fund, given its domination by the United States and the G7 industrialized nations.

A senior British government source, speaking on condition of anonymity because he was not authorized to comment, said that during talks the Saudis had been concerned about becoming a ''milk cow'' to prop up ''basket case'' economies in other parts of the world.

Kuwait's finance minister, Mostafa al-Shimali, told Al-Anbaa daily in comments published Sunday that Kuwait was prepared to listen to what Brown had to offer.

''The matter of supporting world markets depends on investment opportunities on offer and their possible returns,'' he said.

Brown has attempted to win favor with Arab states by stressing they have not been represented enough on international bodies and promising them a seat at the table amid discussions by world leaders ''grasping toward new world order.''

''I believe that your country has a crucial role to play and your voice must be heard,'' Brown told business leaders in Saudi Arabia.

After a marathon three-hour one-on-one session with Saudi Arabia's Abdullah at the Riyadh Royal Palace, Brown moved quickly on to Doha, where he is due to meet Qatari Prime Minister Hamad bin Jassim, before attending a dinner with the ruler, Emir Hamad bin Khalifa Al-Thani, later Sunday.

Any funds from Gulf states are unlikely to be pledged before a meeting of G-20 nations to hammer out potential reform of the global financial system to prevent a repeat of the current crisis, scheduled for November 15 in Washington D.C., which will also be attended by King Abdullah.

Business Secretary Peter Mandelson, who is traveling with Brown and a delegation of more than 20 senior British executives, indicated definite pledges were unlikely in the next few days.

''They are getting each other on to the same page of analysis and the agreed response and Saudi Arabia's active participation in getting the world through this first financial crisis of the global age,'' Mandelson told reporters after Brown met with Abdullah. ''But that is a process, not an event.''

While he is now attempting to woo Gulf leaders to fork out money earned from soaring oil prices, Brown has drawn ire from some oil producing states for criticizing a recent decision by OPEC to cut production by 1.5 billion barrels a day to lift prices. Crude has fallen from a high of $147 in July to under $70 currently.

He repeated his calls for a ''stable'' crude oil price on Sunday, citing the need for ''a sustainable transition to a more low carbon emissions economy for the longer-term.''

Britain has planned an oil summit in London in early December to follow up the talks between oil producers and consumers led by Abdullah in Jeddah in July when the oil price was at a record $147.

The London gathering was initially to be held at heads of state level, but amid controversy over whom had -- or had not -- been invited from the oil producing states, Downing St. said it would be held at ministerial level.

    Brown Expects Saudi Financial Help, NYT, 2.11.2008,
    http://www.nytimes.com/aponline/business/AP-ML-Gulf-Brown.html