FSA Warns Banks On Bonus Culture

The City regulator has warned Britain's biggest banks that they need to demonstrate "a change in culture" when they unveil their bonus pots for 2012 in the new year, paving the way for one of the steepest reductions in payouts on record.

I have learnt that Andrew Bailey, head of the Financial Services Authority's (FSA) supervisory arm, has told the chairs of the major UK banks' remuneration committees that they should take into account the industry's reputation when they decide on bonuses.

He made the demand at a recent meeting with the chairs of the UK banks' remuneration committees at which they were told that overall levels of pay should show a sharp decrease for 2012.

They were also informed that the bonus cuts should go beyond the required evidence of banks clawing back pay awarded to executives and staff involved in mis-selling.

Among the attendees at the meeting, which took place several weeks ago, were Penny Hughes, chair of the remuneration committee at Royal Bank of Scotland; John Thornton, her equivalent at HSBC; Sir John Sunderland at Barclays; and Tony Watson from Lloyds Banking Group.

Major lenders have already begun consulting with shareholders on the shape of their pay pots for 2012, with Barclays' new management in particular signalling that the proportion of revenues paid to its investment bankers will fall sharply.

The warning from Mr Bailey about clawbacks will ultimately result in hundreds of millions of pounds in previously-awarded bonus payments being reclaimed from relevant staff, according to people close to the regulator.

The two taxpayer-backed lenders, Lloyds Banking Group and RBS, have imposed a ceiling on cash payouts of £2,000 for each of the last three bonus rounds, a restriction that is almost certain to be repeated in 2013.

In October, Mr Bailey wrote to the chief executives of major banks with operations in London to inform them that bonuses for 2012 must reflect the mis-selling and market manipulation scandals that have rocked the sector this year.

The FSA's intervention will be welcomed by the major investors in banks, who have argued since the financial crisis that the decline in pay levels has failed to keep pace with the diminishing returns distributed to shareholders.

HSBC is the only one of the major lenders with which City institutions have declared themselves satisfied with the relative distributions between investors and employees. Banks are also under pressure from regulator to retain more capital to strengthen their balance sheets.

The meeting has become a traditional fixture on the FSA's calendar ahead of the annual banking industry pay round.

The FSA declined to comment on specific meetings with banks but said it held discussions with them on a range of issues.

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Bank Staff 'Under Pressure To Sell', Which? Says

Staff at Britain's largest banks remain under pressure to sell products to customers, often regardless of whether they are appropriate, an investigation claims.

Two thirds of bank staff with a sales role said there is now "more pressure than ever" to meet their targets, according to a Which? survey of front line bank employees.

Almost half of the 500 people interviewed said they knew colleagues who had mis-sold products to meet their targets, and 40% reported that they are encouraged to sell even when it is not appropriate.

Which? interviewed branch and call-centre staff from HSBC, Royal Bank of Scotland, Lloyds Banking Group, Barclays and Santander, and found that even when incentives are removed, the practice prevails.

Although over 40% said incentives for sales have decreased, more than 80% said the pressure to meet sales targets has stayed the same or increased.

The research comes despite a string of mis-selling scandals over recent years, knocking customers' trust in UK banks.

The PPI mis-selling scandal has cost the big banks £10bn to date

The most high-profile - the mis-selling of payment protection insurance - has already cost the big banks more than £10bn in compensation claims, with that bill expected to rise.

Of the staff surveyed, over a third said they are not comfortable with the pressure they are under to sell products, and two thirds added that they are sometimes or always ordered to sell more.

Which? chief executive Peter Vicary-Smith called for "big change" across the banking industry, with customers - not sales - put first.

"Our survey reveals the stark realities of the sales culture that still exists at the heart of the banking industry," he said.

"Senior bankers say the culture is changing but this shows it just isn't filtering through to staff on the front line who remain under real pressure to put sales before service, even after incentives are taken away.

"We're calling on the banks to be much more transparent about their sales targets and incentives.

"We also want to see bankers meet professional standards and comply with a fully independent code of conduct."

A spokesman for the British Bankers' Association (BBA) said that any incentives for front line staff are now based on clear criteria related to customer service.

"Selling people products they do not need is not putting the customer's interests first and therefore is ultimately bad for the bank," he said.

"The banks will be looking at the findings of this small survey - along with their own internal research - to understand why any staff might feel otherwise."

Which? said it will provide a collection of evidence on the banking industry to the Parliamentary Commission on Banking Standards, the Government and opposition MPs, and the Financial Standards Authority (FSA).

Barclays and the Co-operative bank have already announced plans to refocus their incentives schemes on customer service.

A spokeswoman for Barclays said: "From this week all Barclays UK front line staff are rewarded solely on customer service.

"This follows our announcement in October which was welcomed by Which?"

An HSBC statement said the bank encourages its employees to act "with integrity in the best interest of our customers".

"No one in the UK retail bank, not just customer facing staff, can earn a bonus without meeting the bank's values and behaviours criteria," it said.

And a spokeswoman for RBS said that its staff are rewarded on the basis of customer service and the performance of their branch overall.

"This is part of our move to make sure that customer service is the top priority for all of our staff," she added.

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Starbucks Tax Row: Protests Planned Across UK

Coffee chain Starbucks is braced for protests over its tax arrangements despite announcing changes to its payments.

The US-owned giant said it expects to pay around £10m in UK corporation tax for each of the next two years, following the revelation that it paid just £8.6m in 14 years of trading in Britain and nothing in the last three years.

Activist group UK Uncut is planning more than 40 demonstrations across the country, "transforming" Starbucks stores into refuges, creches and homeless shelters.

The anti-cuts direct action group said the number of protests planned for today had increased since Starbucks made its announcement.

UK Uncut said it also wanted to highlight the "disproportionate" impact of the Government's spending cuts on women.

Sarah Greene, a UK Uncut activist, said: "It is an outrage that the Government continues to let multinationals like Starbucks dodge millions in tax while cutting vital services like refuges, creches and rape crisis centres.

"It does not have to be this way. The Government could easily bring in billions that could fund vital services by clamping down."

Hannah Pearce, a UK Uncut supporter, said that offering to pay some tax "if and when it suits" does not stop a company being a tax avoider, adding: "This is just a desperate attempt by Starbucks to deflect public pressure - hollow promises on press releases don't fund women's refuges or child benefits."

Union boss Mark Serwotka says Starbucks' tax stance is "scandalous"

She called on the Government to force Starbucks and other tax avoiding firms to "pay their fair share, instead of cutting welfare and tax credits for single mums and disabled women".

A spokesman from Global Women's strike, one of the women's groups supporting Saturday's action, said: "Women - in families, homes, communities and jobs - bear the brunt of austerity.

"At our Women's Centre we see more women cut off benefits, losing their jobs, being made homeless and going hungry.

"Already, 3.5 million children live in poverty, one in five mothers skips a meal to feed her children, and many walk miles to get food handouts because they can't afford the bus fare.

"Women are also expected to pick up the pieces as services disappear or turn people away, saying they are overwhelmed."

Mark Serwotka, general secretary of the Public and Commercial Services union, which is supporting the protests, said: "With hundreds of thousands of public sector workers having their jobs, pay and pensions cut, and people entitled to benefits being demonised and targeted in the most shameful way, it is utterly scandalous that some multinational companies believe they can get away with contributing little or nothing to our economy.

"We fully support this weekend's action which, along with previous campaigns by UK Uncut and others, will highlight the fact that if large companies like Starbucks paid their fair share it would change the debate about public spending overnight."

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Apple To Peel Mac Production Away From China

One of Apple's existing Mac lines will be built exclusively in the US next year, CEO Tim Cook has announced.

He made the revelation in an interview with Rock Center's Brian Williams, who asked him: "Why can't you be a made in America company?"

The iPad, iPhone and iPod are currently made by Taiwanese company Foxconn, with actual manufacturing taking place in China.

Mr Cook did not discuss Apple's relationship with Foxconn, but pointed out some parts of the iPhone, such as the glass, were already being manufactured in the US.

"We've been working for years on doing more and more in the United States," he told Mr Williams.

Rock Center said the announcement could be good news for a country that has been struggling with an unemployment rate of around 8%.

At the same time, the US has been surrendering good-paying factory jobs to lower-wage nations such as China.

Mr Cook, who took over from Steve Jobs two months before he died, said it was important to bring more jobs to America.

Foxconn, which also makes the Kindle, PlayStation 3, Wii U and Xbox 360, is the world's largest maker of electronic components, but has been involved in several controversies.

Most of these relate to how it manages its employees in China, where it is the country's largest private sector employer.

Plants run by Foxconn have seen a number of employee suicides over the past few years.

Anti-Apple protesters say Foxconn treats its workers like machines

In February, Apple hired the non-profit Fair Labor Association to examine working conditions at Foxconn.

Mr Williams asked Mr Cook whether Apple could pull out of China entirely and manufacture everything in the US.

"It's not so much about price, it's about the skills," he replied.

Mr Cook said over time certain skills associated with manufacturing had left the US.

"It's a concerted effort to get them back," he added.

He did not divulge which Mac line would be stamped "made in America" from next year, nor exactly where it would be produced.

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Starbucks Tax Row: £10m Climbdown

Starbucks has vowed to pay more corporation tax than it is obliged to as the coffee chain denies hiding profits from the UK taxman.

The company's UK managing director Kris Engskov told Sky News that the decision to "take action" followed anger from its customers in recent weeks.

Starbucks will now pay around £20m in corporation tax over the next two years, after paying nothing last year.

The U-turn comes after the Government pledged to crack down on tax avoidance after public outrage over how little some multinational companies contribute to the UK Exchequer.

Mr Engskov told Sky's Jeff Randall: "We are paying corporate tax and we are going to do that beyond what is required by the law and whether we make a profit in the next two years and I think that is what we should do.

"We have reacted to our customers... We have seen that doing business responsibly is good for the bottom line and this is a good example of that."

In the same interview, he said the US coffee giant had not been profitable in the UK since it brought its brand to Britain 14 years ago.

Kris Engskov runs Starbucks in the UK

And he admitted their 2011 report and accounts may be wrong when they referred to the fact that the UK was making a "significant portion of the net revenue and earnings of our international operations". 

This could mean major penalties for the company.

Since arriving in the UK, Starbucks has paid just £8.6m in corporation tax despite taking billions of pounds in revenue from its shops, which now number more than 750.

The low bill has been explained by the practice of transfer pricing, which involves charges being made by companies in the same group based in different jurisdictions, with the effect of depressing profits in the higher-tax jurisdiction.

In Starbucks' case, that relates to the royalty fee paid to a sister company in the Netherlands for the right to use its brand and coffee recipe.

While the previous tax arrangements were legal, its actions were called into question amid a wider debate about tax avoidance which has also engulfed the likes of Amazon and Google.

The companies were accused of "immorally" minimising UK tax bills in a damning report by the Public Accounts Committee of MPs.

Its chairman, Margaret Hodge MP told Sky News the development was a "step in the right direction" which had been brought about by "people power."

The firm has argued that its UK operations already inject £300m into the UK economy annually.

Mr Engskov, speaking earlier in a speech to business leaders, admitted that the "emotion" surrounding the tax payments had "taken us a bit by surprise".

"Since we started doing business here, we have always organised our tax affairs according to the letter of the law - always," he said.

"We have used existing and agreed-upon measures to pay what is expected of us, but not more - just as most companies do and I am sure many of the people here today run their businesses in similar ways."

But in his remarks to the London Chamber of Commerce he admitted: "With the backdrop of these difficult times, in the area of tax, our customers clearly expect us to do more."

Mike Lewis, tax justice policy adviser for charity ActionAid UK,said: "Starbucks' tax back-down proves that companies do have a choice about where and how they pay taxes."

Other critics suggested the country should wait to see the colour of Starbucks' money.

Hannah Pearce, a UK Uncut spokesperson said: "Offering to pay some tax if and when it suits you doesn't stop you being a tax dodger.

"Starbucks have been avoiding tax for over a decade and continue to deny that it paid too little tax in the past. Today's announcement is just a desperate attempt to deflect public pressure.

"There's no money yet, and hollow promises on press releases don't fund women's refuges or child benefits."

An HMRC spokesman said: "Corporation Tax is not a voluntary tax. The public expects businesses to pay their fair share and we will challenge, through the courts if necessary, any structures or tax payments that do not comply with the UK tax law."

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West Coast Rail Debacle 'Cost Taxpayers £50m'

Taxpayers face a "significant" bill over the botched West Coast rail franchise process, a report from a government spending watchdog has said.

The Department for Transport's running of the West Coast bidding process lacked management oversight, with some staff "confused" by the system, the National Audit Office (NAO) report said.

The Government has already indicated that repaying bidding costs to the companies competing for the franchise is likely to land taxpayers with a bill of around £40m.

Richard Branson's Virgin Trains has been handed the franchise for the next 23 months after the process that saw the route awarded to its rival FirstGroup was abandoned.

In its report, the NAO said staff and adviser costs, legal costs and money for the two reviews set up by the Government following abandonment of the West Coast bidding amounted to £8.9m.

NAO head Amyas Morse said: "Cancelling a major rail franchise competition at such a late stage is a clear sign of serious problems.

"The result is likely to be a significant cost to the taxpayer."

Margaret Hodge branded the bidding process a "fiasco".

Commenting on the report, House of Commons Public Accounts Committee chairman Margaret Hodge said: "The DfT's handling of the West Coast franchise was a first-class fiasco."

Ms Hodge, Labour MP for Barking, said the Dft had "blundered into this major and complex competition for one of the biggest franchises in the country without even knowing how key parts of its policy were to be implemented".

She went on: "The department's conduct was characterised by haste, confusion and weak internal and external communication.

"However, the ultimate failure of this competition was sealed by a rich mix of the department's feeble and forever changing management and almost non-existent oversight."

Bob Crow, general secretary of the RMT transport union, said the final cost of the West Coast fiasco could be as high as £100m.

He said: "This cost will not be borne by the ministers responsible for this debacle.

Bob Crow says the bid debacle could eventually cost £100m

"It will be carried yet again by the British people and will be paid for through cuts in investment and higher fares, with the train operating companies protected and cushioned in the same way as they have been since privatisation was first unleashed."

Michael Roberts, chief executive of the Association of Train Operating Companies, said: "The Government needs to grip the issues that led to the cancellation of the West Coast franchise competition.

"It must get the programme of franchising back on course and give passengers as well as train companies the confidence that new rail franchises will be awarded through a fair and robust process."

Transport Secretary Patrick McLoughlin said: "The NAO has made a number of recommendations that mirror many of the findings of the Laidlaw Inquiry in terms of the work we need to do to strengthen our organisation and the structures within it.

"I am pleased to say that we are already taking swift action on this front and I believe the plans we are putting in place to ensure future franchise competitions are conducted on the basis of sound planning, the rigorous identification and oversight of risk, and the right quality assurance, will prevent a repeat of these lamentable failures."

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Autumn Statement: The Key Points At A Glance

The main measures and forecasts from the Chancellor George Osborne in his Autumn Statement:

:: Most working age benefits, including Jobseeker's Allowance, will rise by 1% in each of the next three years. Changes to welfare "save £3.7bn by 2015/16". Child benefit to rise by 1% for two years from April 2014.

:: ISA limit raised to £11,520 and basic state pension to rise 2.5% from April. Public sector workers to see average 1% rise in earnings.

:: National pay arrangement in NHS and prison service to continue, and no changes to civil service arrangements, but greater freedom for schools to set pay in line with performance.

:: Will collect £7bn more in tax than the last Government to tackle "evasion" and loopholes. More resources (£77m) to ensure multinational firms "pay their fair share" and avoidance is reduced.

:: Fuel duty escalator "scrapped". Planned 3p a litre rise due in January is cancelled.

:: Income tax threshold increased by £235 in 2013. Means no tax paid on earnings under £9,440.

:: "Need to ask more of the better off": No new homes tax. From 2014/15 the pension lifetime pot relief will fall from £1.5m to £1.25m; annual allowance down from £50,000 to £40,000. This affects top 2% of pension pots.

:: Threshold for 40% rate of income tax to rise by 1% in 2014 and 2015 from £41,450 to £41,865 and then £42,285.

:: Corporation Tax rate cut by further 1% from April 2014.

:: The Bank Levy Rate will be increased to 0.130% next year.

:: Capital Gains Tax annual exempt amount to increase by 1% over the same period, reaching £11,100 and Inheritance Tax nil-band rate to rise from £325,000 now to £329,000 in 2015/16.

:: £1bn more for road improvements - upgrading A1, A30, and M25. Funding guarantee for extension to Northern Line tube.

:: £600m more on scientific research infrastructure.

:: £1bn to expand good schools and build more.

:: The deficit has fallen by a quarter in "just two years". Forecast to fall this year to 6.9% of GDP. Borrowing forecast for 2012/13 is therefore £108bn. It will take one extra year to reach his debt target.

:: Office for Budget Responsibility now forecasts GDP growth -0.1% in 2012, blaming Eurozone crisis. Sees growth of 1.2% in 2013, 2% in 2014 and 2.3% in 2015. OBR expects jobless rate to peak at 8.3% (currently 7.9%).

:: Has delivered £12bn in Whitehall spending cuts. More on the way. Government department resource budgets reduced by 1% next year with schools and hospitals protected.

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Autumn Statement: Fuel Duty Hike Is Scrapped

Autumn Statement's Important Bits

Updated: 3:48pm UK, Wednesday 05 December 2012

By Ed Conway, Economics Editor

The Autumn Statement is what the Treasury likes to call a "fiscal event", the rough translation of which is that although this isn't the kind of tax-and-spend measure-fest we see in the spring Budgets, there are nonetheless plenty of measures to get one's head around.

So here, in roughly descending order of significance, are the key points from today: and their implication for the economy and for families around the UK.

1. The Government will miss its debt target

One of the two fiscal rules George Osborne set himself in 2010 was that by the end of this Parliamentary term (for example, between 2014/15 and 2015/16) total government debt should be falling, as a percentage of gross domestic product. The Office for Budget Responsibility (OBR) said that he is on course to miss this target - that debt will only start falling the year after that.

However, rather than pledging to take action to meet the rule, the Chancellor has, intriguingly, said he will, instead, stick to his existing plans. While some might quibble that his existing plans involved meeting his targets, what this means in practice is that he will not impose extra austerity in the short term purely to meet this target.

It remains to be seen whether the Chancellor will, ultimately, manage to get the public finances back in such a state that he meets this rule. The OBR is, after all, merely making predictions about what will happen in a few years' time.

Nonetheless, the decision to ignore the target, for the time being, is an important one. It took the previous government ten years to miss their fiscal targets. This Chancellor has missed one of his in barely more than two.

The big question now is whether the markets construe this as a blow to the UK's fiscal credibility. The reaction from gilts markets has been relatively muted, with the interest rates charged on Britain's Government debt remaining close to 1.8%.

2. Slashed forecasts, and the threat of a triple dip

The OBR also cut its forecasts for economic growth sharply for this and the coming years. So whereas in March it expected the economy to expand by 0.8%, it now expects a contraction of 0.1%.

On top of this, it's also predicting that GDP - the broadest measure of the country's economic output - will shrink by 0.1% in the final quarter of the year.

Given that the generally-accepted definition of a recession is two successive quarters of contraction, this would put the UK within a whisker of an unprecedented triple-dip, just when it had bounced back from the double-dip earlier this year.

However, it is worth emphasising that the OBR believes it will only be one quarter of contraction, rather than two.

As far as the OBR is concerned (and this is something others are likely to dispute) the main reason for the lower growth is the impact of the euro crisis on the European economy, and the subsequent effect on Britain's trade with the EU.

That fits in with evidence that one of the main drags on GDP in recent quarters was trade - however some have argued that the Government's austerity policies may have been more of a drag on growth than had been previously anticipated.

3. A decade of crisis fiscal policy

This is the first opportunity the Treasury has had to plot its broad fiscal plans into 2017/18, and the upshot is yet another year of austerity.

Given that the crisis first hit in mid-2007 with the collapse of Northern Rock, followed by the Lehman Brothers bankruptcy the following year, it means, in effect, that the post-crisis mopping-up operation will have lasted for at least a decade.

And the scale of the austerity in 2017/18 is not to be sniffed at: combined tax increases and spending cuts of £4.9bn in that year alone.

4. The giveaways

There were, of course, a few Christmas goodies in the Chancellor's bag, and unlike at the Budget most of them - save for extra capital spending - had been kept secret.

The tax-free personal allowance (the amount of salary every Briton can earn before paying any tax on it) will rise to £9,440 from next April - equivalent to an extra £47 of cash.

The Chancellor cancelled (not deferred) the 3p fuel tax rise due in January. And he also cut the main rate of corporation tax by 1 percentage point to 21% in 2014.

In broad terms, this will be a £2.27bn giveaway over this and the next three fiscal years. But that's then followed by a £5.2bn takeaway the following two years.

However, this excludes the effect of the following point.

5. 4G

The auction of the 4G spectrum, for the next generation of mobile phones, is forecast to bring in a whopping £3.5bn - even though it hasn't actually happened yet(!)

This will mean that money effectively flatters this year's fiscal figures, and allows the Government to claim that the overall deficit is coming down this year (rather than rising, as it would if the 4G proceeds were not included).

Some will consider this a fiddle. Although others will recall how much money Gordon Brown made from the 3G auction.

6. Cuts for the rich and the poor

In order to keep the public finances under at least some semblance of control, and to help the Chancellor meet his other fiscal target (more on which below), there will be further cuts and controls on spending.

Welfare bills will be fixed at 1% for three years on working age benefits and tax thresholds, raising an extra £3.5bn by 2015.

But this will be balanced out by measures targeting wealthier households: in particular the tax relief people can claim on pensions will be reduced. The lifetime pension pot will be reduced from £1.5m to £1.25m, while the annual allowance one can put into a pension scheme tax-free will drop from £50,000 to £40,000.

According to the Treasury this will only affect the top 2% of pension pots - so is aimed squarely at the wealthy. Although it isn't as deep a cut as had been expected: some thought the annual allowance would drop to £30,000.

On top of this, as announced on Tuesday, there will be an extra £5bn spent on capital investment projects, including new schools and, in London, the Northern Line extension of the London Underground. These will be paid for by money saved from government departments' budgets.

7. Deficit target met, with or without controversial QE switch

The Chancellor's second borrowing rule is that he needs to balance out the cyclically-adjusted budget (in other words, once you've taken account of the temporary fiscal impact of booms and busts) over five years.

This is a rolling target, rather than the static one incorporated into the debt rule, so it's marginally easier for the Chancellor to meet, provided he commits to tightening his accounts towards the end of that time horizon. And that is indeed what has happened this time around.

The structural deficit will indeed be eliminated within five years, according to the OBR.

This achievement threatened to be overshadowed by what many saw as a suspicious shift in cash from the Bank of England's accounts to the Treasury. The Bank was sitting on about £35bn of profits from its quantitative easing scheme: that now goes across to the Government's accounts.

However, the Treasury would have met his deficit target with or without this accounting change, the Chancellor said.

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Virgin Trains Holds On To West Coast Line

Virgin Trains says it has reached an agreement to operate services on the West Coast Main Line for the next 23 months.

It comes after an embarrassing U-turn by the Department for Transport (DfT), which admitted it got its sums wrong after initially awarding the franchise to rival FirstGroup.

Sir Richard Branson, the founder of Virgin, described the bidding process as "insane" and mounted a legal challenge to the decision.

Transport Secretary Patrick McLoughlin said: "We are determined to ensure not only that passengers continue to experience the same levels of service they have in the past, but that services improve.

"There will be a new hourly service linking Glasgow and London and we will also work with Virgin Trains to explore other service improvements."

Virgin said there will be up to 28,000 more seats each day on the line because of the delivery of 106 new Pendolino carriages.

The temporary deal will run from December 9 until November 9 2014, after which the West Coast line will be let under a long-term franchise.

DfT will be able to cut the 23-month period short "by up to six months if a subsequent franchise can be let on a shorter timescale", the Government added.

Three DfT officials were suspended after the Department scrapped the bidding process, and Virgin was expected to be given the go-ahead to run the line for between nine and 13 months.

The new deal will see Virgin run the line on a temporary basis for far longer, and does not involve an interim franchise before the long-term one is introduced.

More follows...

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Sir Philip Green Sells Topshop Stake

By Mark Kleinman, City Editor

Sir Philip Green, the high street billionaire, is to sell a chunk of his burgeoning Topshop empire to outside investors in a move that will cement his reputation as one of Britain's most successful businessmen.

I can exclusively reveal that Sir Philip is in advanced talks about selling a stake of up to 25% of Topman and Topshop. The deal, which is not yet finalised, is expected to value the two chains at close to £1bn, confirming their status as the most lucrative franchises in British fashion.

If completed, the spectacular move will add credence to Sir Philip's ambition of becoming a global retail magnate and will represent the latest in a string of deals which have transformed him as the most powerful man in the UK fashion business.

The buyer of the stake in Topshop and Topman, which will be ring-fenced from the rest of Sir Philip's fashion businesses as part of the transaction, is understood to be one of the joint owners of J Crew, the American clothing business.

Sources close to the talks said the deal was yet to be finalised but that an agreement could be announced as early as this week.

J Crew is owned by Leonard Green & Partners (LGP) and TPG Capital, two big American private equity firms which between them have backed companies such as Debenhams, the department store chain, and Neiman Marcus, the upmarket American retailer.

People close to the situation said that LGP, which is based in Los Angeles, had been in talks with Sir Philip about making an investment in Topshop for some time.

LGP also owns companies in the banking, consumer products and healthcare industries, and this year announced that it had raised a fund of $6.25bn to invest in the coming years.

TPG and LGP bought J Crew for about $3bn in November 2010. J Crew is run by Millard 'Mickey' Drexler, the former chief executive of Gap, one of the most successful US fashion exports of the past 25 years.

The spectacular deal to sell a stake in Topshop will be Sir Philip's most significant business transaction since he failed with his second attempt to buy Marks & Spencer eight years ago.

Since then, the women's fashion chain has enjoyed a period of soaring growth fuelled by its knack of producing on-trend clothing at affordable prices. Its partnership with the supermodel Kate Moss has also kept Topshop in the tabloid headlines and raised the profile of Sir Philip's business.

Sir Philip's latest deal will also mark a decade since he created the Arcadia fashion business following an £800m takeover that set him on the path to becoming one of Britain's wealthiest people. The Sunday Times Rich List reported this year that Sir Philip and wife Tina, the legal owner of the business, were worth £3.3bn.

Arcadia's six other brands, which include Dorothy Perkins and Miss Selfridge, will not be included in the transaction, according to people close to the discussions.

The funds from the stake sale will be used to accelerate Top Shop's international expansion. Sir Philip has been in talks with a wide range of potential investors and partners for several years as he targeted growth in the US and Asia.

Topshop outlets in the US have performed well since flagship stores opened in Chicago, Las Vegas and New York, fuelling the billionaire's ambition to open shops in a much larger number of markets. Earlier this year, he struck a deal with Nordstrom, the New York-listed department store chain, to sell Topshop and Topman-branded clothing in up to 100 outlets.

Sir Philip is understood to be determined that his staff do not see the sale of a stake in Topshop as undermining his commitment to the rest of his brands.

Arcadia employs 43,000 people and is one of Britain's biggest private sector employers. Sir Philip has defended the company's tax arrangements amid the escalating row over corporate taxes because the business is owned by his Monaco-based wife.

He pointed out last month that Arcadia had paid more than £2bn in tax since he acquired the business, including £591m in corporation tax.

Announcing Arcadia's annual results last month, Sir Philip said pre-tax profit had increased before exceptional items from £133.1m to £166.9m in the year to August 25.

Sir Philip also owns the BhS chain, which has struggled amid tough trading conditions on the high street. He has explored a sale of the chain in the past.

Goldman Sachs, Sir Philip's long-standing City adviser, is understood to have been working on the deal to sell a stake in Topshop for at least six months.

Sir Philip refused to comment on the talks to bring a new investor into Topshop and Topman on Tuesday night. LGP could not be reached for comment.

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Tesco Confirms It Could Pull Out Of US

Tesco has confirmed a review of its loss-making US operations with "all options under consideration" as it attempts to convince the City on its wider turnaround plans.

The move, which was exclusively revealed by Sky's City Editor Mark Kleinman last night, could see Britain's biggest retailer close or sell all of its American stores which trade under the Fresh & Easy brand.

As a result of the move it was also announced that Tim Mason, the chief executive of Fresh & Easy, is to leave Tesco today after a career of over 30 years with the company.

Tesco confirmed too that its battle to retain strong market dominance in the UK remained strained as like for like sales, excluding fuel and VAT, fell 0.6% in the third quarter - figures which pile more pressure on the supermarket giant's boss, Philip Clarke.

In his statement confirming the review, Mr Clarke said: "My role is to deliver long-term value for shareholders. Following a year in which my priority for Fresh & Easy was to improve its performance, I have now made a fully informed assessment of its long term potential.

"Whilst the business has many positives, its journey to scale and acceptable returns will take too long relative to other opportunities. I have therefore decided to conduct a strategic review of Fresh & Easy with all options under consideration."

Fresh & Easy currently operates approximately 200 stores employing 5,000 people.

The brand was launched in 2007 but has never made a profit, losing several hundred million pounds overall - £74m in the first half of this year alone.

Kleinman reported that Mr Clarke was already under pressure because of the group's sluggish performance in its home market which resulted in a £1bn transformation programme focused on improving customer service and the availability of fresh produce.

While Tesco has been treading water under its new boss, rivals including J Sainsbury and Waitrose have been performing strongly.

Regarding Tesco's turnaround attempts, Mr Clarke said today: "I am pleased with the performance of our food business in the UK.

"Our six-part plan is about improving the shopping trip for customers for the long term and this is a positive early sign. We've now refreshed nearly 300 stores, upgraded or introduced well over 3,000 products and added innovations such as Delivery Saver to our already successful online grocery business."

He described general merchandise sales as "not good enough."

More follows ...

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Autumn Statement: Osborne Tightens The Screw

Chancellor George Osborne will today warn there are no "miracle cures" as he admits more drastic action is needed to balance Britain's books.

Mr Osborne will confirm in a bleak mini-budget that Whitehall departments are being ordered to find another £5bn in cuts to fund projects aimed at kick-starting the economy.

He is also widely expected to concede that sluggish growth means it will take longer to tackle the deficit and that his key target of having public sector debt falling by 2015-16 may be missed.

Delivering his Autumn Statement this afternoon, Mr Osborne will argue that he is "confronting the country's problems, instead of ducking them".

"The public know that there are no miracle cures. Just the hard work of dealing with our deficit and ensuring Britain wins the global race," he will say.

Cabinet ministers were told yesterday about the plans to use fresh cuts to fund capital projects over the next two years.

They will include £1bn to build or expand up to 100 new academies and free schools over the next two years, with cash directed at areas experiencing a shortage in classroom places.

Departments will be forced to slash spending by 1% in 2013-14 and 2% the following year but health, schools, international aid, HM Revenue and Customs and nuclear decommissioning will be protected.

Treasury sources said the department mental savings amounted to less than the £3bn underspend by departments in the last two years and that the rest was coming from existing budgets.

But Labour claimed the move amounted to an admission that the reduction in infrastructure spending since 2010 had been "a catastrophic mistake" and weakened the economy.

The Chancellor is also expected to target the pension pots of higher earners by slashing the amount of annual tax relief earned on pension contributions from £50,000-a-year to £30,000.

Implementing the full cut could raise as much as £1.8bn for the Government.

A crackdown on people and businesses avoiding or evading tax is also expected, with a £77m boost for HM Revenue and Customs to track down those not paying their fair share.

Mr Osborne will also signal approval for up to 30 new gas-powered electricity power stations, and float possible tax breaks and regulatory reforms to encourage investment in innovative "fracking" technologies for extracting gas from shale deposits.

• Follow Sky's live coverage of the Autumn Statement on Wednesday
•  9am-10am: Jeff Randall
•  10am-5pm: Dermot Murnaghan
•  5pm-7pm:   Live at Five

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Dandy Comic Publishes Its Final Print Edition

By James Matthews, Scotland Correspondent

The Dandy's final printed edition goes on sale today as it marks its 75th anniversary by relaunching as an online-only publication.

Britain's longest-running comic will now be available to download online, and as a smartphone and tablet app.

Dundee-based publisher DC Thompson announced in August that the weekly children's comic would make the transition into cyberspace following dwindling sales in recent years.

The issue features a cameo from Sir Paul McCartney, who said in 1963 it was his ambition to appear in the comic, and a pull-out of the first issue from December 4 1937.

The website will feature old favourites Desperate Dan, Bananaman and Korky the Cat in new animated strips, featuring voice overs and sound effects.

Users will also be able to play interactive games, watch videos and create their very own virtual pet.

David Bain, the comic's head of digital development said: "The Dandy is alive and well, and it's going to continue as usual. It's just as of next week it's going to be available online on a regular basis, with all the famous characters and scripts and storylines and humour, as well as games, goodies and interactivity.

"It's all about fun, humour and a bit of mischief, a bit of pranking."

Ellis Watson, chief executive of DC Thompson said: "I appreciate it's almost a deliberately naive venture into the unknown for a publisher that's been cutting down trees for 75 years, squishing them flat and smearing ink all over them.

"We're not super slick, we're not Silicon Valley, but what we are is some pretty talented animators and story tellers that are really excited about seeing if we can introduce these wonderful characters to another couple of generations."

The first online issue will be free of charge, with following issues being priced at £1.49. A yearly subscription for the digital comic will be £29.99.

During its peak circulation in the 1950s, the Dandy sold two million copies each week. This figure has dropped in recent years to around 8,000.

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Tax: Starbucks, Google And Amazon 'Immoral'

By Darren McCaffrey, Sky News Reporter

Starbucks, Google and Amazon have been accused of "immorally" avoiding paying their fair share of tax in the UK, as the Chancellor prepares a blitz on tax dodgers.

MPs on the Public Accounts Committee criticised the companies for the "unconvincing and, in some cases, evasive" evidence they gave on why their corporation tax payments are so low.

Starbucks told the committee it had made a loss for 14 of the 15 years it has operated in the UK, a claim the committee said it found "difficult to believe".

In a report, the MPs added that Amazon's representative left them frustrated because he was "evasive and unprepared to answer legitimate questions".

They also said Google "undermined its own argument" that profits should be taxed in the countries where they are made because it transfers its non-US profits, including from the UK, to Bermuda, which has a more advantageous tax system.

Starbucks says it is reviewing its tax arrangements

Margaret Hodge, who chairs the Public Accounts Committee, said: "Global companies with huge operations in the UK generating significant amounts of income are getting away with paying little or no corporation tax here.

"This is outrageous and an insult to British businesses and individuals who pay their fair share.

"Corporation tax revenues have fallen at a time when securing proper income from taxes is more vital than ever.

"There is little credible information about what is going on. The evidence we took from large corporations was unconvincing and, in some cases, evasive."

Starbucks has now declared that it is preparing to change its tax affairs so that it pays more into Britain's coffers and there is growing pressure on others to follow suit.

The report was published as George Osborne prepares to unveil a £154m crackdown on wealthy companies and rich individuals who dodge tax.

Officials will be ordered to use the cash to draft in an army of investigators to target high earners who aggressively avoid or evade paying tax.

The money will also fund extra staff to speed up work challenging multinationals' transfer pricing arrangements to stop global companies using legal loopholes to shift profits out of the UK.

However, Mr Osborne has warned against pricing Britain out of the world economy.

"If we make our taxes less competitive, that will just mean more companies stay out of Britain," he said.

But Katja Hall, from the Confederation of British Industry, told Sky News that tax avoidance is not a widespread problem.

"Companies pay £163bn in tax in the UK every year and the large majority of companies pay the right amount of tax," she said.

The Institute of Directors condemned the "hectoring from Westminster" and called for the tax system to be simplified.

Director General Simon Walker said: "If these firms are immoral to take advantage of tax loopholes, then politicians are surely immoral for creating the loopholes in the first place.

"Taxes should be simpler to cut down on avoidance and relieve the burden our complex tax code puts on companies who do try to do the right thing."

An HMRC spokesman said: "HMRC ensures that multinationals pay the tax due in accordance with UK tax law. We have been very successful in reducing tax avoidance by large businesses in recent years.

"We relentlessly challenge those that persist in avoiding tax and have recovered £29bn additional revenues from large businesses in the last six years, including £4.1bn in the last four years from transfer pricing enquiries alone. These figures speak for themselves."

The latest tax crackdown will be outlined in this week's Autumn Statement, which is also expected to contain bleak news for benefits claimants.

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Exclusive: Germans Set To Feast On KP Snacks

By Mark Kleinman, City Editor

One of Germany's biggest food companies is poised to snatch control of household name British food brands including Hula Hoops and KP Nuts after a £400m-plus raid on their owner.

I understand that Intersnack, which has been in talks with United Biscuits' owners for several months, is close to seeing off rivals in the auction of the British food producer's snacks division.

If successfully completed, a deal would make Intersnack one of the most prominent food companies in Britain.

UB's snacks arm owns the McCoy's, Mini Cheddars, Skips and Phileas Fogg brands, some of which have been staples in British consumers' kitchens for decades.

People close to the talks cautioned tonight that Intersnack and UB had yet to reach a formal deal and that the negotiations could still fall through.

The German group has been vying with a number of private equity firms to win control of KP Snacks.

Capvest, a specialist investor in the consumer goods sector, also tabled an offer for the UB division but is thought to have been outbid. Pamplona Capital, another private equity firm, and Calbee, a Japanese food company, are not thought to have submitted formal bids.

UB is owned by Blackstone and PAI Partners, two private equity firms. They will continue to own the group's biscuits division, which is home to brands including Penguin, McVitie's Jaffa Cakes and Go Ahead, with a sale of that unit possible next year.

Credit Suisse is advising Blackstone and PAI, while Goldman Sachs is advising Intersnack. The current owners tried to sell UB in its entirety two years ago but failed to secure a deal following talks with Bright Food, a Chinese company.

Bright Food subsequently acquired Weetabix, the breakfast cereal producer, a takeover that ranked among the most significant so far of a western brand by a Chinese counterpart.

Blackstone and PAI declined to comment.

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Singapore Airlines In Virgin Sell-Off Talks

Singapore Airlines has confirmed it is in talks to sell its 49% stake in British carrier Virgin Atlantic.

SIA did not name the interested parties, but Reuters news agency reported that Delta Air Lines had held recent talks to buy SIA's stake.

Delta, the second-largest US airline by operating revenue, has been looking to acquire a stake in Virgin Atlantic for more than two years in an effort to expand its access to London's Heathrow airport, sources said.

Previous talks broke down over price and other issues, and there is no guarantee that the recent discussions would result in a pact, Reuters quoted the sources as saying.

Delta wants to expand at Heathrow, which operates at close to full capacity

The European Union requires that EU carriers be under European control, meaning Delta would need to involve an EU airline if it sought majority control of Virgin.

Delta has been considering ways to partner with Air France-KLM, which could take an additional stake in Virgin and allow the carriers to acquire majority ownership. Virgin founder Sir Richard Branson owns 51% of the airline.

Delta has made clear that it would like to expand at Heathrow, a lucrative airport for prized corporate passengers where landing slots are generally hard to acquire.

Virgin is the second-largest carrier at Heathrow after British Airways.

Branson, who set up Virgin Atlantic in 1984, has been weighing the airline's future for some time and two years ago appointed Deutsche Bank to examine offers.

"We are always talking to many airlines on a number of different matters but we never comment on the details of these discussions," a Virgin Atlantic spokeswoman said. Delta declined to comment.

Heathrow, Europe's busiest airport, is operating at close to full capacity after the Government blocked its expansion in 2010.

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Mega Monday To Make Online Sales History

Online retailers in the UK are expecting today to be the busiest shopping day in history.

Recent years have seen online shopping figures consistently peaking on the first Monday in December, dubbed Mega Monday.

Visa Europe predicts £320m will be spent on its cards alone as online transactions top 6.8 million, an increase of 21% on last year, making December 3 this year the busiest online shopping day in history.

It said: "A combination of pay day for the majority of consumers falling on the last Friday of the month and a weekend spent browsing the shops results in shoppers logging on to buy their gifts online on the subsequent Monday.

"All of these factors will result in consumers spending £222,222 per minute, making 4,722 transactions every 60 seconds."

This month will also see more than £11bn withdrawn from cash machines, equating to more than £41,000 per second in the pre-Christmas peak.

Sainsbury's Bank predicts a 1.3% rise in cash withdrawals compared with December last year, to reach a total of £11.1bn.

Friday December 21 is expected to be the busiest day for cash withdrawals, as it is traditionally when shoppers rush to buy last-minute gifts, while this Monday could give online retailers boosts of up to 70%.

Visa Europe commercial director Dr Steve Perry said: "On Mega Monday, people across the UK will go online and use their Visa cards to make 6.8 million transactions, the most in a single day in UK history. That's 21% more than in 2011, signalling that consumers are becoming increasingly accustomed to the advantages of shopping online for everyday purchases and special items, especially in the lead-up to Christmas."

Amazon.co.uk also predicts Mega Monday to be its biggest single day, with orders set to peak at 9.20pm.

Christopher North, managing director of Amazon.co.uk, said: "Monday December 3 could be the busiest day in the history of Amazon.co.uk, and we're preparing for it by hiring more than 10,000 seasonal employees across our eight UK fulfilment centres."

Marks & Spencer says it is prepared for what it expects to be its busiest day of the year.

Online analyst Experian expects UK consumers to make 115 million visits to retail websites this Monday, an increase of 36% on last year.

The busiest shopping day on the high street often falls two days before Christmas Day, with the weekend of December 22 and 23 expected to draw peak numbers of shoppers this year.

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George Osborne Plans Tax Avoidance Crackdown

By Darren McCaffrey, Sky News Reporter

Chancellor George Osborne is set to unveil a £154m blitz on wealthy companies and rich individuals who dodge tax.

Officials will be ordered to use the cash to draft in an army of investigators to target high earners who aggressively avoid or evade paying tax.

The money will also fund extra staff to speed up work challenging multinationals' transfer pricing arrangements to stop global companies using legal loopholes to shift profits out of the UK.

Mr Osborne's latest tax crackdown will be outlined in this week's Autumn Statement, which is also expected to contain bleak news for benefits claimants.

Margaret Hodge chairs the Public Accounts Committee

Details of the plan emerged as a damning report by the Public Accounts Committee (PAC) condemned global companies with huge UK operations that are getting away with paying little or no corporation tax.

The tax avoidance plans employed by companies like Starbucks, Amazon and Google are described as "outrageous and an insult to British businesses and individuals who pay their fair share".

Starbucks has now declared that it is preparing to change its tax affairs so that it pays more into Britain's coffers and there is growing pressure on others to follow suit.

Margaret Hodge, who chairs the PAC, said: "It does feel as if corporation tax has become a voluntary tax and if you look at the money the Treasury gets in from corporation tax, in the last year alone we have over £6bn less.

Starbucks says it is reviewing its tax arrangements

"At times like this when money is tight we need every penny of tax we can get."

The report is also critical of Her Majesty's Revenue and Customs (HMRC) saying that it lacked determination and looked way too lenient in the face of aggressive tax planning.

But Katja Hall, from Confederation of British Industry, told Sky News that tax avoidance is not a widespread problem.

"Companies pay £163bn in tax in the UK every year and the large majority of companies pay the right amount of tax," she said.

The PAC report wants so called "tax scroungers" to be named and shamed in much the same way as benefit cheats.

However, Mr Osborne warned against pricing Britain out of the world economy.

"If we make our taxes less competitive, that will just mean more companies stay out of Britain," he said.

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Millions Of Households 'Feel Squeezed'

More than 10 million households are feeling financially squeezed and almost one in 10 have defaulted on a loan, bill or housing costs, a consumer group has said.

Releasing its findings ahead of Chancellor George Osborne's Autumn Statement this week, Which? urged the Government to ensure spiralling energy and food costs are kept under control.

The group's "squeezometer" found almost one in four people are feeling financially squeezed, equating to 10.2 million households.

Researchers found 9% of households have defaulted on a loan, bill or housing costs.

Some 6% of households have gone into an unauthorised overdraft or used a payday loan to tide themselves over.

Researchers highlighted consumers' top worries as the price of fuel, energy and food.

A string of energy firms have recently announced bill hikes, putting further pressure on families this winter.

Food costs are also on the increase, and last week the Office of Fair Trading said eight  supermarkets have agreed to a set of principles following concerns over special offers and promotions for food and drink.

The supermarkets have agreed not to artificially inflate prices to make a later "discount" look more attractive.

Which? executive director Richard Lloyd said: "With 10 million households feeling the squeeze and consumer confidence remaining low, the government has a job on its hands to convince people that everything possible is being done to keep unavoidable costs like energy and food bills under control.

"We're looking for further progress in reforming the energy market, an end to misleading food price promotions, and more competition in banking to take some of the pressure off hard-pressed consumers."

The research asked 2,100 UK adults in October if they had experienced a range of financial difficulties in the previous month.

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Osborne Eyes Tax Evaders And Pensions Of Rich

The Chancellor has promised to hunt down tax evaders and tax the wealthy - warning that everyone must make a contribution.

In his Autumn Statement on Wednesday, George Osborne is set to hit the pension pots of the wealthiest by slashing the £50,000 annual tax relief cap on pensions to as little as £30,000, according to The Sunday Times. That could raise between £600m and £1.8bn.

Tax evaders are also under the scanner of the Chancellor who told The Sun "we are hunting down those who evade tax wherever they try to hide".

The comments come as several leading football clubs face questions about their tax arrangements and amid an unprecedented public outcry over multinational corporations' tax avoidance through complex offshore mechanisms.

Starbucks, which recently came under fire from MPs over its tax affairs, is reportedly in talks with officials at Revenue and Customs about doing a deal.

In an article in The Sun, Mr Osborne said: "We are still all in this together. Everyone must make a contribution to dealing with our debts, from the richest in our society to those living a life on benefits.

"Every one of my Budgets has raised more from the richest. The situation under Labour where top people in the City were paying lower tax rates than their cleaners has been ended."

Meanwhile, shadow chancellor Ed Balls told the Sunday Mirror that a change of course was needed from David Cameron and Mr Osborne.

"When the medicine makes the patient sicker, you don't just take more of it. We need to change the medicine, or change the doctor."

Any form of mansion tax - or splitting council tax bands - is likely to be ruled out in the coming statement.

There is also speculation a planned 3p per litre rise in fuel duty planned for January may be delayed.

Some benefits are also expected to be frozen.

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Making Sense Of Britain's Lopsided Recovery

One of the most common observations you encounter here in London, where Sky News is based, is that despite all the headlines about recession - about the fact that this has been the worst slump in modern British history - it often doesn't feel as if there has been a recession at all.

And it turns out that this is quite right - London and the South East never experienced a double-dip recession at all.

And parts of London - particularly the east end of inner London - didn't even see a fall in their economic output in nominal terms during the deepest years of recession, in 2008/09, according to analysis of official statistics by Sky News.

Meanwhile, other parts of the country have seen the sharpest and deepest collapse in recent economic history. The double-dip recession was largely experienced by Northern Ireland and the North East of Britain, according to analysis from Capital Economics.

The difference in economic experience between London and other parts of the UK (it's not even necessarily just a North-South divide as parts of the South are also suffering) is greater than ever before on modern record. And the gap has widened more here in the UK than in any other major economy in recent decades.

With both the Labour and Conservative leaders trying to claim the mantle of being the "one nation" party, it's clear that in economic terms, Britain is anything but.

We have been travelling to postcodes all around the UK to see how the experience of the recession, and the fledgling recovery, has varied throughout.

We were disturbed by much of what we saw - families facing more hardship than ever before, while others in London are oblivious. Some households stuck deep in negative equity while others reap the benefits of a property boom.

We have produced a series of television and web pieces about the divergence in experiences depending on the postcode in which you live; we're calling it 'The Lopsided Recovery'.

The green line shows the double-dip recession

The first of those pieces concerns the overall growth picture. The official GDP figures show that Britain faced a very sharp recession in 2009, then recovered in 2010 and early 2011, only to face a double dip in 2012. But this masks an enormous divergence between regions.

The North East has had a far deeper recession than the broader UK. The size of its economy is still more than 5% below its 2008 peak. Meanwhile, London's economy has more than regained its pre-crisis peak. It never even saw a recession in 2012.

And if you look in nominal terms (in other words, before you adjust for inflation), East London expanded in 2008 and 2009. It was the only part of the UK to avoid a nominal-terms contraction in that year - aside from Aberdeen, home to the North Sea oil industry, which also grew throughout.

Eurostat said the disparity is greater in Britain than other EU nations

These kinds of divergences in experience are not unusual in an economy - there are always regional disparities in all countries as it's impossible for everyone to be growing at precisely the same speed all the time. But there is evidence that the gulf in experience is greater in the UK than elsewhere.

According to official EU figures, the disparity in real incomes between regions in the UK is greater than in any other European country.

An economic paper produced by the Department for Business, Innovation and Skills a couple of years ago found that while the regions of Britain converged economically more than other major countries between 1950 and 1985, between 1995 and 2007 they have diverged more than in other nations.

Convergence has been reversed in recent years

The worrying trend for the UK is that such disparities have only widened in the recent recession. This looks stark enough on paper - it is even more striking in person.

In Newry, Northern Ireland, where the economy is also more then 5% below the pre-crisis peak, Damien Quinn of one of the neighbourhood community associations, talks of a sharp rise in suicides.

Worn out by years of trying and failing to get work, young men (it is almost always young men) are killing themselves to escape the alternative: permanent unemployment, drug dependence and poverty. The latest funeral was just the week before he spoke to us.

In Hartlepool, Angie Wilcox of the Owton Manor Residents Association, sees a growing number of people coming through her doors for cheap food and help as they battle unemployment. She fears that welfare reforms will only make locals more desperate.

Meanwhile, in East London's Old Street, the area nicknamed 'Silicon Roundabout', Julia Fowler, who runs tech fashion start-up Editd, says she has barely seen any evidence of recession.

It is harder than ever to find decent employees; she has been expanding the business since it started in the depths of recession. For those in London, the main problems are that the cost of living - particularly when it comes to housing - just keeps rising, along with the local economy.

There's nothing inherently perverse about one part of the country performing better or worse than another. After all, a nation state is a union of different economic and cultural areas. However, the longer one part of the country remains so far shy of the rest, the more it will have to be subsidised by its richer regional neighbours.

This kind of regional redistribution already happens: according to the Centre for Economics and Business Research, London taxpayers pay a subsidy of around 20% which goes to its regional neighbours; Northern Ireland receives a subsidy of almost 30%.

The longer such imbalances persist, the more resentment is generated on both sides: one has only to look at Greece and the rest of the Eurozone, which is an analogous situation, except in a dysfunctional currency area.

And the longer certain parts of the country are excluded from economic success, their people consigned to more or less permanent unemployment, the more difficult they will find it to regain their feet at any point in the future.

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