UK > History > 2011 > Economy (I)

As Tension Rises in France,

Harsh Talk With Britain

December 16, 2011

The New York Times

By LIZ ALDERMAN

PARIS — To the long list of victims emerging from Europe’s financial crisis, make room for a new one: the “Entente Cordiale” between Britain and France.

A week after the British prime minister, David Cameron, refused to sign a Europe-wide pact that leaders had hoped would stabilize the euro zone, a cross-Channel spat has escalated into a full-blown war of words. Fears in Paris have reached a fever pitch over the prospect that France is about to lose its triple-A credit rating, the highest available.

President Nicolas Sarkozy started preparing the country this week for the imminent loss of its gilt-edged status, though Fitch Ratings on Friday affirmed France’s top credit rating while changing its outlook to negative.

A downgrade by Standard & Poor’s Ratings Services, which has put France on review with a negative outlook, became more likely last week after a summit meeting of European Union leaders was widely declared a flop.

But in the last two days, French officials have unleashed a diatribe suggesting that Britain, not France, is far more deserving of a downgrade.

“At this point, one would prefer to be French than British on the economic level,” the French finance minister, François Baroin, declared Friday.

The ruckus comes as Mr. Sarkozy prepares for a tense re-election campaign heading into what promises to be a gloomy year economically for the country and much of the rest of Europe.

Troubled by the crisis in the euro zone, France is probably already in a recession, the government and the central bank warned this week, with a decline in economic activity expected to continue at least through March. Business and consumer sentiment have deteriorated, and unemployment is stuck at just below 10 percent.

Paris has embraced two austerity plans since the summer in a bid to reduce the country’s chronic budget deficit and meet the demands from Berlin to set an example for the rest of Europe to follow. Officials say those steps are also necessary to prevent France’s international borrowing costs from rising to unhealthy levels because of investors’ concern that France is losing the capacity to foot a growing bill from the euro zone crisis.

The verbal onslaught seemed aimed at deflecting attention from those problems. Within hours, headlines blared from British news Web sites taking exception to the perceived French snub.

“The gall of Gaul!” read The Mail Online. An article in The Guardian accused French politicians of descending “to the level of the school playground.”

Both countries are in poor economic shape. While the French are not suffering anything like the distress being felt in Greece, Portugal and Ireland — which cannot pay their bills without help from the European Union and the International Monetary Fund — the French government is not immune to speculators who see its rising debt levels as making it vulnerable to attacks in the bond market.

France’s debt as a percentage of gross domestic product was 82.3 percent in 2010, a figure that is expected to rise in the coming years even after it tightens its belt. Britain’s debt was 75 percent of its G.D.P. and also rising fast despite a stringent austerity program that is, at least for now, only adding to the country’s economic woes.

In France, the budget deficit was 7.1 percent of G.D.P. last year. Mr. Sarkozy has pledged to reduce it to 3 percent by 2013, partly through higher taxes, but he has been reluctant to spell out which social programs may have to be cut as well, out of fear of further alienating already disenchanted voters.

A looming recession is making that fiscal dilemma even worse by adding to social costs and reducing tax revenue.

“It is very bad news for people, because it means the unemployment rate will increase as more firms will have to fire people or go bankrupt in the private sector,” said Jean-Paul Fitoussi, a professor of economics at L’Institut d’Études Politiques in Paris. “It’s also bad news for politicians. They are in a kind of a trap because they have to say to the people that there is nothing they can do for them.”

As he walked to his job in an affluent suburb of Paris, Steve Kamguea, 22, an entry-level banker at AlterValor Finances, said he saw little hope for a revival of economic growth in France.

“With the problems in the euro zone hitting us, people are anxious about what will happen in the future,” Mr. Kamguea said. “Purchasing power is already low, and it’s hard to get by,” he added, shielding his face from a driving cold rain. “Many people don’t know if they can find a job, and if they do, how much it will pay.”

The prospect of losing France’s sterling credit rating may throw more fuel on the fire. Both Standard & Poor’s and Moody’s said they would review all European Union countries for a possible downgrade soon after last week’s summit meeting.

On Friday, Fitch left France off a list of six euro zone countries that it warned could be downgraded soon. The agency named Belgium, Cyprus, Ireland, Italy, Spain and Slovenia.

But Fitch, in a separate statement reaffirming France’s AAA rating, revised its outlook on long-term debt to negative from stable. It suggested that France could lose the top rating over the next two years, saying it was the most exposed of other euro countries to a further intensification of the crisis.

As for last week’s euro crisis summit and actions by the European Central Bank to ease a banking credit crunch, Fitch said the commitments “were not sufficient to put in place a fully credible financial firewall to prevent a self-fulfilling liquidity and even solvency crisis for some non-AAA euro area sovereigns. In the absence of a comprehensive solution, the euro zone crisis will persist and likely be punctuated by episodes of severe financial market volatility.”

In the six-country announcement, Fitch was even more severe, concluding that after the summit meeting, “a ‘comprehensive solution’ to the euro zone crisis was technically and politically beyond reach.”

Also Friday, Moody’s Investors Service downgraded Belgium by two notches to Aa1 with a negative outlook.

Because a potential credit downgrade has been widely telegraphed, most French officials do not expect significant damage. Many cite the one-notch downgrade S.& P. made to the United States’ AAA credit rating this summer, saying the move did not stop investors from flocking to United States Treasury securities.

In Europe, “if everyone is downgraded at the same time, it may be a nonevent,” said one high-ranking French finance official, who spoke on condition of anonymity. In any case, the official added, French debt, and that of most other euro zone governments, is already trading in financial markets as if the downgrade had already happened.

A senior French banking official insisted that a downgrade would not affect the French banking industry nearly as much as new regulatory requirements that banks raise tens of billions of euros in new capital to help guard against a further worsening of the debt crisis in the euro zone.

Some banks in France, Italy, Spain and even Germany have already started to pull back on lending to consumers and businesses, analysts say. A number of European banks are planning to sell assets to raise fresh capital.

Those issues are probably far more worrisome than the prospect of a credit downgrade, but that has not stopped the rating question from infiltrating the national psyche and dominating discussions of public affairs. It has even hit the streets. “France will lose its Triple-A,” lamented a recent scrawl of graffiti on the side of a commercial building in the chic Marais quarter.

Despite the growing nervousness, the high-ranking French official insisted Friday that France was not calling on the ratings agencies to actually pull down Britain’s own triple-A rating. “That would be stupid,” he said.

The message, the official added, was more to tell the ratings agencies that there was “no ground to downgrade France, but if a downgrade does happen, there are other countries that should be in the same spot.”

That did little to placate Britain’s political establishment. Nick Clegg, Britain’s deputy prime minister, telephoned Prime Minister François Fillon of France on Friday to object to France’s criticism.

Mr. Fillon “made clear it had not been his intention to call into question the U.K.’s rating but to highlight that ratings agencies appeared more focused on economic governance than deficit levels,” Mr. Clegg’s office said.

Mr. Clegg accepted the explanation but had a blunt reply of his own. “Recent remarks from members of the French government about the U.K. economy were simply unacceptable,” Mr. Clegg told Mr. Fillon, according to the statement. “Steps should be taken to calm the rhetoric.”

    As Tension Rises in France, Harsh Talk With Britain, NYT, 16.12.2011,
    http://www.nytimes.com/2011/12/17/business/global/angry-salvos-on-euro-pact-sail-across-the-channel.html

European Commission Chief Assails Britain Over Treaty Veto

December 13, 2011
The New York Times
By SARAH LYALL and STEVEN ERLANGER

LONDON — A senior European official said on Tuesday that Britain’s demands for measures to protect its financial services industry at last week’s summit meeting were impossible to meet and directly responsible for the collapse of e a Europe-wide agreement meant to help save the euro.

In blunt language, the official, José Manuel Barroso, the president of the European Commission, said that the “specific protocol on financial services” requested by Prime Minister David Cameron would have presented “a risk to the integrity of the internal market” as the European Union’s vast trading area is known, and was thus untenable.

“This made compromise impossible,” Mr. Barroso told the European Parliament in Strasbourg, France. “All other heads of government were left with the choice between paying this price or moving ahead without the U.K.’s participation and accepting an internal agreement among them.”

Mr. Barroso’s portrayal of Britain as asking for extra protection for its financial services sector seemed to contradict the account given by Mr. Cameron, who told Parliament on Monday that he had asked for no special treatment for Britain, simply a “level playing field,” with the rest of Europe.

“The choice was a treaty with the proper safeguards, or no treaty,” Mr. Cameron said. “The result was no treaty.”

Britain’s demands had the effect of denying European leaders of one of their main objectives in last week’s summit: to have all 27 European Union countries endorse changes to the Lisbon treaty, the basic governing document of the European Union, which requires unanimity among all 27 members. Instead, at least 23 European countries, and possibly 26, agreed to exclude Britain in drafting and ratifying a different agreement, an intergovernmental treaty among themselves.

Working out the details of this proposed “treaty within a treaty” looks to be a highly complicated undertaking. The issue now likely to preoccupy lawyers in Brussels is whether such an agreement can be put in place and administered using the official European institutions like the European Commission. Germany and France argue that it can, and that it would make no sense to have separate institutions serving just the countries that sign the new agreement.

But Mr. Cameron suggested on Friday that the current European Union institutions should be authorized to support only initiatives endorsed by all 27 union members.

And this is hardly the end of the maneuvering. Several countries have said that they need to take the proposed new agreement to their parliaments, and may in the end join Britain in opting out. Sweden, for instance, another large country that does not use the euro, says it might ask for some changes to the current proposal.

But Britain clearly stands alone now, uncertain about how much influence it will be able to exert on future negotiations in Europe over financial regulations and other matters. Mr. Cameron argues that Britain’s position in Europe has not changed; many people, including some of his now-irritated counterparts in Europe, disagree and warn that Britain may have argued itself out of a position at the table.

Mr. Cameron is caught between the fiercely anti-European wing of his own party and his partners in Britain’s governing coalition, the pro-European Liberal Democrats. British officials said that Mr. Cameron felt he needed to bring back some concessions for the city in return for supporting a European Union treaty of all 27 members, and that without them he would have been hard-pressed to get the treaty passed at home.

But European officials say that Mr. Cameron miscalculated the mood of other leaders and blindsided them with his demands. Moreover, they said, the other leaders resented being asked to include in the proposed treaty amendments that had nothing to do with the euro zone or the current crisis, and feared that if Britain got special treatment, other countries would want it, too.

 

Sarah Lyall reported from London and Steven Erlanger from Paris.

Alan Cowell contributed reporting from London.

    European Commission Chief Assails Britain Over Treaty Veto, NYT, 13.12.2011,
    http://www.nytimes.com/2011/12/14/world/europe/
    european-commission-chief-assails-david-cameron-over-treaty-veto.html

UK isolation grows

as three more countries reconsider eurozone treaty

The 23 EU countries ignoring the UK veto may be joined
by Hungary, Sweden and the Czech Republic, leaving Britain alone

Friday 9 December 2011
12.51 GMT
Guardian.co.uk
Ian Traynor, Nicholas Watt and David Gow in Brussels
This article was published on guardian.co.uk at 12.51 GMT
on Friday 9 December 2011. It was last modified at 15.26 GMT
on Friday 9 December 2011.

The sense of unprecedented isolation afflicting Britain in Europe has been reinforced in Brussels after Hungary joined Sweden and the Czech Republic in reconsidering whether to take part in a new pact aimed at rescuing the euro.

Britain parted ways with the rest of Europe earlier on Friday morning when David Cameron dramatically wielded his veto to block Germany's drive to reopen the Lisbon treaty in an attempt to rescue the single currency.

Initially 23 of the 27 EU countries said they would ignore the British veto and negotiate a new pact outside the treaty. Later the other three waverers said they would take the agreement to their own parliaments, leaving the UK on its own.

The prime minister's unexpected move was seen as a watershed in Britain's fractious membership of the EU. He insisted on securing concessions on and exemptions from EU financial markets regulation as the price of his assent to the German-led euro salvation blueprint. The others balked, accusing Cameron of putting Britain's perceived interests ahead of resolving the EU's worst crisis.

The prime minister blocked the accord, meaning that Britain is on its own while Cameron has failed to secure the concessions for Britain's strong financial services sector. In one of the most significant developments in Britain's 38-year membership of the EU, the British prime minister said early on Friday morning he could not allow a "treaty within a treaty" that would undermine the UK's position in the single market.

Cameron's blocking tactics frustrated the German chancellor Angela Merkel's plans to secure a new punitive rulebook for the single currency by anchoring it in the Lisbon treaty. Plan B is to create a "fiscal compact" among a coalition of the willing – probably everyone but Britain – with quasi-automatic penalties for countries breaking the single currency rules and stronger powers of intervention for European institutions policing the pact.

Britain, however, is also likely to contest the new architecture, arguing that bodies like the European commission responsible to all 27 member states should not be given a role to police the euro.

The outcome on Friday morning, following nine hours of negotiation through the night, was a setback for Merkel, perhaps a disaster for Britain, and a partial victory for Nicolas Sarkozy of France, who had been pressing for an inter-governmental agreement among the 17 members of the eurozone to underpin tough new fiscal rules for the single currency.

"We could not accept this," he said of Cameron's demands.

But many other countries opposed the Merkel plan to reopen the Lisbon treaty and will not be disappointed that the German scheme has failed. Merkel nonetheless stressed that the accord would stabilise the euro. "I have always said, the 17 states of the eurogroup have to regain credibility," she said. "And I believe with today's decisions this can and will be achieved."

Cameron wielded the British veto in the early hours of the morning after France succeeded in blocking a series of safeguards demanded by Britain to protect the City of London. Cameron had demanded that:

• Any transfer of power from a national regulator to an EU regulator on financial services would be subject to a veto.

• Banks should face a higher capital requirement.

• The European Banking Authority should remain in London. There were suggestions that it might be consolidated in the European Security and Markets Authority in Paris.

• The European Central Bank be rebuffed in its attempts to rule that euro-denominated transactions take place within the eurozone.

Sarkozy rejected the demands out of hand.

Cameron defended his decision to wield the British veto on the grounds that eurozone members could have used the institutions of the EU to undermine Britain's interests in the single market without his safeguards. Speaking at 6.19am local time, he said: "I said before I came to Brussels that if I couldn't get adequate safeguards for Britain in a new European treaty then I wouldn't agree to it. What is on offer isn't in Britain's interests so I didn't agree to it.

"Of course we want the eurozone countries to come together and to solve their problems. But we should only allow that to happen inside the European Union treaties if there are proper protections for the single market and for other key British interests. Without those safeguards it is better not to have a treaty within a treaty but to have those countries make their arrangements separately."

Cameron acknowledged there were risks in striking out alone. But he said Britain would protect its position by insisting that the institutions of the EU could not be used to enforce the new fiscal rules.

"While there were always dangers of agreeing a treaty within a treaty, there are also risks with others going off and forming a separate treaty. So we will insist that the EU institutions – the court, the commission – that they work for all 27 nations of the EU. Indeed those institutions are established by the treaty and that treaty is still protected."

Cameron indicated that Britain may go further and block the use of EU institutions if eurozone countries club together to shape financial regulations and labour laws.

The decision by Cameron will transform Britain's relations within the EU. Other projects, such as the euro and the creation of the passport-free Schengen travel area, have gone ahead without British involvement. But it is the first time since Britain joined in 1973 that a treaty that strikes at the heart of the workings of the EU will be agreed without a British signature. Britain signed the 1991 Maastricht treaty after winning an opt-out on the single currency and the social chapter.

Cameron will be able to tell Eurosceptic backbenchers he refused to sign a treaty that would have undermined British interests. But some Eurosceptics may say the new treaty marks a major change in the EU and that the British people should be consulted in a referendum.

Sources in Brussels say Cameron is playing a "dangerous game" because financial service regulations are decided by the system of qualified majority voting in which Britain does not have a veto. Britain can form a "blocking minority" at the moment to stop harmful legislation. But this will shrink as more countries join the euro.

The summit also agreed that:

• Eurozone countries will provide up to €200bn in extra resources to the International Monetary Fund to help countries in difficulty.

• The eurozone's two bailout funds, the European Stability Mechanism (ESM) and the European Financial Stability Facility (EFSF), will be managed by the European Central Bank.

    UK isolation grows as three more countries reconsider eurozone treaty, G, 9.12.2011,
    http://www.guardian.co.uk/business/2011/dec/09/uk-isolation-grows-eurozone-treaty

Most European Leaders Agree on Fiscal Treaty

December 9, 2011
The New York Times
By STEVEN ERLANGER and STEPHEN CASTLE

BRUSSELS — European leaders, meeting until the early hours of Friday, agreed to sign an intergovernmental treaty that would require them to enforce stricter fiscal and financial discipline in their future budgets. But efforts to get unanimity among the 27 members of the European Union, as desired by Germany, failed as Britain and Hungary refused to go along for now.

Importantly, all 17 members of the European Union that use the euro agreed to the new treaty, along with six other countries who wish to join the currency union one day. Two countries, the Czech Republic and Sweden, said they would want to talk to their parties and parliaments at home before deciding, said President Nicolas Sarkozy of France, but it seemed unlikely that Sweden would join. Hungary said it wanted to examine the details, leaving Britain isolated.

Though not a perfect solution, because it could be seen as institutionalizing a two-speed Europe, the intergovernmental pact could be ratified much more quickly by parliaments than a full treaty amendment. Crucially, the deal was welcomed immediately by the new head of the European Central Bank, Mario Draghi.

“It is a very good outcome for euro area members and it’s going to be the basis for a good fiscal compact and more disciplined economic policy in euro area countries,” Mr. Draghi said early Friday morning.

The support of Mr. Draghi and the bank to continue to buy the bonds of troubled large countries like Italy and Spain is crucial to buy time for their economic adjustment and restructuring, to reduce their debt and avoid a collapse of the euro.

The outcome was a significant defeat for David Cameron, the British prime minister, who had sought assurances to protect Britain’s financial services sector in exchange for doing a deal. Mr. Sarkozy said that “David Cameron requested something we all considered unacceptable, a protocol in the treaty allowing the U.K. to be exempted for a certain number of financial regulations.”

Mr. Cameron said, “What was on offer wasn’t in British interests, so I didn’t agree to it.” He conceded that there were risks with others going ahead to form a separate treaty, but added, “We will insist that the E.U. institutions, the court and the Commission work for all 27 nations of the E.U.”

The European Council president, Herman Van Rompuy, said that in addition, the leaders agreed to provide an additional 200 billion euros to the International Monetary Fund to help increase a “firewall” of money in European bailout funds to help cover Italy and Spain. He also said a permanent 500 billion euro European Stability Mechanism would be put into effect a year early, by July 2012, and for a year, would run alongside the existing and temporary 440 billion euro European Financial Stability Facility, thus also increasing funds for the firewall.

The leaders also agreed that private sector lenders to euro zone nations would not automatically face losses, as had been the plan in the event of another future bailout. When Greece’s debt was finally restructured, the private sector suffered, making investors more anxious about other vulnerable economies.

Mr. Sarkozy said that the institutions of the European Union would be able to police the new pact, though Britain may dispute that.

Chancellor Angela Merkel of Germany, who pressed hard for a treaty that would codify and enforce debt limits and central oversight of national budgets, said the decisions made here will result in increased credibility for the euro zone. “I have always said the 17 states of the euro zone need to win back credibility,” she said. “And I think that this can happen, will happen, with today’s decisions.”

After the agreement on the treaty was reached early on Friday morning in Europe, Asian markets remained noncommittal — the Nikkei 225 was down about 1.4 percent — about where they were before the news. On Thursday, the euro fell against the dollar, and the borrowing costs of the euro region’s two most closely watched convalescents, Italy and Spain, shot higher in bond trading.

President Obama said on Thursday that the European leaders’ efforts to reach a long-term “fiscal compact where everybody’s playing by the same rules” were “all for the good.” Yet he added, “But there’s a short-term crisis that has to be resolved to make sure that markets have confidence that Europe stands behind the euro.”

The best hope for providing that shot of confidence has been seen as the European Central Bank. But the bank’s president, Mr. Draghi, at a news conference in Frankfurt on Thursday, seemed to back away from signals he sent last week that a grand bailout bargain might be in the works — a big infusion from the central bank in exchange for a commitment to greater fiscal discipline from the European heads of state.

On Thursday, Mr. Draghi said that he was “surprised” that a speech he made last week had been widely interpreted as meaning the central bank stood ready to shore up weak European Union members like Italy and Spain by buying many more of their bonds — or to possibly work in concert with the International Monetary Fund. He played down the I.M.F. idea Thursday as too “legally complicated” and said it might violate the spirit of the euro treaty.

Many analysts were stunned by what appeared to be Mr. Draghi’s turnaround, which they said would make it even more crucial for the European heads of state to forge a market-calming master plan at their summit meeting — as unlikely as such an outcome is starting to look.

“While Draghi had opened the door for more E.C.B. support last week, he closed it again today,” Carsten Brzeski, an economist at the Dutch bank ING, wrote in a note to clients. “According to Draghi, it was up to politicians to solve the debt crisis.”

For now, Mr. Draghi appears to be leaving any government bailouts to the heads of state, while focusing the European Central Bank’s efforts on the less controversial business of keeping money flowing through commercial banks.

The main step the central bank took Thursday, which buoyed stock markets before Mr. Draghi held his news conference, was to cut its main interest rate to 1 percent, from 1.25 percent. That returned the rate to the record low level that had prevailed from 2009 until April. Mr. Draghi did not rule out the possibility that the rate could go even lower.

The central bank also announced additional measures to aid euro zone banks suffering from a dearth of the short-term lending and to avert a credit squeeze. The European Central Bank said it would start giving commercial banks loans for three years, compared with a maximum of about one year previously. Banks will be able to borrow as much as they want at the benchmark interest rate.

They must provide collateral, but the central bank on Thursday also broadened the range of securities it accepts, which will help banks that have large amounts of assets that are hard to sell. The central bank also eased its requirements for reserves that banks must maintain, which frees more cash.

In a sign of how badly banks need the money, 34 institutions took advantage of a new lower interest rate offered by the European Central Bank in conjunction with other central banks for three-month loans denominated in dollars.

Earlier Thursday, the Bank of England held its benchmark rate steady at a record low 0.5 percent, after the bank’s governor warned of growing risks for Britain’s economy from the euro area. Mr. Draghi, who took over at the European Central Bank from Jean-Claude Trichet on Nov. 1, has wasted little time reversing rate increases that Mr. Trichet oversaw in April and July. Those increases were widely criticized as an overreaction to tentative signs of inflation and may have helped hasten a widespread economic slowdown in Europe.

The economy of the 17 countries in the euro currency union is almost stagnant, growing just 0.2 percent in the third quarter, with unemployment at 10.3 percent. Economists expect the euro zone economy to slip into recession early next year if it has not happened already. Declining output makes the debt crisis even worse by cutting tax receipts.

The E.C.B. lowered its growth projections Thursday, saying that output could fall as much as 0.4 percent next year.

Lower interest rates will be particularly welcome in countries like Portugal and Italy, where the debt crisis has pushed up interest rates and made it harder for businesses to get loans. And the cuts will provide immediate relief to the many homeowners in Ireland and other euro countries who have variable-rate mortgages tied to the central bank’s rate.

But many economists continue to argue that ultimately the European Central Bank will have to intervene more aggressively in the region’s government bond markets, to prevent borrowing costs for Italy and other countries from becoming so high that they are unable to refinance their debt.

Jack Ewing contributed reportingfrom Frankfurt, and Mark Landler from Washington.

    Most European Leaders Agree on Fiscal Treaty, NYT, 9.11.2011,
    http://www.nytimes.com/2011/12/10/business/global/european-leaders-agree-on-fiscal-treaty.html

Britain Suffers as a Bystander to Europe’s Crisis

December 7, 2011
The New York Times
By SARAH LYALL and STEPHEN CASTLE

LONDON — No matter what happens at the European summit meeting on the euro in Brussels that begins Thursday, Britain is sure to lose.

There is looming recognition at 10 Downing Street that if the euro falls, Britain will sink along with everyone else. But if Europe manages to pull itself together by forging closer unity among the 17 countries that use the euro, then Britain faces being ever more marginalized in decisions on the Continent.

Many Europeans have been irritated by British Conservatives’ quiet satisfaction throughout the crisis with the decision not to join the euro (the United Kingdom ostentatiously kept its currency, the pound), particularly when juxtaposed with the panic over Britain’s inability to have any significant impact on Europe’s biggest crisis since the end of the cold war.

“Germany is the unquestioned leader of Europe,” said Charles Grant, director of the Center for European Reform. “France is definitely subordinate to Germany, and Britain has less influence than at any time I can recall.”

Of particular concern here is the health of Britain’s financial industry, a vital economic engine at a time of slowing growth and deep cuts in government spending, which is seen to be vulnerable to new European regulations that could hurt British competitiveness in global markets.

Despite all that is at stake, Prime Minister David Cameron’s coalition government looks doomed to be cast in the role of impotent bystander, torn between anti-Europe forces and European leaders’ moves toward greater fiscal integration on the Continent — with or without Britain.

On Wednesday, Mr. Cameron told a fractious Parliament that his main goal in Brussels was to “seek safeguards for Britain” and “protect our own national interest” by resisting measures like a proposed financial transaction tax. But such Britain-centric rhetoric has annoyed the brokers of Europe’s future, Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France, who are trying to find a way to save the euro while imposing legally binding fiscal discipline on the Continent’s floundering southern economies.

They have not been shy about expressing their frustration. Just six weeks ago, after Mr. Cameron tried to inject himself into talks about the euro, Mr. Sarkozy said bluntly, “You have lost a good opportunity to shut up.” He later added: “We are sick of you criticizing us and telling us what to do. You say you hate the euro and now you want to interfere in our meetings.”

Steven Fielding, director of the Center for British Politics at the University of Nottingham, said: “Cameron might sound off to look good to his backbenchers, but in Europe, he hasn’t got much to negotiate with. It’s been made clear that France and Germany can do whatever the hell they like and Britain can say yes or no, but it doesn’t matter, since they’ll do it anyway.”

The paradox of this is that plans for tighter integration among the 17 euro zone countries are at the same time destined to create greater divisions within Europe — divisions between countries that use the euro and those that do not, and divisions within the euro zone itself, depending on the health and importance of the various economies. A two-, three-, four- and even five-tier Europe could possibly emerge.

“The markets have defined who are the good guys and who are the bad guys, and their interest rates are in many ways the manifestation of this,” said Alexander Stubb, Finland’s minister for European affairs. “When we look at future E.U. rules, it is the triple-A countries that are running the show.”

The political price of Britain’s self-proclaimed exceptionalism was made clear with a vengeance to Mr. Cameron on Wednesday, when he was pounded from all sides in a raucous session in the House of Commons. Fractious Europe-hating Conservative backbenchers called for him to stand firm on Europe, to “show bulldog spirit,” in a “resolute and uncompromising defense of British national interests,” as one legislator, Andrew Rosindell, put it.

Trying to placate them, the prime minister pledged not to sign anything that did not contain “British safeguards.”

Meanwhile, should the Europeans in the euro zone “go ahead with a separate treaty” that leaves out the noneuro countries, Mr. Cameron explained, “then clearly that is not a treaty that Britain would be signing or would be amending.” However, he said, he would still retain “some leverage” over the process.

“The more the euro zone countries ask for, the more we will ask for in return,” he said. But France and Germany have already made it abundantly clear that they will go ahead with their plans for the euro zone without regard to the needs or interests of Britain.

The explosive debate in Britain, while never welcome, comes at an unusually inopportune time for Mr. Cameron. The so-called special relationship with the United States is not looking all that special right now, and enormous cuts in defense spending are making it hard for the British military to maintain its status as America’s right hand.

The austerity budget is fraying at the edges, amid strikes and protests over layoffs and rising fees. Growth has been slowing, despite Mr. Cameron’s insistence that businesses would pick up the pace when it became clear that the government’s finances were sound. And now Britain looks to be in an unusually poor position to defend its interests in Europe.

Members of the Labour opposition lost no time exploiting what they saw as Mr. Cameron’s weakness on the issue.

“Six weeks ago, he was promising his backbenchers a handbagging for Europe, and now he’s just reduced to hand-wringing,” the Labour leader, Ed Miliband, told Parliament, as his party members whooped their approval. “The problem for Britain is that at that most important European summit for a generation, that matters hugely for businesses up and down the country, the prime minister is simply left on the sidelines.”

Even more worryingly for the government, several prominent Conservatives, including the cabinet minister in charge of Northern Ireland, Owen Paterson, broke ranks with the party line and said flatly that Mr. Cameron should make good on what they called his promise to hold a national referendum on any proposed European treaty changes. With much of Britain in the anti-Europe camp, the no side would surely prevail in such a vote.

Mrs. Merkel has said that she would like any treaty changes to be approved by the entire European Union, so in theory Britain could exercise a veto. But Germany and France have also said they will make changes in the way the euro zone alone operates, if that is the only way to defend the common currency.

Most dangerous to Mr. Cameron was the unwelcome intervention of the mayor of London, Boris Johnson, a potential wild-card rival for the Conservative leadership. Mr. Johnson, who is perhaps Britain’s most popular politician, enjoys injecting himself into questions of foreign policy when the spirit moves him.

If Britain was asked to sign a treaty creating “a very dominant economic government” across Europe, he told BBC radio, then Mr. Cameron should veto it. “And if we felt unable to veto it, I certainly think that it should be put to a referendum,” he said. He added that in rescuing the euro, there was a danger of “saving the cancer, not the patient.”

Mr. Cameron says he has pledged to call a referendum on any treaty that would transfer more power from Britain to Europe. None of the current possibilities features such a treaty, he said, so there is no cause for a referendum.

The other political pressure on Mr. Cameron, of course, comes from the unique challenge of a coalition government with partners who disagree on many issues, including Europe. This puts him and his deputy prime minister, Nick Clegg, a Liberal Democrat, in tough spots for equal but opposing reasons.

“Nick Clegg has party activists who don’t like the idea of the coalition and don’t like many of the things it has done, and they’re the most Europhile of the three main parties,” Mr. Fielding of the Center for British Politics said. “And David Cameron has on his back benches people who don’t like the idea of the coalition and don’t like many of the things it has done, and they’re the most Euroskeptic. It’s a tricky position for them all to be in.”

 

Sarah Lyall reported from London, and Stephen Castle from Brussels.

    Britain Suffers as a Bystander to Europe’s Crisis, NYT, 7.11.2011,
    http://www.nytimes.com/2011/12/08/world/europe/britain-suffers-as-a-bystander-to-europes-crisis.html

UK incomes fall 3.5% in real terms, ONS reveals

Big fall in salaries for average workers and sizeable rises for senior managers,
says annual households earning survey

Wednesday 23 November 2011
11.27 GMT
Guardian.co.uk
James Ball
This article was published on guardian.co.uk at 11.27 GMT on Wednesday 23 November 2011. It was last modified at 15.34 GMT on Wednesday 23 November 2011.

UK households are facing pay cuts in real terms of more than 3.5% as salary increases fail to keep pace with inflation, official figures reveal.

The median salary for a full-time worker in the UK rose 1.4% in 2011 to £26,244, against a headline CPI inflation rate of 5% or higher, according to the Annual Survey of Hours and Earnings from the Office for National Statistics.

Overall earnings growth was even lower, with the average UK salary increasing just 0.5% on 2010 levels once part-time workers are included.

This was driven by a shift to part-time work as a result of high unemployment and low economic growth: the indicative figures for 2011 included 380,000 fewer full-time workers than a year before, with 72,000 more part-time employees.

Progress in closing the gender pay gap has also slowed, with women in full-time employment earning on average £5,409 less than men – the gap narrowed by £179 in 2010 compared with £558 in 2009.

At such a rate, it would take until 2041 for the earnings of women working full-time to match those of men.

The headline figures also masked sizeable falls in pay for some of the UK's lowest-earning professions – and sizeable salary boosts for senior managers and directors.

Workers in "elementary occupations", a classification including labourers, farm workers, postal workers and others, saw their typical pay fall 0.9% against its 2010 level, while professional pay rose 1% and managerial salaries rose 0.5%.

Directors and chief executives of leading organisations enjoyed the most sizeable pay rises, with median earnings up 15% to £112,157, in part a result of trends shifting earnings to basic pay and away from bonuses.

Salaries of senior corporate managers also increased substantially – up 7.1% year-on-year to £77,679.

By contrast, the annual pay of waiters and waitresses (mostly part-time workers) fell 11.2% year-on-year to £5,660 – the most substantial drop of any group of workers. Cleaning staff earnings fell 3.4%.

The TUC general secretary, Brendan Barber, said the latest figures showed the UK's sluggish economic growth was due to a squeeze on wages rather than the wider economic crises.

"Today's figures confirm that 2011 has been a year of wage stagnation, with pay rises far outstripped by inflation, and low-paid employees being squeezed particularly hard," he said

"Falling wages and self-defeating austerity have been the main reasons for the UK's economic woes, rather than a eurozone crisis which has yet to fully show up in official statistics.

The amount of pay needed to be in the top 10% of full-time earners increased by 1.9% since 2010, to £52,643; while the threshold for the bottom 10% of full-time workers increased 0.6%, to £14,905.

    UK incomes fall 3.5% in real terms, ONS reveals, G, 23.11.2011,
    http://www.guardian.co.uk/money/2011/nov/23/uk-household-earnings-fall

This royal wedding is Britain's Marie Antoinette moment

Back in the real world, below this thin layer of pomp,
there is a social dislocation whose cracks are starting to emerge

Friday 29 April 2011
20.00 BST
Guardian.co.uk
Polly Toynbee
This article was published on guardian.co.uk at 20.00 BST on Friday 29 April 2011.
A version appeared on p37 of the Main section section of the Guardian
on Saturday 30 April 2011. It was last modified at 00.06 BST
on Saturday 30 April 2011.

How well we do it! Was the princess beautiful in lace and was the prince charming? Indeed they were. The glorious pomp and circumstance did not disappoint those 2 billion worldwide watchers, indulging vicariously in the theatre of majesty. They tell us this is what we are best at, the great parade, the grand charade. If you weep at weddings here was one to cry for, for us more than them. The more extreme a ceremony's extravagance, the more superstitious you might feel about the outcome: the simpler the better the prognosis, in my experience.

But let's not speculate, for we know next to nothing of these best-marketed of global celebrities beyond the homely platitudes sparingly fed to the multitudes. We might agree that they are indeed "grounded"; we might ponder on the chances of a prince surviving so dysfunctional a childhood; or we may just wish them well and use the day off to party, as many did.

Is this what Britain is and who we are? Here was a grand illusion, the old conspiracy to misrepresent us to ourselves. Here arrayed was the most conservative of establishments, rank upon rank, from cabinet ministers to Prince Andrew to the Sultan of Brunei, the apotheosis of the Daily Telegraph and the Spectator in excelsis, a David Starkey pageant choreographed by Charles, the prince of conservatives.

Of course Tony Blair and Gordon Brown had no invitation, being the prime ministers who held back the forces of conservatism for 13 years. Displayed in all its assertiveness was a reminder of what Labour is always up against as perennial intruder. Constitutional monarchy is constitutionally Tory, the blue inherited with its wealth, in its fibre, in its bones.

The manicured story of the Middletons' four-generation rise from pit village to throne offers such perfect justification, living proof of David Cameron's promised social mobility, echoed in the jokey "It should have been me" souvenir mugs. Notwithstanding repellent sniggers of the Eton set who call the Middleton girls "the wisteria sisters" for their social climbing, or the "doors to manual" giggle at their former air steward mother, the Middletons belong in the top 0.5% of earners: children of new wealth always did marry into aristocracy. Besides, Kate Middleton, Samantha Cameron and the Hon Frances Osborne all went to the same school.

Yet despite months of coverage, rising to a crescendo of print and broadcasting frenzy this week, the country has remained resolutely phlegmatic. Cameras pick out the wildest enthusiasts camped out or dressed as brides, yet the Guardian/ICM poll and others put those expressing "strong interest" at only 20%.

In poll after poll, more than 70% refused to be excited. Laconic, cool, only half the population said they would watch Friday's flummery. Few are republicans – though latest YouGov polls show those of us hoping the Queen will be Elizabeth the Last has risen to 26% – but a healthy scepticism thrives. Not love of monarchy but fear of something worse wins the day as the spirit of "confound their politics" prevails over the thought of some second-hand politician as head of state.

A jaundiced view of royalty is not confined to blasé metropolitan sophisticates: you can hear it everywhere, north more than south, in any pub or bus stop and on Twitter – the knowing shrug that finds this stuff preposterous, childish and not who we are. How embarrassingly Brown stumbled trying to pin down an ineffable definition of Britishness. But he was fumbling for something other than images of monarchy and empire to assert, quite rightly, that this is not a conservative nation: after all, Cameron did not win the last election, even with an open goal. This may not be a nation of reforming radicals, but there is no lack of robust popular riposte to royal displays of inherited entitlement.

How will history look back on this day? Out in the world of bread, not circuses, in the kingdom behind the cardboard scenery, this has been a week that told a bleak story of the state of the nation. History may see the wedding as a Marie Antoinette moment, a layer of ormolu hiding a social dislocation whose cracks are only starting to emerge. The Office for National Statistics just showed GDP flatlining for the last six months, recovery stalled ever since the announcement of the government's great austerity. Most household incomes are shrinking – as never since the 1920s. Hundreds of thousands of jobs are being cut, services slashed, £18m taken from the welfare budget, university fees in crisis, consumer confidence plunging.

This week I went to Barclays' annual meeting to watch another monarch, CEO Bob Diamond. He is in line for £27m pay this year, despite shares falling, £1.6bn profits lost and dividends cut – at a time when bank lending to manufacturing has fallen. Angry shareholders in the hall rose one by one to protest. Elderly, sometimes inchoate, they echoed the Association of British Insurers, who recommended voting against the bank's grotesque boardroom remuneration. But no, the little shareholders were voted down by unseen fund managers, all in the same game. The board shrugged off its critics, claiming that if they cut their own pay "we could very quickly jeopardise the true rewards of our success". But for how much longer?

The NHS, the most politically sensitive of public services, is warned by the public accounts committee that patient care is at risk in a £20bn cut with no plan for services that go bankrupt. The OECD, hardly a left-leaning organisation, this week warned that poverty in British households will rise inexorably so "social spending on families needs to be protected". But it is not being protected: the opposite is happening, as Sure Start is stripped bare. "Cutting back on early years services will make it difficult for the UK to achieve its policy of making work pay," says the OECD report.

Few yet realise the scale of the conservative revolution in progress. Professors Peter Taylor-Gooby and Gerry Stoker have just revealed that by 2013 public spending will be a lower proportion of GDP in Britain than in the US. They write in the Political Quarterly: "A profound shift in our understanding of the role of the state and the nature of our welfare system is taking place without serious debate." Can that really be done without rebellion? That will be the test of what kind of nation we are.

    This royal wedding is Britain's Marie Antoinette moment, G, 29.4.2011,
    http://www.guardian.co.uk/commentisfree/2011/apr/29/royal-wedding-uk-gdp-growth

One Hyde Park flat is sold for £136m

Nick and Christian Candy sell the Knightsbridge home

for a record price in their new London development

Saturday 16 April 2011
21.12 BST
Guardian.co.uk
Andrew Clark
This article was published on guardian.co.uk at 21.12 BST on Saturday 16 April 2011. A version appeared on p14 of the Main section section of the Observer
on Sunday 17 April 2011.

It is the perfect London pied-à-terre for a non-dom tycoon about town. A three-storey penthouse overlooking Hyde Park has been sold for £136m – becoming by far the most expensive flat ever bought in Britain.

An unnamed buyer, using lawyers in Ukraine, has bought two apartments in the newly opened One Hyde Park development in Knightsbridge that have been knocked into one to create a 25,000 sq ft (2,300 sq m) penthouse with a wine cellar and access to room service at the neighbouring Mandarin Oriental hotel, according to documents filed last week at the Land Registry.

The price eclipses the value of landmark properties elsewhere in the world. In Beverly Hills, the 3.7 acre Hearst mansion, where John and Jacqueline Kennedy honeymooned, is on the market for just $95m (£58m). And in Manhattan, luxury apartments in the Plaza hotel overlooking Central Park cost a little over $50m.

One Hyde Park has been developed by thirtysomething brothers Nick and Christian Candy, who began their property career with a £6,000 loan from their grandmother, and who have been involved in several other luxury projects, including an aborted scheme to build on the site of London's Chelsea Barracks.

Nick Candy said that 45 flats in the development have sold so far for a total of £963m – an average of £22m each: "No one else has achieved that – not just in London, but anywhere in the world," he said. The £136m sale was agreed several years ago, but has only just been formally documented by the Land Registry. For the same amount, the buyer could have bought 1,564 houses in Burnley, the Lancashire town recently named as Britain's cheapest, with an average property price of £87,194.

The penthouse was purchased as an empty shell, and the buyer is spending £60m fitting it out. Neighbours will be a multicultural bunch – purchasers already identified include the Kazakh copper billionaire Vladimir Kim, the prime minister of Qatar and Irish developer Ray Grehan.

"There's a lot of Indian and Chinese money in London and we're doing a lot of deals with Middle Easterners," said Candy, adding that buyers are investing in London and elsewhere following unrest in nations such as Egypt, Bahrain and Syria. "Because of the turmoil, they need to find a safe place for their money," he said.

    One Hyde Park flat is sold for £136m, R, 16.4.2011,
    http://www.guardian.co.uk/uk/2011/apr/16/knightsbridge-flat-sold-for-136m

Unemployment figures

show more than one in five young people out of work

• Surprise drop in total of people out of work to 2.48m
• Women claiming jobseeker's allowance at near 15-year high
• Unemployed 16 to 25-year-olds down in January but up 12,000 on quarter

Wednesday 13 April 2011
10.16 BST
Guardian.co.uk
Graeme Wearden
This article was published on guardian.co.uk at 10.16 BST
on Wednesday 13 April 2011. It was last modified at 10.25 BST on Wednesday 13 April 2011

Youth unemployment has remained at near record levels with more than one in five young people out of work, data released on Wednesday showed.

The number of people aged between 16 and 25 who were out of work hit 963,000 in the three months to February – 12,000 more than in the previous quarter. This pushed Britain's youth unemployment rate up by 0.1 percentage points to 20.4%.

The number of unemployed 16 to 17-year-olds increased by 14,000 on the quarter to reach 218,000, while the number of unemployed 18 to 24-year-olds fell by 2,000 on the quarter to reach 745,000.

The Office for National Statistics also reported that the number of women claiming jobseeker's allowance has reached a near 15-year high of 462,300.

The youth unemployment data was slightly better than a month ago. The total number of young people out of work, which is measured on a rolling three-month basis, had hit 974,000 in the three months to January, the highest level since records began in 1992.

The ONS also reported a surprise fall in the number of people out of work. The UN's International Labour Organisation (ILO) measure of unemployment showed that 2.48 million people were out of work in the three months to February, lowering the unemployment rate from 8% to 7.8%. But the number of people claiming unemployment benefit in March rose by 700.

Campaigners have warned that Britain risks creating a "lost generation" of young people who are unable to find work. TUC general secretary Brendan Barber criticised the government today for scrapping the Future Jobs Fund, which provided grants to firms who created new jobs.

Huddlebuy, a group buying websites for small businesses, reported today that two-thirds of small firms have delayed taking on new staff because of the uncertain economic conditions.

    Unemployment figures show more than one in five young people out of work, G, 13.4.2011,
    http://www.guardian.co.uk/business/2011/apr/13/unemployment-fifth-young-people-jobless

Ministers admit family debt burden is set to soar

• Households bear the impact of deficit cut
• Average family debt to reach £77,000 by 2015

Toby Helm and Daniel Boffey
Guardian.co.uk
Saturday 2 April 2011
21.30 BST

Families will be hit by a spiralling debt crisis over the next four years that will see average British households plunge further into the red as the government austerity programme bites, official figures reveal.

The Office for Budget Responsibility has raised its prediction of total household debt in 2015 by a staggering £303bn since late last year, in the belief that families and individuals will respond to straitened times by extra borrowing. Average household debt based on the OBR figures is forecast to rise to £77,309 by 2015, rather than the £66,291 under previous projections.

Economists say the figures show that George Osborne's drive to slash the public deficit and his predictions on growth are based on assumptions that debt will switch from the government's books to private households – undermining his claims to be a debt-slashing chancellor.

Labour accused the government of piling agony on to hard-pressed families and storing up long-term problems of personal indebtedness.

At last year's budget the official forecast from Osborne was that household debt – which includes mortgages and credit card debt – would be £1,823bn. But in a recent adjustment not highlighted in last month's budget, the OBR has raised the figure to £2,126bn.

A Treasury spokesman said Osborne put the adjustment down to "higher-than-expected inflation driven by higher than expected rises in commodity prices". The Treasury also attempted to head off criticism by saying the OBR had also produced figures showing that the level of household savings was "holding up".

But experts expressed alarm. The Nobel prize-winning economist Paul Krugman, writing on his blog, said: "People have been digging into the details of the government forecast and finding that it relies on the assumption that household debt will rise to new heights relative to income.

"Why? Because the only way the economy can avoid taking a hit from government cuts is if private spending rises to fill the gap – and although you rarely hear the austerians admitting this, the only way that can happen is if people take on more debt."

Ed Balls, the shadow chancellor, said: "George Osborne says the only thing that matters is getting government borrowing down. But while he is cutting further and faster than any other major country in the world, borrowing by hard-pressed families is now forecast to rise every year.

"And to make things harder still, George Osborne's VAT rise is looking like an own goal as it pushes up inflation which threatens higher interest rates for mortgages and household borrowing."

In the Commons, Labour MP Chuka Umunna raised the issue of the hidden household debt figures with Osborne, accusing him of transferring debt to the overdrafts and credit cards of ordinary families.

Last June, OBR forecasts showed that household debt would rise from an average of £58,000 in 2010 to £66,291 by 2015. Now its projections show it expects it to rise to £77,309. For the country's 27.5 million households this means an average increase of £11,018.

Tony Dolphin, senior economist at the IPPR thinktank said: "This is the downside of the chancellor's deficit reduction plan. As tax increases and public spending cuts squeeze households' disposable incomes, they will be forced to take on more and more debt in an attempt to maintain their living standards.

"George Osborne talks of rebalancing the economy away from debt-fuelled government and household spending and towards exports and investment but the OBR's figures show his austerity programme will force households to take on ever more debt just to make ends meet. The future growth in the economy that is needed to bring unemployment down will only come about if we choose to live beyond our means."

The OBR now expects debt as a percentage of household income to increase from 160% in 2010 to 175% in 2015, where last June it was forecasting a small decline. Real personal disposable incomes are forecast to increase by 1.3% over the next four years.

    Ministers admit family debt burden is set to soar, R, 2.4.2011,
http://www.guardian.co.uk/politics/2011/apr/02/family-debt-burden-government-figures

Young people bear brunt as councils reveal cuts to services

Dramatic reductions for libraries and children's services
will take effect at start of new financial year


Friday 1 April 2011
The Guardian
Polly Curtis
This article appeared on p12 of the Main section section of the Guardian
on Friday 1 April 2011.
It was published on guardian.co.uk at 00.05 BST on Friday 1 April 2011.

Cuts to council-run services will bring dramatic reductions in children's services, libraries and youth clubs and a new wave of privatisation for frontline services, the most comprehensive survey so far of town halls will reveal today.

It shows the cuts, which will begin to really bite today as budgets for the 2011-2 financial year kick in, have been disproportionately targeted at the young. Youth clubs, play services and Sure Start centres are bearing the weight of above-average reductions.

The impact will be compounded by further cuts to libraries, cultural services, parks and leisure, triggering warnings that children and teenagers will be forced on to the streets with nothing to do.

The study, conducted by the Local Government Association (LGA), surveyed finance directors from 40% of local authorities. It also finds that two-thirds of councils are embarking on privatisation programmes to cut costs.

The communities secretary, Eric Pickles, has accused some councils of failing to rein in costs before making cuts to services. However, the LGA said the survey proved councils were doing everything they could but were faced with reductions in their grants of up to 17% this year.

"It's a matter of managing which services are cut. You can always trim a little from some things but to say you can do it without any strain on services is unrealistic," said Lady Eaton, who chairs the LGA.

She added that the pattern was for town halls to protect the most crucial services for the vulnerable, creating inevitable new gaps. "Only 5% of the total budgets are flexible – things like library services, cultural activities, youth services are not statutorily required.

"Now we're in a position that statutory responsibilities – education, social care, refuse collection – those come first. It's a sad reflection of the resources, it's the way the world is at the moment," she said.

Eaton also added that councils would like to make more profound reforms to save money but had been hampered by the government's decision to frontload the cuts this year. "When the cuts were front-loaded it didn't allow time for innovative thinking. You can't share your library services with another authority within a week," she said.

The biggest cuts are being made to central services – largely the back-office functions administration, human resources, finance and IT that residents do not see.

A third of councils have dipped into their reserves to prevent further cuts and nine out of 10 have already reduced the cost of senior staff, either through cutting numbers or pay. Seven in 10 councils are setting up shared services with other authorities to find new economies.

The survey asked finance directors to list the services facing above-average cuts. Some 58% said that their central services were getting greater spending reductions, 22% said services such as youth clubs and play groups, 16% said library services, 14% said early years services and 12% refuse collection services.

Some 63% are planning to cut Sure Start services. One in 10 said that their planning and economic development work would get a disproportionately high cut, raising concerns about the government's growth plans in those areas.

Anne Longfield, chief executive of the youth charity 4Children, said the cumulative effect would mean there was going to be "dramatically less for teenagers to do". She said: "Young people don't feel there are enough places to go and things to do even now. We are predicting that provision is going to halve one way or another. This will store up trouble. We're going to see troubling rises in crime [and] more early parenthood."

The survey found 63% of areas were protecting children's social care and 57% were protecting adult social care – the services that cater for the most vulnerable – with below average cuts. Another 21% said other services were being cut to preserve refuse collections.

Four out of five councils are cutting library services. The plans include transferring libraries to community groups to run, moving them into other public buildings such as schools, mobile libraries and other reforms including privatisation plans.

Private firms are springing up including Library Systems & Services, a Maryland-based chain which has set up in Liverpool with a target to manage 15% of local libraries in England within five years.

Nearly 80% of councils have, or are planning, pay freezes; a quarter are embarking on pay cuts.

The survey shows that 67% of councils are embarking on outsourcing programmes. Dave Prentis, the general secretary of Unison, said: "Outsourcing is a false economy, savings are over-promised and often fail to materialise.

"The dangers to workers and people who depend on outsourced services are huge. The evidence proves that the profit motive and public services do not mix. We've all heard the horror stories of home care – vulnerable elderly people left with sub-standard care as 15-minute slots are sold off to the lowest bidder."

The Department for Communities and Local Government said: "Every bit of the public sector has had to play its part to pay off the last government's deficit.

"Through shared services, reducing top salaries, increasing town hall transparency and improving procurement, councils are showing that if they cut out the waste they can do more for less and protect the frontline."

The key players

Margaret Eaton and Eric Pickles are both Yorkshire-born true blue Tories with a fondness for straight-talking. She is the Tory leader of Bradford council, where he served between 1979 to 1990 latterly in the same position. They go way back.

But in 2008 Lady Eaton became chair of the Local Government Association, and last year Pickles became the communities secretary responsible for the most severe cuts in councils' history. On the face of it that friendship has descended into an increasingly heated war of words.

Pickles has claimed in the Guardian that "big government" was as much to blame as the banks for the financial crisis accusing some councils of failing to cut chief executive pay while relishing cuts to services. Eaton, confounding expectations that she might be timid in the face of a Tory government, hit back accusing him of being "detached from reality".

Eaton attempts to settle that row by publishing a survey revealing that most councils are already doing what Pickles accuses them of neglecting: dipping into their reserves, cutting chief executive pay and merging back offices with neighbouring councils.

Eaton acknowledges that the timing of the cuts a month before the local elections, could make it difficult for Tory councillors. There are predictions that Labour could win up to 1,000 seats from Lib Dems and Tories voters disgruntled with the cuts.

"The Liberals as well will be under pressure because it's always pressure on the parties in government," Eaton says. "In many cases it's a case of a pox on all your houses ... people are anxious that when you've got your government in power you really know that it's harder."

Then she makes the startling admission that this May's elections could mark the start of a major come-back for Labour in local government. "It wouldn't be enough this year – but it would be if there was the same surge over a couple of years ... You could get to Labour being the largest party in local government in two to three years."

Remarkably, Eaton says that her friendship with Pickles has survived the tumultuous year. But she wants to end the most extreme rhetoric surrounding council cuts, and hopes that the survey is the evidence to settle it. Her message to Pickles? "Eric, we are doing our bit."

    Young people bear brunt as councils reveal cuts to services, G, 1.4.2011, http://www.guardian.co.uk/society/2011/apr/01/councils-reveal-services-cuts-young-people-brunt

Social care cuts are already biting, say charities

One in four disabled and older people say their services have been reduced even before the spending cuts next month

Patrick Butler
The Guardian
Wednesday 30 March 2011
This article appeared in the Guardian on Wednesday 30 March 2011.
It was published on guardian.co.uk at 00.01 BST on Wednesday 30 March 2011.
It was last modified at 08.57 BST on Wednesday 30 March 2011.

Nearly one in four disabled and older people have experienced cuts to services and increased charges for care, even before local authority spending cuts are implemented, say charities.

Many families are already being "pushed to breaking point" by reductions to the amount of care they receive, including transport help and respite care, with more than half saying increased charges mean they can no longer afford food and heating.

"We are extremely concerned that services which were already failing to keep pace with changing demographics are being cut back further. These cuts are having an impact on families before the major cuts to local authority funding bite from April 2011," said a joint statement by 40 leading care charities.

In a survey conducted by the charities, more than a fifth of respondents said services had been cut back even though their needs had stayed the same. More than half of respondents said they had seen their health suffer as a result of the changes to services, while 52% said they were struggling to maintain their independence.

The findings, published by the 40 charities, were based on responses from more than 1,000 disabled and older people and their carers. It comes as councils in England prepare to embark on cuts of 26% over the next four years. By 2014-15 there could be a £1.2bn funding gap in adult social care, according to the King's Fund health thinktank.

The charities said vulnerable people's care needs were increasingly unmet. More people were not receiving enough care, or had been declared ineligible for state-funded care because their disability or long-term health condition was not considered to be "critical".

Significant numbers of families were going without the care and support services they needed and this would be exacerbated by bigger cuts to come, the charities said. "Too often people are falling between the gaps in the health and social care systems, leaving disabled and older people without support, and heaping more pressure on families. There is no doubt that this mix of chronic underfunding and sustained cuts could have serious economic and social consequences unless these challenges are met now."

The survey was carried out to underpin the charities' evidence to the government's Commission on the Future Funding of Social Care, which is expected to report in July.

The Care and Support Alliance includes household names such as Carers UK, Alzheimer's Society, Macmillan Cancer Support, Mencap, the Princess Royal Trust for Carers, Rethink and Scope.

The Department of Health said the government had allocated an additional £2bn a year by 2014/15 to support the delivery of social care and protect the most vulnerable in society. "This funding should enable local authorities to protect people's access to services and deliver new approaches to improve their care."

    Social care cuts are already biting, say charities, G, 30.3.2011, http://www.guardian.co.uk/society/2011/mar/30/social-care-cuts-charities

David Cameron calls civil servants 'enemies of enterprise'

• PM in strongly worded attack on bureaucracy
• Small firms invited to bid for major public contracts


 

Sunday 6 March 2011
19.33 GMT
Guardian.co.uk
Nicholas Watt
Chief political correspondent
This article was published on guardian.co.uk at 19.33 GMT on Sunday 6 March 2011.
A version appeared on p12 of the Main section section of the Guardian on Monday 7 March 2011.
It was last modified at 00.01 GMT on Monday 7 March 2011.

David Cameron has pledged to confront the "enemies of enterprise" in Whitehall and town halls across the country, attacking what he called the "mad" bureaucracy that holds back entrepreneurs.

The prime minister, who was criticised for failing to outline economic growth plans after last year's autumn spending review, moved to recover ground by promising to place the promotion of enterprise at the heart of the budget on 23 March.

In one of the strongest attacks by a prime minister on the civil service, Cameron yesterday made clear he shared the frustration of Tony Blair, who famously claimed in 1999 that he bore "scars on my back" from those opposed to his reforms.

The prime minister, who said that enterprise was about morals as well as markets, listed three "enemies of enterprise' in a speech at the Conservative spring forum in Cardiff:

• "The bureaucrats in government departments who concoct those ridiculous rules and regulations that make life impossible, particularly for small firms."

• "The town hall officials who take for ever with those planning decisions that can be make or break for a business – and the investment and jobs that go with it."

• "The public sector procurement managers who think that the answer to everything is a big contract with a big business and who shut out millions of Britain's small- and medium-sized companies from a massive potential market."

The prime minister added: "Every regulator, every official, every bureaucrat in government has got to understand that we cannot afford to keep loading costs on to business because frankly they cannot take any more. And if I have to pull these people into my office to argue this out myself and get them off the backs of business then believe me, I will do it."

The chancellor, George Osborne, who used his speech on Saturday to announce the creation of 10 enterprise zones, will unveil changes in the budget to give small- and medium- sized firms opportunities to bid for large government contracts.

"We're throwing open the bidding process to every single business in our country – a massive boost for small businesses, because we want them to win at least a quarter of these deals," Cameron said.

The speech showed the influence of Andrew Cooper, Downing Street's new director of strategy, who starts his new job on Monday. Cooper is said to be drawing up a vision for the future to show that the government has plans that go beyond spending cuts.

The prime minister said he was optimistic about the future because Britain is the home of innovative entrepreneurs. He then launched a staunch defence of his recent trip to the Gulf, on which he was accompanied by 36 British business leaders, including eight from the defence and aerospace sector.

"I know some people are disdainful about [selling Britain to the world]," he said.

"They see me loading up a plane with businesspeople and say: 'That's not statesmanship, that's salesmanship'. I say this: attack all you want, but do you think the Germans and the French and the Americans are all sitting at home waiting for business to fall into their lap?"

    David Cameron calls civil servants 'enemies of enterprise', G, 6.3.2011, http://www.guardian.co.uk/politics/2011/mar/06/david-cameron-civil-service-enemies

House prices record year-on-year fall

Figures from the Land Registry show house prices fell by 0.9% in the year to January

Comment: Northern Rock's first-time buyer mortgage obscures the real problem

Monday 28 February 2011
13.08 GMT
Guardian.co.uk
Press Association
This article was published on guardian.co.uk at 13.08 GMT on Monday 28 February 2011.
It was last modified at 15.46 GMT on Monday 28 February 2011.

House prices in England and Wales recorded their first year-on-year fall for 15 months during January, latest figures show, as the housing market continued to come under pressure.

The average cost of a home dropped by 0.9% during the year to the end of January to £163,177 – the first time annual growth has been negative since October 2009, the Land Registry said.

The year-on-year drop came despite house prices edging ahead by 0.2% during the month itself – the first rise for five months.

Property transactions remained subdued with just 54,012 homes changing hands in November (the latest month for which figures are available) – the lowest level since May last year and 6% down on October's figure.

House prices have come under increasing pressure due to a lack of demand as potential buyers sit on their hands due to uncertainty in both the housing market and the wider economy, while those who want to make a purchase are struggling to raise the required mortgage finance.

Paul Diggle, property economist at Capital Economics, said: "The small gain in house prices in January is unlikely to signal an end to the weakening trend. Indeed, if our economic forecasts are correct, the downward pressures on house prices are only set to build through 2011."

Howard Archer, chief UK and European economist at IHS Global Insight, said: "The small rise in house prices in January, following four months of decline, does little to dilute the impression that the the housing market is stuck in the doldrums with prices under pressure.

"We expect house prices to continue to trend down gradually in 2011 after losing ground overall in the latter months of 2010. Specifically, we suspect that house prices will fall by around 5% in 2011 and eventually end up losing around 10% from the peak levels seen in the first half of 2010."

All regions of England and Wales recorded annual house price falls, apart from London, where values have risen by 2.4% during the year to the end of January, and the east, where they have edged up by 0.2%.

Falls have been steepest in Wales, with the average cost of a home diving by 6.1% during the past year, while in Yorkshire and the Humber and the north-east prices have dropped by 2.6% and 2.5% respectively.

The cost of a home in Wales dived by 4.2% during January alone, while prices fell by 2% in the north-west.

Only four regions recorded price rises during the month, with values increasing by 1.6% in London and the south-west, and by 0.5% in the south-east and 0.4% in the east.

    House prices record year-on-year fall, G, 28.2.2011, http://www.guardian.co.uk/money/2011/feb/28/house-prices-year-on-year-fall

HSBC profits double to almost £12bn

• Unnamed highest-paid banker earned over £8.4m in 2010
• Chief executive Stuart Gulliver earned £6.1m

Monday 28 February 2011
10.49 GMT
Guardian.co.uk
Jill Treanor
This article was published on guardian.co.uk at 10.49 GMT on Monday 28 February 2011.
It was last modified at 15.40 GMT on Monday 28 February 2011.
It was first published at 09.28 GMT on Monday 28 February 2011.

HSBC revealed that its highest-paid banker took home more than £8.4m last year as it reported that profits more than doubled to $19bn (£11.8bn) in 2010.

The UK's largest bank also admitted that more than 253 of its staff were paid more than £1m last year and that some 89 of these were based in the London.

The bank said 280 of its most senior employees had shared in bonuses of $374m. Some 186 of these were in the UK and their share of the bonuses was $172m. This means key bankers in the UK get paid an average bonus of $920,000 verses $1.3m group-wide, although this is partly because the UK numbers include lower-paid staff involved in monitoring the bank's risks.

Information provided by the bank showed that if their salaries are included, those key staff earned a total of $471m, which averages at $1.7m – just over £1m.

Stuart Gulliver, who took over as chief executive at the start of the year, is to take his £5.2m bonus in shares. His total pay was £6.1m, down on the £10m he received a year ago when he was the highest-paid employee of the bank.

While the chief executive's office is Hong Kong, Gulliver joked that he lives on Cathay Pacific and British Airways, spending a third of his time in the UK, a third in Hong Kong and a third in the air.

For 2010, the highest-paid banker – who is not named – received between £8.4m and £8.5m; one took £6.8m and three received between £6.3m and £6.4m.

HSBC provides more information about pay than other financial institutions because it is listed in Hong Kong, which demands disclosure of the five highest-paid staff. In banking, the biggest earners are often outside the boardroom.

Under Project Merlin, the deal between major banks and the UK government, the disclosure is different and only requires the pay of the five highest-paid executives outside the boardroom – rather than all bankers and traders – to be disclosed. Under this measure the highest-paid executive received £4.2m.

The information about the bonus pool for senior staff is being provided to comply with a new Financial Services Authority rule, which requires so-called "code staff" – those deemed to be high paid and taking big risks – to have their pay published in aggregate.

Gulliver replaced Michael Geoghegan as chief executive after a very public boardroom reshuffle. For 2010 Geoghegan received £5.8m after his £2m salary and benefits were topped by a £3.8m bonus. He is also to receive £1m for 2011 and a pension contribution of £401,250 under the terms of his contract. While he stepped down at the end of December, he will receive £200,000 in consultancy fees to 1 April, which he will donate to charity.

The bank cut its long-term return on equity target to 12%-15% from a previous 15%-19% target, blaming the costs caused by regulations requiring banks to hold more capital and extra liquid instruments that can be sold quickly in a crisis. The shares fell 4% to 682p as the market digested numbers which, Gulliver admitted, showed income was flat, costs were up and that profits had been bolstered by the $12.4bn fall in impairments to $14bn – the lowest level since 2006.

The new finance director, Iain Mackay, said: "We've targeted 12% to 15% through the cycle for return on equity, principally taking into consideration what we view as a somewhat unstable and uneven economic recovery over the coming years as well as much higher capital requirements."

Commenting on the profits, which were below the $20bn estimated by analysts, Gulliver said: "Underlying financial performance continued to improve in 2010 and shareholders continued to benefit from HSBC's universal banking model.

"All regions and customer groups were profitable, as personal financial services and North America returned to profit. Commercial banking made an increased contribution to underlying earnings and global banking and markets also remained strongly profitable, albeit behind 2009's record performance, reflecting a well-balanced and diversified business."

HSBC's new chairman, Douglas Flint – who was the finance director until he replaced Stephen Green in December – said the group would not forget the financial crisis and support from governments around the world, adding the group entered 2011 "with humility". Green's departure to join the government as trade minister caused the bank to reorganise its top team last year.

But Flint hit out against George Osborne's permanent levy on bank balance sheets, saying that if the chancellor removed the levy – which will cost HSBC about $600m – the bank would increase its payouts to shareholders. The final dividend was announced at 12 cents, up from 10 cents at the same point last year.

Flint was also concerned about the new rules that force banks to hold more liquid instruments such as government bonds. "It will be a near impossibility for the industry to expand business lending at the same time as increasing the amount of deposits deployed in government bonds while, for many banks but not HSBC, reducing dependency on central bank liquidity support arrangements," he said.

"It is to be hoped that the observation period, which starts this year and precedes the formal introduction of the new requirements, will inform a recalibration of these minimum liquidity standards."

For 2009 the bank reported a 24% fall in pre-tax profit to $7bn (£4.63bn), which included a total bill for salaries and bonuses of $18.5bn, down 11%.

    HSBC profits double to almost £12bn, G, 28.2.2011, http://www.guardian.co.uk/business/2011/feb/28/hsbc-profits-double-almost-twelve-billion-pounds

Police numbers fall by 2,500

Recruitment freeze marks first significant drop in number of officers after a decade of increases

Alan Travis
Guardian.co.uk
Thursday 27 January 2011
16.05 GMT
This article was published on guardian.co.uk at 16.05 GMT on Thursday 27 January 2011.
It was last modified at 14.47 GMT on Friday 28 January 2011.

The number of police officers in England and Wales has fallen by more than 2,500 in the past year due to a recruitment freeze across all forces.

The drop of 2,503 to 142,363 officers in September 2010 is the first significant fall in police numbers after a decade when the size of the police force reached a record high.

The politically sensitive fall comes before chief constables cope with a 20% reduction in Whitehall funding over the next four years. The reduction in numbers coincided with a 5% fall in the crime rate.

The Home Office figures published today also reveal a similar fall in the number of civilian staff employed by the police: a drop of 2,193 to 78,120. The number of police community support officers also fell, by 438 to 16,378.

The only growth has been in the number of volunteer special constables. A 15% increase in their numbers has brought the total number of specials to 16,772.

The policing and criminal justice minister, Nick Herbert, said: "It's not surprising that many forces have suspended recruitment after the economic downturn, and some had stopped recruiting officers before the last government left office.

"Having reached record numbers in the police workforce, forces can and must make savings in their back and middle offices, prioritising the frontline and prioritising visible policing."

Both the home secretary, Theresa May, and Herbert have been arguing that there is not necessarily a direct link between the number of police officers and crime levels. Ministers argue that in many forces around Britain and in other countries there have been significant reductions in crime alongside stable or even falling police numbers.

The latest British Crime Survey, published last week, showed that crime levels fell by 5% in the 12 months to September – the same period that saw police numbers fall. Nevertheless, Labour politicians have warned that a fall in police numbers will inexorably lead to a rise in crime.

The largest percentage falls in officers were in the smallest forces of West Mercia (-5.8%), Wiltshire (-5.4%) and Durham (-5.3%). The largest numerical fall was in the Metropolitan Police, which lost 474 officers.

Chief Constable Peter Fahy, the lead for workforce development at the Association of Chief Police Officers, said: "With recruitment frozen across most police forces and officers continuing to retire or leave the service, it is inevitable that police officer numbers will decline over the coming four years. The challenge is to maintain those parts of the service which are most valued by the public while reducing bureaucracy and unproductive activity.

"This has to be a debate not about officer numbers but about what officers spend their time doing and the overall impact of funding reductions on public confidence in policing. The way policing is organised and delivered will have to change significantly as this reduction in officers takes hold."

    Police numbers fall by 2,500, G, 27.1.2011, http://www.guardian.co.uk/uk/2011/jan/27/police-numbers-fall-by-2500

Inflation hits 4% after January's VAT rise

• Inflation figure now at twice Bank of England target
• Mervyn King, Bank of England governor, to write to chancellor

Julia Kollewe
Guardian.co.uk
Tuesday 15 February 2011
10.54 GMT
This article was published on guardian.co.uk at 10.54 GMT on Tuesday 15 February 2011.
It was last modified at 11.33 GMT on Tuesday 15 February 2011.
It was first published at 10.01 GMT on Tuesday 15 February 2011.

Inflation rose to 4% last month, its highest annual rate in more than two years and twice the Bank of England's target. It puts the Bank under increasing pressure to raise interest rates sooner rather than later.

The higher cost of petrol along with rising alcohol, furniture and restaurant prices following the VAT increase at the start of January fuelled the rise from 3.7% in December, the Office for National Statistics said. Inflation is now at its highest since November 2008. However, some economists had expected a rise to 4.2% or 4.3%, and the pound dipped slightly against the dollar and euro after the numbers were released.

Alan Clarke at BNP Paribas summed up the feeling in the City by saying the figures were "not as bad as feared but still bad".

Prices rose 0.1% between December and January, the first increase on record between those two months. The two main factors were the surge in oil prices – Brent crude oil is now hovering near $104 a barrel – and the VAT increase to 20% on 4 January, the ONS said.

Some components reflected the VAT increase more than others. Those that increased a lot due to VAT were alcohol and tobacco, furniture, restaurants, cafes and hotels. By contrast, clothing was hardly affected because of the January sales and as many retailers postponed passing on the VAT rise. "In the past, given the January sales, changes in the VAT rate have tended to show through in February for clothing, so this is probably not the last we will see on VAT related price increases," said Clarke.

Mervyn King, governor of the Bank of England, recently warned that families face the biggest squeeze on their spending power since the 1920s, with inflation-adjusted wages falling over the past six years.

King has written to the chancellor, George Osborne, to explain why inflation is so far above the Bank's 2% target. He said the rise in VAT, the fall in sterling in late 2007 and 2008 and the commodity price boom, in particular energy prices, were to blame. Inflation is likely to continue to pick up to somewhere between 4% and 5% over the next few months, "appreciably higher" than when he last wrote to the chancellor three months ago, he admitted.

The governor hinted at the growing row on the monetary policy committee over whether and when interest rates should go up, saying "there are real differences of view within the committee".

"The MPC's central judgment, under the assumption that Bank Rate increases in line with market expectations, remains that, as the temporary effects of the factors listed above wane, inflation will fall back so that it is about as likely to be above the target as below it two to three years ahead," King wrote. "The MPC judges that attempting to bring inflation back to the target quickly risks generating undesirable volatility in output and would increase the chances of undershooting the target in the medium term."

Osborne responded by acknowledging that commodity price rises have been "a key driver of recent UK inflation" and said the government was taking steps, including in the G20, to make commodity markets work better.

The Bank will set out its thinking more clearly when it publishes its quarterly inflation and growth forecasts on Wednesday.

"The key to determining where monetary policy is heading is the medium-term inflation forecast, and here tomorrow's inflation report will be crucial," said Hetal Mehta at Daiwa Capital Markets. "We think a move as early as May is unlikely as it is too close to when the fiscal tightening picks up pace."

    Inflation hits 4% after January's VAT rise, G, 15.2.2011, http://www.guardian.co.uk/business/2011/feb/15/inflation-hit-four-per-cent-in-january

Youth unemployment hits record high

• Sharp rise in 16-17 year-olds unemployed
• Fears over abolition of EMA grant
• Gordon Brown urges G20 to tackle 'generational timebomb'
• Unemployment claimants fall to 1.46m
• Overall jobless level drops below 2.5m

Wednesday 19 January 2011
12.02 GMT
Guardian.co.uk
Graeme Wearden
This article was published on guardian.co.uk at 12.02 GMT on Wednesday 19 January 2011.
It was last modified at 13.35 GMT on Wednesday 19 January 2011.
It was first published at 10.50 GMT on Wednesday 19 January 2011.

Youth unemployment has hit a record high, fanning fears that Britain's young people could become a "lost generation" who cannot find work despite the recession ending a year ago.

The total number of adults under 25 who are out of work moved close to the 1 million mark in the three months to November, rising by 32,000 to 951,000. This pushed the youth unemployment rate up to 20.3%, which is also the highest level since records began in 1992.

There was a particularly sharp rise in the number of 16 and 17-year-olds classed as unemployed, rather than in employment or education, up to 204,000 from 177,000 in the previous quarter.

With the Educational Maintenance Allowance (EMA) being abolished, and the Future Jobs Fund closing in March, analysts fear the youth unemployment crisis will deepen further in the months ahead.

"Britain is now perilously close to seeing 1 million young people struggling to find work," warned Martina Milburn, chief executive of youth charity The Prince's Trust.

"At this time when there is huge pressure on the public purse, government, charities and employers must work together to help young people into jobs and save the state billions," Milburn added.

Brian Johnson, insolvency practitioner at HW Fisher & Company, warned that many companies remain very reluctant to take on new trainees or staff with little experience.

"These are anxious times for many employees and anyone unfortunate to have lost their job but it is also a terrible time for graduates and school leavers entering the jobs market. Over the past few years we have lost businesses and banks and now, before our very eyes, we are losing an entire generation," said Johnson.

Youth unemployment is becoming an increasingly serious global problem, with the number of under-25s out of work worldwide recently estimated at 81 million.

Bob Crow, head of the RMT union, claimed that "a whole generation is being cut adrift on a tidal wave of austerity cuts that will have huge economic and social ramifications well into the future".

Gordon Brown will tomorrow call on world leaders to address this issue, warning of a "timebomb" that could damage both the developed world and emerging economies. The former prime minister is urging the G20 to make youth unemployment a priority.
Claimant count falls

The latest youth unemployment data emerged as the Office for National Statistics reported that the number of people claiming unemployment benefit fell last month.

The claimant count dropped by 4,100 people in December to 1.46 million, and the ONS also revised November's claimant count figure to show a 3,200 decline.

City economists has expected the claimant count to be broadly flat in December, as hiring by private companies was countered by the government's cuts to public spending.

However, the number of people who have been claiming Jobseeker's Allowance for up to six months increased by 7,200 to reach 960,300.

Today's data also showed that the number of people out of work has inched back below the 2.5 million mark. The ILO Labour Force measure showed that 49,000 people lost their jobs in the three months to November. That put the unemployment rate at 7.9%, up from 7.7% in the preceding quarter. The total number of people out of work came in at 2.498m, down from the 2.502m hit last month, but higher than the 2.448m over the June-August period.

Ross Walker of RBS warned that employment showed little signs of recovery, a year after Britain officially emerged from recession.

And Howard Archer of IHS Global Insight cautioned that unemployment is still likely to rise this year, due to lacklustre economic growth and increasing job losses in the public sector.

There were also signs that many people would like to work more than they are able to. The ONS reported that the number of employees and self-employed people who were working part-time because they could not find a full-time job increased by 26,000 in the three months to November, to 1.16 million. This is the highest figure since comparable records began in 1992.

The number of people in employment aged 16 and over fell by 69,000 on the quarter to reach 29.09 million, the ONS said. Today's data also showed that total pay, including bonuses, rose by 2.1% over the last year. This is significantly lower than the rising cost of living, with inflation hitting 3.7% on an annual basis last month.

    Youth unemployment hits record high, G, 19.1.2011,
    http://www.guardian.co.uk/business/2011/jan/19/youth-unemployment-heads-towards-1-million

Three prisons to close in coalition justice reforms

800 prison places will be lost, tallying with Ken Clarke's plans to reduce the incarcerated population by around 3,000

Haroon Siddique
The Guardian
Thursday 13 January 2011
This article appeared in the Guardian on Thursday 13 January 2011.
It was published on guardian.co.uk at 05.00 GMT on Thursday 13 January 2011.
It was last modified at 08.31 GMT on Thursday 13 January 2011.

Three prisons are to shut by July with the loss of 800 places, it was reported today.

The closures, which tally with justice secretary Ken Clarke's plans to reduce the prison population in England and Wales by around 3,000 over four years, will be announced today, according to the Times. They are likely to dismay Conservative rightwingers who have reacted angrily to Clarke's previous pronouncements on prison population. However, prison reformers have long argued that building more prisons is not a long term solution to offending.

The prisons that will reportedly close are Ashwell prison in Rutland, Lancaster Castle in Lancashire and Morton Hall women's jail in Lincolnshire. The inmates will be moved elsewhere while staff will be transferred to nearby prisons or invited to apply for voluntary redundancy.

The latest Ministry of Justice figures show there are currently 82,991 prisoners, around 5,000 less than the usable operational capacity of 87,936.

Clarke's plans would see judges given more discretion over how long killers spend behind bars, more offenders handed fines or community sentences, and some foreign nationals allowed to escape jail as long as they leave the UK forever.

Clarke said it was a "simpler, more sensible" approach but Tory backbenchers voiced concern that criminals would avoid being sent to prison. Shortly after becoming justice secretary he clashed with former Conservative leader Michael Howard when Clarke signalled an end to the "Victorian bang 'em up culture" of the last 12 years, marking an assault on Howard's 'prison works' orthodoxy. Howard responded by insisting that "crime went down as the prison population started to go up".

The Conservatives went into the election pledging to match Labour's plans to build sufficient prisons to house 96,000 inmates by 2014. The Liberal Democrats had a pledge to halt the prison building programme and urge the courts to use community punishments instead of short prison sentences. The coalition agreement split the difference by agreeing to take a fundamental look at sentencing policy.

Ashwell prison, a former Army camp, is a facility for medium risk males with a capacity of 214. Lancaster Castle is leased from Lancashire County Council while the land itself is owned by the Duchy of Lancaster. It has a capacity of 238. Women's prison Morton Hall, a former RAF base, has a capacity of 392. It will be converted into an immigration removal centre housing illegal immigrants awaiting deportation, according to the Times.

A Ministry of Justice spokeswoman said: "An announcement on prison capacity will be made to parliament this morning."

    Three prisons to close in coalition justice reforms, G, 13.1.2011,
    http://www.guardian.co.uk/society/2011/jan/13/three-prisons-close-justice-reforms