Cameron's Speech Rebuked By Fiscal Watchdog

David Cameron has been rebuked by the Office for Budget Responsibility about the impact of his Government's austerity measures on economic growth.

In a high-profile speech on Thursday, the Prime Minister said the OBR was "absolutely clear that the deficit reduction plan is not responsible" for depressed growth, adding "in fact, quite the opposite".

But the head of the independent fiscal watchdog has written to Mr Cameron saying he misrepresented its position.

Chairman Robert Chote wrote to Number 10, disputing the claims.

He insisted that it believed there was a short-term effect and that "fiscal consolidation measures have reduced economic growth over the past couple of years".

The strong retort from the watchdog came in response to a passage from the Prime Minister's speech which he used to insist there was "no alternative" to the Government's strategy.

"There's not some choice between dealing with our debts and planning for growth," he said.

"As the independent Office for Budget Responsibility has made clear growth has been depressed by the financial crisis, the problems in the eurozone and a 60% rise in oil prices between August 2010 and April 2011.

"They are absolutely clear that the deficit reduction plan is not responsible. In fact, quite the opposite."

But the OBR published a letter sent to Number 10 on Friday by Mr Chote in which he took exception to the claims.

"For the avoidance of doubt, I think it is important to point out that every forecast published by the OBR since the June 2010 Budget has incorporated the widely-held assumption that tax increases and spending cuts reduce economic growth in the short term."

He added that an impact of "external inflation shocks, deteriorating export markets and financial sector and eurozone difficulties were more likely explanations" than incorrect multipliers for the reason growth was even weaker that initially forecast.

A Downing Street spokesman said: "The OBR has today again highlighted external inflation shocks, the eurozone and financial sector difficulties as the reasons why their forecasts have come in lower than expected.

"That is precisely the point the Prime Minister was underlining."

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US Boom: Jobs Jump By 236,000 In February

The number of people hired in the United States by non-farm employers jumped by 236,000 in February, exceeding expectations.

The unemployment rate also dropped to 7.7% from 7.9% in January, the lowest level since December 2008.

The Obama administration said it is evidence that the economic recovery is "gaining traction".

New jobs have averaged more than 200,000 per month since November last year.

Wages have increased and the gains were broad-based, led by the best construction hiring in six years.

New construction jobs continue to build up the US economy

But there was one negative detail in the government's February employment report.

Employers added fewer jobs in January than first estimated.

Job gains were lowered to 119,000 from an initially reported 157,000.

However, December hiring was a little better than first thought, with 219,000 jobs added instead of 196,000.

The upbeat figures saw a strengthening of the dollar, with Sterling sliding beneath the $1.49 figure.

Many economists expected hiring to fall in early 2013 largely due to the ongoing uncertainty surrounding the US budget, higher tax rates and looming federal spending cuts that took effect in March.

Yet the latest jobs report indicates job creation is speeding up.

However, early 2011 and 2012 also saw hiring jumps only to see the figures die back as the year went on.

White House economist Alan Krueger noted in a statement that the new unemployment rate was measured before $85bn (£56bn) in automatic budget cuts started taking effect.

The administration has warned that the cuts could have a negative impact on employment and economic growth.

It is urging Congress to move toward a "sustainable federal budget" by closing tax loopholes, enacting entitlement reforms and cutting spending.

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More Than 400 In Barclays Millionaires' Club

By Mark Kleinman, City Editor

More than 400 staff at Barclays earned pay deals worth more than £1m last year, a reduction on 2011 but a substantial number for a year in which the bank's reputation was dragged through the mire.

According to Barclays' annual report, which was published on Friday morning, the number of employees paid more than £1m fell from 473 in 2011, with proportionately larger falls in the number paid more than £2.5m and in excess of £5m.

The disclosures are the most detailed given yet by Barclays and are designed to demonstrate a new commitment to transparency in the way it pays its top staff.

The 356-page annual report confirmed Sky News' revelation last month that Barclays had imposed around £450m of financial penalties on staff because of the Libor-rigging scandal through a combination of clawback and bonus reductions.

Barclays said it had decided to comply ahead of schedule with new Government requirements for companies to publish a single figure for the total remuneration of executive directors.

By one measure, this showed that Antony Jenkins, the new chief executive, earned a total of £1.129m in 2012, although this excludes a long-term share award valued at £1.467m.

The bank did not identify the pay package awarded to Rich Ricci, the chief executive of its investment bank, who was one of four executives to forego their annual bonus because of the Libor scandal, although he is thought to have received less than £3.5m in total.

Five employees were paid more than £5m in 2012, although the bank declined to identify them or specify what their total remuneration had been.

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Bank Holds Off On More Economic Stimulus

The Bank of England's Monetary Policy Committee (MPC) has voted not to pump billions of pounds more into the UK economy, despite fears of weak growth.

In what was likely to have been a close decision on extending quantitative easing (QE) after a 6-3 split among the nine-member MPC the previous month, the bank also held the base rate of interest rate at 0.5% - keeping it at a historic low for four years.

The QE programme, which currently stands at £375bn, was likely to have been kept on hold because of signs of growing activity in the main service sector of the UK economy.

Pressure for more action came amid signs that the Bank of England's flagship Funding for Lending scheme was so far struggling to encourage banks to lend more to households and businesses.

There were also disappointing snapshots of output in the manufacturing and construction sectors.

Nevertheless, there is a growing chorus among economists that the UK will avoid a triple-dip recession.

The British Chambers of Commerce (BCC) allied itself to that view in its latest economic forecast, despite cutting its estimate for GDP output to just 0.6% for 2013.

It now expects the economy to recover from its 0.3% contraction in the fourth quarter and grow in the current quarter - albeit by a paltry 0.1%.

BCC chief economist David Kern said: "We expect quarterly growth to increase very gradually over the next two years, but it will remain modest and below-trend for some time."

The flat-lining performance leaves Chancellor George Osborne under pressure ahead of his Budget statement to MPs on March 20. But his handling of the economy has been further backed by the Prime Minister, who has dismissed calls for a borrowing-fuelled spending drive, warning it would leave families facing devastating interest rate hikes.

While the Government is facing intense political pressure to change course and invest in the recovery, there remains scope for the Bank of England to act in support of growth.

Deputy Governor Paul Tucker recently told MPs that he had even put negative interest rates up for consideration as part of efforts to kick-start the recovery.

Others are worried about the prospect of more QE.

Howard Archer, chief UK and European economist at IHS Global, said it risked weakening the pound further.

"There is a danger that doing further QE at a time when sterling is already under serious downward pressure could cause the pound to fall too far too fast, which would be both destabilising and perhaps over-stoke inflation risks," he said.

:: The European Central Bank kept its core interest rate for the euro area at 0.75% for the eighth successive month.

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Barclays Chief Jenkins Hints At Jobs Axe

By Mark Kleinman, City Editor

The chief executive of Barclays has suggested that the growing automation of banking services could result in tens of thousands of jobs disappearing from its workforce during the next decade.

I have learned that during meetings with leading shareholders following Barclays' annual results last month, Antony Jenkins said that he envisaged a future in which the bank employed as few as 100,000 people. Barclays currently employs approximately 140,000 staff.

Mr Jenkins is understood to have discussed during the investor meetings the objective of Barclays becoming a self service-oriented company which allows its remaining staff to focus on delivering "added value" to customers and clients across its retail, investment and wealth management operations.

The suggestion by Mr Jenkins could stoke concerns that he is planning a vast redundancy programme, although a Barclays insider insisted that Mr Jenkins had not been setting a formal target for job cuts and that his comments should be regarded as "blue-sky thinking about the long-term future".

"He was talking about how the bank needs to be more efficient in general terms," a person close to Mr Jenkins said. "It's about how we do the same or more with a smaller headcount, but there is no specificity about how much smaller."

Antony Jenkins replaced Bob Diamond as chief executive last year

Even so, the reference to such a potentially dramatic reduction in the size of Barclays' workforce is inflammatory, given Mr Jenkins' effort to position it as the 'Go-To' bank for stakeholders. Mr Jenkins took over as chief executive in the wake of the Libor-rigging scandal that saw Barclays fined £291m by regulators in the UK and US.

His comments come as banks face growing pressure from investors to make themselves more efficient amid pressure from regulators to hold more capital. The major UK-based banks have consistently underperformed in terms of delivering returns to investors since the financial crisis because of their bloated cost bases, and have been under pressure to reduce bonus pools in order to deliver more capital to shareholders.

Barclays has more than 1,650 branches in Britain, employing tens of thousands of people. Achieving job reductions on the scale implied by Mr Jenkins during his recent meetings would, insiders said, principally involve Barclays' investment bank's back office as well as the closure of some branches both in the bank's home market and overseas, although a spokesman said that such actions were not on the bank's immediate agenda.

Any large-scale closure of UK branches would entail further bad news for high streets ravaged by the collapse of a string of prominent retailers.

Mr Jenkins has already set out a concrete cost reduction programme at Barclays, which will involve £1.7bn being eradicated from the bank's cost-base by 2015. 3700 jobs will be axed as part of the plan to address costs, which the Barclays chief executive referred to last month as a "strategic battleground".

Many of the proposed job cuts are taking place within Barclays' investment banking arm, with the bulk of the rest focused on its retail banking operations in troubled Eurozone countries such as Italy and Spain.

Accompanying last month's full-year results, in which Barclays reported a profit of £246m, Mr Jenkins gave a presentation about the future of the bank in which he referred to the "21st Century industrialisation" of the industry.

The "large-scale focused automation of core processes", "globalisation of processes [and] reduced real-estate footprint" and "customer and client-centric self-service via best-in-class digital and mobile" were all signalled by the Barclays chief in his presentation.

Barclays has been a pioneer in internet and mobile-based banking and payment services, including through its money-transfer app, Ping-It, which has been hugely popular as customers increasingly switch to digital channels.

One investor said Mr Jenkins' presentation underlined his determination to overhaul Barclays in a more radical way than even that attempted by Bob Diamond, his predecessor.

Barclays declined to comment on Mr Jenkins' remarks.

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PM: We'll Come Through If We Hold Firm

Cameron Firm On Tough Resolutions

Updated: 4:54pm UK, Thursday 07 March 2013

By Jon Craig, Chief Political Correspondent, in Keighley

David Cameron came to Bronte country to talk about human emotions … or rather the impact on them of these tough economic times.

"I know things are tough right now," he said at the beginning of his big speech on the economy in a smart, modern workshop at the Cinetic Landis factory, heading up hill out of Keighley towards the moors.

"Families are struggling with the bills at the end of the month. Some are just a pay cheque away from going into the red. Parents are worried about what the future holds for their children."

Spoken with Bronte-like passion.

It was as if he wanted to answer straightaway the criticism of his opponents - and some Conservative MPs - that he's a rich, posh boy who doesn't understand the hardship facing ordinary families.

But after the "I feel your pain" opening, he ended his speech with a defiant message on the economy, rejecting calls for a U-turn on spending cuts and repeating Margaret Thatcher's famous slogan: "There is no alternative."

"This month's Budget will be about sticking to the course," said the Prime Minister. "Because there is no alternative that will secure our country's future."

Aah, but there is, his critics are arguing. And those critics now include Vince Cable, according to Labour, after his New Statesman article calling for more borrowing to fund more capital spending.

But David Cameron wasn't having any of that.

After he said in his speech that he was prepared to "roll up his sleeves and fight" opponents of various Government initiatives like the HS2 rail project, I asked him in his Q&A if he would do the same with his Business Secretary.

No need, he said, somewhat unconvincingly. "He agrees with the Government's policy," he said. "The article he wrote in the New Statesman was cleared and approved by the Treasury."

Really? By Danny Alexander, perhaps, but not George Osborne, I fancy.

Vince Cable's intervention rather took the gloss off the PM's speech in the big, shiny workshop in this highly impressive machine tools factory, where they're working seven days a week to meet their export demands from China and other countries.

The Prime Minister was clearly intending, less than a fortnight before the Budget, to give a few pointers to the Chancellor's statement on March 20. There would be more help for people to get mortgages, he hinted, and possibly more help for motorists hit by rising fuel bills.

He described himself as a "low tax Conservative" and said the only way to cut taxes was to cut the deficit. Labour, he said, believed there was a "magic money tree". From branding Ed Miliband a "croupier in the casino" at PMQs to a "magic money tree". Colourful!

But the main thrust of his defiant message came at the end of his speech, when he concluded by insisting the Government would "stick to the course" because it was about "doing the right thing".

Why? Because, he said, if there were to be good jobs, good public services and money to look after people in their old age, the deficit had to be cut and there must be no more "squandering billions on welfare for people who could work".

This speech came just a few days after Mr Cameron pledged in a Sunday Telegraph article that there would be no "lurch to the Right".

And yet here he was repeating Mrs Thatcher's "There is no alternative" slogan.

But then Margaret Thatcher has always been David Cameron's heroine, in true Wuthering Heights style.

Was Maggie Catherine Earnshaw to Dave's Heathcliffe, I wonder? No, it was Gordon Brown who was likened to the brooding Heathcliffe.

Wait a minute, the PM also talked here about "tough choices", a Tony Blair phrase.

Perhaps Dave is Jane Eyre to Blair's Mr Rochester? No, Frank Field compared Gordon Brown to him too.

Many Tory MPs see the Prime Minister as a flawed hero these days, however.

No wonder he only stayed in Bronte country for about an hour and a half.

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EasyJet: Budget Airline Joins FTSE 100

Budget airline easyJet has been promoted to the FTSE 100 Index after a record run for its share price.

The Luton-based firm is the London market's 82nd largest company and with a value of £4bn is large enough to earn a place among the ranks of blue-chip companies in the latest quarterly review of FTSE indices.

Its shares closed at a record high of 1017p on Friday, having stood at just under 400p when Carolyn McCall took over as chief executive in July 2010.

The company, which joined the stock market in 2000, has benefited from an improved operational performance and the launch of allocated seating, which helped it attract 10 million business passengers last year.

EasyJet has consistently beaten City expectations for profits but a long-running war of words with founder and major shareholder Sir Stelios Haji Ioannou has overshadowed some of its recent success.

Sir Stelios, whose family holds around 36% of the company's shares, has been unhappy at plans to place a large order for a fleet of more fuel-efficient aircraft.

At its recent annual meeting, the entrepreneur was unsuccessful in a vote against the company's remuneration report and re-election of Sir Mike Rake as chairman.

Sir Mike has already said he will leave the company in the summer because easyJet's promotion to the FTSE 100 Index will conflict with his role as chairman of another blue-chip company, BT Group.

The FTSE 100 is the index of the biggest firms listed in London.

It will be the first time that Easyjet has made it into the blue-chip index.

The London Stock Exchange is also returning to the FTSE 100 after a nearly three-year absence.

The changes will take effect from the start of trading on Monday March 18.

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RBS Apology As Customers Hit By New IT Glitch

RBS, NatWest and Ulster Bank have apologised after many customers were unable to use their accounts online or withdraw cash for several hours.

The technical problems, which started on Wednesday evening, come less than a year after they were hit by a computer meltdown that left millions of people unable to access their money.

"We are disappointed that our customers have faced disruption to banking services for a period this evening, and apologise for that," the banks said in a message on Twitter.

The banks said their systems were back to normal around three hours after they admitted there was a problem - but not before hundreds of customers took to Twitter to voice their frustration.

Many said they had difficulties using cash machines or logging into online banking, while others complained their cards had been declined.

Steve Ireland, who lives in London, told Sky News he discovered the problem when he tried to pay with his card at a supermarket.

RBS boss Stephen Hester had to apologise for a glitch last June

"I was out shopping after a night out with my partner to celebrate a birthday," he said. "I went into a very big chain supermarket and got to the cash desk with all my shopping, only to be told the card was declined.

"It was a really bad experience and very embarrassing. You get evil looks from the cashier when you can't pay."

Stuart Keel, from Cornwall, said he tried to use a cash machine but it was not working.

"We went to the supermarket thinking we could use our cards in there, no problem," he said.

"While we were walking around I was using my NatWest (smartphone) app and it wasn't working at all."

He said his card was then declined at the checkout.

"I thought, 'There's something not right here'," he added.

In June last year, millions of people were affected when a software update failed at the banks.

Customers were unable to view up-to-date balances, while payments such as direct debits for bills were not made and some wages were not received.

Stephen Hester, the chief executive of the banks' parent company RBS Group, which is 80% state-owned, was forced to apologise for the problems at the time and £100m was put aside to compensate customers.

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Daw Mill Mine Closes Leaving 650 Jobs At Risk

The owner of Daw Mill Colliery confirms it is to close, ending 47 years of coal production at the Warwickshire mine.

UK Coal Mine Holdings said the majority of its 650-strong workforce are facing redundancy.

The move comes after what the company's chief executive described as a "ferocious fire" at the mine last month.

"This has been a terrible week, not just for the company and its employees but also for the energy security of the country," Kevin McCullough said in a statement.

"Having successfully completed the restructuring, and being only weeks away from returning to healthy production, this ferocious fire has dealt a blow to everything we tried to achieve over the last 12 months - in just ten days.

"We are now exploring the possible transfer of some colleagues to our other mines. 

"Regrettably however, this news is likely to see the majority of the Daw Mill workforce being made redundant and our thoughts and best wishes are with these colleagues and their families at this difficult time."

More follows...

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Miliband: Low-Skill Immigration Is Too High

Britons must get a "fair crack of the whip" when it comes to competing for jobs with immigrants, Ed Miliband will say later.

In a party political broadcast, the party leader will admit Labour got the immigration issue wrong while in power and should not have dismissed the concerns raised by ordinary people.

He will insist that diversity is "good for Britain", but will say that migration needs to work for all of the country's people, not just some.

Reducing the number of low-skilled migrants coming to the UK will be part of Labour's "new approach" to the issue.

Tougher enforcement of the minimum wage will be among the measures he suggests, along with tighter controls on employment agencies to stop migrant workers being brought in from overseas to undercut homegrown staff.

Miliband: 'Rules need to be fair'

The broadcast - to be shown on TV channels in England this evening - comes ahead of a major speech by shadow home secretary Yvette Cooper on Thursday, in which she is expected to set out a raft of new policies.

These include more prosecutions and higher fines for paying less than the minimum wage, as well measures to tackle "gangmasters" employing illegal migrants in the social care, hospitality and construction industries - including a ban on housing workers in over-crowded accommodation.

Ms Cooper is also expected to detail proposed reforms of the immigration system and action to improve the training of UK workers so they can fill jobs in shortage occupations.

Aides said Labour's "long thought-through" approach contrasted with the "kite-flying" of Government ministers, who have floated a range of possible initiatives to limit Romanian and Bulgarian immigration when the countries' nationals gain full freedom of access to the UK at the end of the year.

Labour argues that policies must address the key "pull-factor" for low-skilled migrants, which is the availability of work.

In his broadcast, Mr Miliband will say: "Britain's diversity is a source of our great strength. It makes us a more successful country.

"But people can lose out if migration isn't properly managed. The pace of change can be too fast or people can see their wages undercut.

"Low-skill migration has been too high and we need to bring it down.

"That means the maximum transitional controls for new countries coming in from eastern Europe; it means properly enforcing the minimum wage so people aren't brought here to undercut workers already here; and it means let's give proper training to workers already here so that they have a fighting chance of filling the vacancies that exist.

"There's nothing wrong in employing people from abroad, but the rules need to be fair so that local people get a fair crack of the whip."

Mr Miliband will promise a boost to English language teaching to new migrants, along with an English-speaking requirement for all state employees working face-to-face with the public.

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Payday Loans: Firms Face Tougher Ad Rules

Payday loans firms are facing tighter advertising rules as the Government tries to ensure that companies do not take advantage of people drowning in debt.

The plans include limiting the number of adverts firms are allowed to put out per hour, the times they can advertise and forcing them to make sure that interest rates are clearly displayed.

The Government will work with the Advertising Standards Authority and the industry to make sure advertising does not tempt consumers into taking out payday loans that they cannot afford.

The clampdown emerged as the Office of Fair Trading (OFT) prepares to publish the results of a wide-ranging probe into the payday lending industry later.

The OFT has carried out spot checks of 50 major lenders and obtained information from all 240 lenders in the market.

The regulator said in its interim report last autumn that formal investigations have been launched into several firms over their debt collection methods.

Charities have reported rocketing numbers of complaints about payday lenders from borrowers.

The Money Advice Trust (MAT) recently said that complaints about payday loans have doubled year-on-year to reach a record of 20,000 across 2012.

The charity warned that "something is drastically wrong" with the way that expensive loans are being dished out to people who cannot afford them, with lenders often rolling over loans.

New regulator the Financial Conduct Authority (FCA), which will oversee the consumer credit market from next year, will prioritise tighter rules on payday lending that could come into effect from April 2014.

The FCA's rules will be binding and if they are broken the regulator will have tough enforcement powers including imposing unlimited fines and the ability to claw consumers' money back.

The Government is also planning to do more to encourage greater communication within the industry to stop consumers taking out multiple loans from different lenders.

Sajid Javid, Economic Secretary to the Treasury, said: "The Government is introducing a fundamentally new approach to regulating consumer credit, which will ensure that irresponsible firms and bad practice will have no place in the consumer credit marketplace.

"Consumers can have greater confidence that the new FCA will intervene early and decisively in their interests - thanks to its more focused remit, objectives and powers."

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Childcare Costs: Fees Double In 10 Years

The cost of a nursery place has almost doubled over the last decade, childcare charities warned today.

Parents are struggling to pay fees which are soaring towards levels being charged by private schools, a report by the Daycare Trust and the Family and Parenting Institute found.

A full-time nursery place will set a family back an average of £11,000 a year.

The report says the burden of such fees on working parents is akin to taking on a "second mortgage".

The typical cost for a nursery place for a child aged under two years old has risen by 77% since 2003 to reach £4.26 per hour, while wages have stagnated.

London was found to be particularly expensive, with average nursery fees costing just under £14,000 a year for a full-time place.

The report argues that childcare costs are becoming increasingly difficult for families to manage.

In the last year alone, the average nursery cost for a child aged under two has increased at an above-inflation rate of 4.2%, to around £106 a week for a part-time place at 25 hours a week. A full-time place is regarded as one that is 50 hours a week.

Costs for children aged over two have increased at an even faster rate of 6.6% annually to around £104 a week for a part-time place, the report found.

Some nursery places are more expensive than a private school education

Childcare costs for older children have soared by 9% over the last year, with the typical cost of an after-school club of 15 hours a week reaching around £50.

Anand Shukla, chief executive of Daycare Trust and the Family and Parenting Institute said: "The survey makes clear that, from a parent's perspective, costs are increasingly difficult to manage which is a finding that should concern us all.

"Families are being expected to pay more for their child's nursery place - an average of £14,000 per year in London - than the fees for many private schools - and this cannot continue."

The survey regularly asks local authorities to report the price that parents pay for different forms of childcare in their area.

The report suggests that the rising cost of childcare is evidence of a "market failure in our childcare system", with a lack of new providers setting up to meet levels of demand in some areas.

The report points out that 91% of nursery care is delivered by the private and not-for-profit sectors in England. It says that private sector providers often have more costs to overcome than those in the public sector such as rents and servicing debts.

The study says the rise is driven by staffing costs. At present, regulations stipulate that for children under two in nurseries there must be one member of staff for three children.

The report said: "While salaries for nursery workers are not high, the need to maintain safe supervision levels and high quality childcare does, inevitably, mean that childcare cannot - and should not - be provided 'on the cheap'."

One of the ways in which the Government helps parents with childcare costs is a voucher scheme which is available through employers and allows mothers and fathers to pay for childcare out of their pre-tax wages.

Basic rate tax payers can pay for up to £243 of childcare a month with the vouchers.

Julian Foster, managing director of one of the voucher schemes, named Computershare Voucher Services, called for the limits on childcare vouchers to be increased and said the scheme should be extended to help the self-employed.

He said: "(This) would show to this country's working families that Government 'gets it'.

"They get that support needs to be widely accessible, they get that household budgets are becoming increasingly strained, and they get that working mothers and fathers - part of the lifeblood of the British economy - need adequate support to raise their families and this country's future."

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Forbes Rich List: 1,426 Billionaires Worldwide

The world now has a record 1,426 billionaires with a combined wealth of $5.4 trillion (£3.6trn), according to a new survey.

The 2013 Forbes annual billionaires issue said a total of 210 new billionaires have been added to the list, with their wealth up $800bn (£530bn) on the previous year.

Mexico's telecoms entrepreneur Carlos Slim continued to top the list with a net worth of $73bn (£48bn), up $4bn (£2.6bn) in the previous 12 months.

Zara fashion chain boss Amancio Ortega moved up two spots to number three, with a net worth of $57bn (£38bn), to sit behind Microsoft founder Bill Gates.

The surprise shift was for veteran American investor Warren Buffett, who dropped from second to fourth place with $53.5bn (£35.5bn) - even though he increased his wealth by $9.5bn (£6.3bn) in the year.

It was the first time since 2000 that Mr Buffett failed to make the top three in the list.

The 1,426 billionaires have an average wealth of $3.8bn (£2.5bn), up $100m (£66bn) on the 2012 list.

In 2012 the top three were Carlos Slim, Bill Gates and Warren Buffett

The US continues to lead with 442 billionaires, followed by 386 in the Asia-Pacific region.

There are 366 ultra-rich on the list in Europe, with 129 in the Americas and 103 in the Middle East and Africa.

Forbes said here was a 32% increase in the number of female billionaires, with 138 now on the list.

The richest woman in the world, worth an estimated $30bn (£20bn), is Liliane Bettencourt - whose father foundered cosmetics giant L'Oreal.

Italian fashion head Miuccia Prada ranks 79 on the list with $12.4bn, just slightly behind Facebook founder Mark Zuckerberg's $13.3bn (£8.8bn) position at 66.

Britain's richest man, the Duke of Westminster, is listed as the 89th richest person with $11.4bn (£7.6bn).

Sir Richard Branson is ranked 272 on the list with $4.6bn (£3bn) - behind Topshop's Sir Philip Green at 248 with $5bn (£3.3bn).

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Funding For Lending Credit Cut Sharply

British lenders taking part in a Bank of England scheme to boost firms' and households' access to credit cut lending sharply in the last three months, official statistics have revealed.

The lower than expected Funding for Lending Scheme (FLS) figures have dampened hopes that the project could help revive economic growth.

The BoE announced the scheme jointly with the Government in June 2012, as a way to unblock a credit log-jam which some economists say is a big factor behind Britain's weak economic recovery.

Banks and building societies cut lending by a net £2.425bn between October and December.

The figure compares to an increase of around £1bn in the first months of the FLS's operation.

Total net lending by banks and building societies taking part in the scheme - which includes all major British lenders apart from HSBC - is now down by £1.502bn since June 30.

The bank said that the scheme's benefits will not be fully clear until later in 2013.

"I would not expect to see a return to rising aggregate quantities until we start getting data for 2013 at the earliest," the bank's Paul Fisher said.

Taxpayer-backed lenders Royal Bank of Scotland and Lloyds Banking Group saw lending fall, despite drawing money from the scheme.

Lloyds has drawn £3bn so far, but lending fell by £3.1bn last quarter, while RBS has taken £750m, but its lending still fell by £1.7bn.

Prime Minister David Cameron's official spokesman said that the Government and the BoE had always made clear that it would take some time before the impact of the Funding for Lending scheme was felt, and that it was not expected as early as the fourth quarter of 2012.

"I think the Bank of England at the time of the launch of the policy was clear that it would take some time for the impact of the policy to be fully felt," the spokesman said.

"The most recent figures for lending in the economy, for January - the first month of Q1 2013 (the first quarter of 2013) - show that lending to the economy increased in January.

"I think we are also seeing the impact of the Funding for Lending scheme through lower borrowing costs. I think we are seeing evidence of the policy having a clear impact."

But shadow chancellor Ed Balls said: "These are deeply disappointing figures. Net lending is actually down since the Funding for Lending scheme started and down by £2.4bn in the final three months of 2012.

"And the Bank of England's own figures show that net lending to businesses fell by £4.5bn in the last quarter."

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New FSA Rules Prompt Internet Bank Rethink

By Mark Kleinman, City Editor

A new retail bank which has been struggling to secure funding and regulatory approval for more than three years has restarted talks with potential investors, buoyed by new rules governing start-up lenders.

I have learnt that Home & Savings Bank, which has been seeking as much as £250m of external capital since 2009, has in recent weeks resumed canvassing private equity firms, hedge funds and wealthy individuals about backing its launch plans.

The company, which would be a telephone and internet-based lender, is the brainchild of a group of former bank executives and Martin Finegold, the boss of Cambridge Place Asset Management, a London-based hedge fund.

People familiar with Home & Savings Bank's business plan said it had scaled back its ambitions and was now aiming to raise between £100m and £150m.

The nascent bank's management team includes Stuart Sinclair, former head of Tesco Personal Finance, and Peter Birch, one-time head of Abbey National.

Its new fundraising objective has been galvanised by the imminent publication of guidelines by the Financial Services Authority (FSA), which will allow banking start-ups to operate with much less capital than established high street rivals.

Mr Finegold's fund has already burned through millions of pounds in costs incurred by the development of Home & Savings Bank.

Over a three-year period it has held talks with dozens of possible investors, including Advent International and Blackstone, the buyout firms, and Magnetar Financial, the hedge fund. Home & Savings Bank also tried to pursue a stock market flotation but without success.

All of those discussions proved fruitless amid what many analysts see as a vicious circle hindering such embryonic projects: regulators will not approve new lenders until they have sufficient capital, while investors are reluctant to commit capital when there is uncertainty about whether a bank will receive regulatory approval.

Since the financial crisis a number of new retail banks have launched in Britain, the most prominent of which has been Metro Bank. Despite its public relations success, however, even it has made only modest competitive in-roads against the likes of Barclays, Lloyds Banking Group and Royal Bank of Scotland.

Last month, Sky News revealed that talks over the FSA reforms were being held up by demands from the Treasury to accelerate further the timetable for authorising new banks.

A spokesman for Home & Savings Bank declined to comment.

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HSBC Boss Gulliver In Line For £2m Bonus

By Mark Kleinman, City Editor

HSBC is to award its chief executive a bonus of just under £2m for 2012 following a year of successful strategic action to overhaul the bank but which was marred by a £1.2bn fine for violating US money-laundering laws.

I have learned that HSBC, Britain's biggest lender by market capitalisation, will announce on Monday alongside its full-year results that Stuart Gulliver has been awarded the bonus as part of a multimillion pound pay package.

Mr Gulliver intends to accept the award, according to HSBC insiders. His bonus will be deferred and subject to clawback, and he will not be able to cash it in until he retires from or leaves HSBC.

As part of an effort to demonstrate greater transparency over the way it rewards top executives, HSBC will for the first time publish a single figure for the aggregate pay and benefits packages awarded to Mr Gulliver and his most senior colleagues.

This will include pension contributions as well as salary, annual bonus and a long-term share award that has been allotted to him this year. It is designed to show compliance with new Government rules that will come into force later this year, which have been spearheaded by Vince Cable, the Business Secretary.

Douglas Flint, the chairman, Sir Simon Robertson, the deputy chairman, and John Thornton, the non-executive director who chairs the remuneration committee, are understood to have orchestrated the switch to the new disclosure regime ahead of the Government deadline.

For 2011, Mr Gulliver was awarded an annual bonus of just over £2.1m, alongside his base salary of £1.25m and £3.75m in long-term share awards, making a total of £7.2m.

In 2012, his bonus and LTIP are understood to have been determined "in broadly the same ballpark" with a total package worth between £6m and £7m, one person close to the bank said.

HSBC has been applauded by many leading City shareholders for the way it details its executive pay policies through the publication of a 'scorecard' for Mr Gulliver, who took over in 2011.

The chief executive is eligible for an annual bonus of three times his salary and six times his base pay in long-term incentive awards.

A chunk of both payments is determined by HSBC's compliance success and the bank's reputation during a 12-month period. Mr Gulliver is understood to have been awarded nothing in this bracket in 2012, the same outcome as a year earlier, when HSBC was fined for mis-selling bonds to elderly customers.

HSBC suffered one of the most ignominious episodes in its history last year, when it was forced to pay £1.2bn to US regulators to settle money laundering and sanctions breaches which had allowed its Mexican operation to be used by drug cartels and terrorist organisations.

In January, the bank established a committee to bolster its defences against financial crime, recruiting the former heads of HM Revenue and Customs and the Serious Organised Crime Agency, as well as a former US deputy attorney-general.

HSBC will set out plans on Monday to claw back millions of pounds from senior executives deemed to have been culpable in the Mexican situation.

While the bank will not name the affected individuals, they include Sandy Flockhart, the former head of the bank's Asian operation, who was at one stage seen as a contender against Mr Gulliver for the top job.

Mr Flockhart, who left HSBC last year, ran its Mexican subsidiary between 2002 and 2007, and had several million pounds-worth of shares which he is understood to have been told he will not now receive.

I understand, however, that Lord Green, the trade minister who stepped down as HSBC chairman in 2010, will not be included in the clawback effort, partly because he opted to take his long-term pay awards as pension contributions.

Michael Geoghegan, Mr Gulliver's predecessor as chief executive, has also been excluded from the clawback arrangement because the bank's remuneration committee did not conclude that he had been personally responsible for the compliance failings.

The effort to demonstrate pay restraint will be reflected in a lower bonus pool than the £2.8bn that was paid out for 2011, less than a quarter of which was paid to UK employees. HSBC will say on Monday that there has been an across-the-board reduction in the payout pot because of the US fine, although it is still understood to be paying out roughly £2bn in bonuses to staff around the world.

HSBC is also expected to pay a healthy final dividend, with its payouts to shareholders an increasingly-important source of income to UK investors in the context of a banking sector which has seen dividend expenditure shrink dramatically since the financial crisis.

In the UK, HSBC has abandoned a structure for paying staff that saw it impose a £50,000 cap on cash bonuses last year. The scheme involved the bank issuing shares that were then sold immediately in the market to hand executives larger cash sums.

HSBC bosses felt the initiative, devised with the Bank of England and Financial Services Authority, was "cosmetic". Instead, payouts will not include a cash ceiling but larger sums will have to be deferred for several years and won't pay out until employees leave or retire.

Analysts expect HSBC's full-year results to show continued progress under Mr Gulliver at accelerating the pace of change of what had historically been seen as a sluggish supertanker.

He has sold scores of businesses which did not meet internal targets for generating returns and has prioritised growth in the world's fastest-growing economies.

"HSBC has made excellent progress in its strategy to simplify the business and refocus it on growth markets and markets that benefit from international connectivity," analysts at Shore Capital said.

They predict underlying full-year profit of £12.5bn, against £11.8bn in 2011.

HSBC, which declined to comment, is also expected to outline a further provision for compensating customers who were mis-sold payment protection insurance.

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StanChart Cuts Bonuses After £440m Iran Fine

By Mark Kleinman, City Editor

Standard Chartered will this week cut both its group-wide bonus pool and the payout for its chief executive despite a record trading year buoyed by continued economic growth in its core markets.

I understand that London-headquartered Standard Chartered will announce alongside its annual results on Tuesday that it will pay out around $1.4bn (£930m) in bonuses, down from $1.535bn (£1.02bn) last year.

Peter Sands, the bank's chief executive, will see his own award reduced from $3.5m (£2.3m) for 2011 to less than £2m, according to insiders.

Bank chief executive Peter Sands

The reduced payouts will reflect a $667m (£443m) settlement struck late last year between the bank and US regulators over failings in the disclosure of transactions with entities in countries including Iran.

The smaller bonus pool will come despite analysts' expectations that Standard Chartered will announce underlying profits for last year of approximately $7.5bn (£5bn). Including the US fines at a statutory level, earnings are expected to be flat compared to last year's $6.8bn (£4.5bn).

People close to the bank said the bonus reductions were not only an acknowledgement of the Iran episode. They were, they said, also a reflection of demands for banks to hold more capital and for Standard Chartered's board to continue delivering its commitment to a progressive dividend policy.

More detailed disclosure about pay for top executives will not emerge until Standard Chartered's annual report is published next month.

People close to the bank said it would not be able to reclaim past bonuses in relation to the US settlement because the staff involved in the erroneous processing actions were too junior and because the errors took place before clawback was an established feature of bankers' employment contracts.

Standard Chartered, which declined to comment on its bonus plans, is also expected to criticise the deal proposed last week by the European Commission to cap bank bonuses at the level of a year's salary, or two years' with the consent of shareholders.

The rules, which if ratified will come into effect next year, would apply to the global operations of any bank domiciled within the European Union.

Standard Chartered would be at a particular disadvantage from these rules because, although it is based in London, it does little business within the EU. The bank's operations are focused on Asia and Africa, having positioned itself to benefit from the emerging trading blocs of the next few decades.

Mr Sands is thought to be particularly annoyed by the EU proposals after several reviews of Standard Chartered's domicile concluded that the UK continued to offer the most appropriate base for the bank.

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China Energy Firm Bows To Pollution Pressure

China: Life In Polluted Beijing

Updated: 3:40am UK, Monday 04 March 2013

Until I moved to Beijing, I would never have believed that the same view from the same window at the same time could be so strikingly different 24 hours apart, but on Thursday and Friday this week it was.

On Thursday morning I woke up, peered out of the window of my Beijing apartment and saw almost nothing: the skyline of the city's Central Business District was entirely obscured.

It looked like morning mist. If only it was.

With a glance at an ingenious app on my iPhone called "Beijing Air", the depressing news was delivered: the air quality index was 530.

All you need to know to put that figure in context is that the safe level is 25. Take a look at the chart below to see how Beijing and plenty of other Chinese cities fare compared to New York (London is much the same).

Beijing mornings begin not with a glance at the weather app but air app.

The day's activities are largely governed by the number on the screen. If it's less than 150, that's great news despite the fact that anything above 25 is unhealthy.

If it is between 150 and 250, you know it's bad. Anything more than 300 and plans must be made to avoid all contact with the outdoors.

Sky News has provided me with an air purifier. With Swiss efficiency, it sucks in the dirty air and squirts it out, clean. It's not cheap though (in fact it is unnecessarily expensive) and most of Beijing's 20 million residents can't afford the luxury – not that breathing clean air should be a luxury.

Oddly though, from the Beijingers I have quizzed about the air, I have found just resignation mixed with a good pinch of denial.

Every morning on my 8am walk to work, I pass groups of middle-aged women who gather there for their daily exercise in the city's Ritan Park. In perfect unison and to a typically Chinese tune, they dance. It is a wonderfully Chinese sight.

One morning I stopped to chat to them. I met Madame Wong and her two friends, Luo Chunyan and Wang Shulan.

They were all clearly aware of the bad-air issue; they couldn't really ignore it as it hung all around us.

And yet they seemed resigned to it all.

"We live in this world, and although the air is important, we can't stay indoors all the time, can we?" Lou Chunyan told me. "I think it's fine."

Wang Shulan accepted that it was a worry but wondered what she could do about it.

"We are all used to it," she said. "Our club was formed 6 years ago and we come every day unless it's snowing. Of course we are worried but I feel better when I come out and do exercise. If I stay at home I will feel really uncomfortable."

Madame Wang blamed the number of cars on Beijing's roads.

"I remember 20 years ago when I was working, there were foggy days too. I used to cycle 40 minutes to get to work, but it was never this bad," she recalled.

"Then it was fog, not smog. Nowadays when you say fog, you actually mean smog.

The government has to deal with it ... and the control of cars is the most important thing. As you can see, the heavily polluting factories are now outside the city. It is just the car fumes which are to blame."

The government has introduced measures to stem the problem. Among them, a law that uses car registration plates to determine the days when drivers are allowed onto the city's roads and stricter emissions regulations aimed at taking older cars off the roads.

However, their broad approach seems to be more one of awareness than anything else.

Pollution figures, including the most dangerous PM2.5 (the tiny particles which can be absorbed deep into the lungs), are now published for all to see and the state-run media is reporting the dangers on a regular basis.

That will encourage people to make more of an effort, but it will also draw attention to the problem and could turn pressure back on the unelected Communist rulers.

Last month, we were granted access to the government department responsible for monitoring the air.

The vice-manager of the department is Li Yunting. She knows just how bad the air is: the record-breaking figures flash up on her bank of screens on an hourly basis.

Unusually for a government employee commenting on a sensitive subject, she offered me a personal view of the problem.

"My child is very young. He is three-years-old and I told his grandparents not to take him outside because the air isn't good," she said.

"These days I am thinking of changing my own mask to a more protective one to protect myself against the pollution. I know my friends and lots of citizens are buying the masks to wear outside."

There is now a clear effort by the Chinese government to tackle the issue. They know it is an international embarrassment that could genuinely affect international business in the Chinese capital.

But they are walking a tightrope: by allowing transparency over the issue (state media once referred to it as "fog"; now they admit it's "smog"), they risk a backlash for not doing enough to tackle it.

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Pressure On First Buyers As House Prices Rise

By Nick Martin, Sky Correspondent

House prices edged up month-on-month in both January and February this year, bringing good news for homeowners but adding pressure on first-time buyers.

Building society Nationwide said it was cautiously optimistic that activity will pick up in the months ahead.

It comes after reports revealed more young people were living with their parents while trying to save for a deposit for a property. 

According to the Halifax, the average age of a first-time buyer is 30 years old - up from 29 in 2011.

There has been a significant increase in the proportion of first time buyers receiving financial help in recent years.

The Council of Mortgage Lenders (CML) estimate that 65% of first time buyers of had financial assistance in mid 2012 compared with 31% in mid-2005.

Kirsty Gilmore, 26, from Bristol, has been living at home for 18 months and has saved more than £30,000. But that is still not enough to buy a property. She says the market is so competitive it is hard to get a good price.

"I want to have my own place, I want to start a family and have a home to call my own, not just my mum and dad's.

"You feel a bit excluded from society - nobody cares and you're stuck in this rut really - and everyone else my age is," she told Sky News.

Mortgage approvals for home buyers have dipped for the first time since a Government scheme to boost lending was launched last August, Bank of England figures showed.

There were 54,719 approvals in January, showing a 2% decline compared with an 11-month high recorded the previous month and marking the first time that there has been a month-on-month decrease since July.

Mortgage approvals for house purchases had been on a steady upward path since the Government's Funding for Lending scheme, which aims to help borrowers by giving lenders access to cheap finance, was launched at the start of August.

The latest figures echo recent findings from the CML, with some analysts blaming the recent bad weather.

Housing minister Mark Prisk said the Government was trying to help first time buyers get onto the property ladder.

"Many people have to rely on the bank of mum and dad - so what we are trying to do with the builders and the Government by putting equity loans forward is make those deposit affordable for first time buyers. It's already helped 17,000 people. We hope it will help 27,000."

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HSBC Boss Gulliver In Line For £2m Bonus

By Mark Kleinman, City Editor

HSBC is to award its chief executive a bonus of just under £2m for 2012 following a year of successful strategic action to overhaul the bank but which was marred by a £1.2bn fine for violating US money-laundering laws.

I have learned that HSBC, Britain's biggest lender by market capitalisation, will announce on Monday alongside its full-year results that Stuart Gulliver has been awarded the bonus as part of a multimillion pound pay package.

Mr Gulliver intends to accept the award, according to HSBC insiders. His bonus will be deferred and subject to clawback, and he will not be able to cash it in until he retires from or leaves HSBC.

As part of an effort to demonstrate greater transparency over the way it rewards top executives, HSBC will for the first time publish a single figure for the aggregate pay and benefits packages awarded to Mr Gulliver and his most senior colleagues.

This will include pension contributions as well as salary, annual bonus and a long-term share award that has been allotted to him this year. It is designed to show compliance with new Government rules that will come into force later this year, which have been spearheaded by Vince Cable, the Business Secretary.

Douglas Flint, the chairman, Sir Simon Robertson, the deputy chairman, and John Thornton, the non-executive director who chairs the remuneration committee, are understood to have orchestrated the switch to the new disclosure regime ahead of the Government deadline.

For 2011, Mr Gulliver was awarded an annual bonus of just over £2.1m, alongside his base salary of £1.25m and £3.75m in long-term share awards, making a total of £7.2m.

In 2012, his bonus and LTIP are understood to have been determined "in broadly the same ballpark" with a total package worth between £6m and £7m, one person close to the bank said.

HSBC has been applauded by many leading City shareholders for the way it details its executive pay policies through the publication of a 'scorecard' for Mr Gulliver, who took over in 2011.

The chief executive is eligible for an annual bonus of three times his salary and six times his base pay in long-term incentive awards.

A chunk of both payments is determined by HSBC's compliance success and the bank's reputation during a 12-month period. Mr Gulliver is understood to have been awarded nothing in this bracket in 2012, the same outcome as a year earlier, when HSBC was fined for mis-selling bonds to elderly customers.

HSBC suffered one of the most ignominious episodes in its history last year, when it was forced to pay £1.2bn to US regulators to settle money laundering and sanctions breaches which had allowed its Mexican operation to be used by drug cartels and terrorist organisations.

In January, the bank established a committee to bolster its defences against financial crime, recruiting the former heads of HM Revenue and Customs and the Serious Organised Crime Agency, as well as a former US deputy attorney-general.

HSBC will set out plans on Monday to claw back millions of pounds from senior executives deemed to have been culpable in the Mexican situation.

While the bank will not name the affected individuals, they include Sandy Flockhart, the former head of the bank's Asian operation, who was at one stage seen as a contender against Mr Gulliver for the top job.

Mr Flockhart, who left HSBC last year, ran its Mexican subsidiary between 2002 and 2007, and had several million pounds-worth of shares which he is understood to have been told he will not now receive.

I understand, however, that Lord Green, the trade minister who stepped down as HSBC chairman in 2010, will not be included in the clawback effort, partly because he opted to take his long-term pay awards as pension contributions.

Michael Geoghegan, Mr Gulliver's predecessor as chief executive, has also been excluded from the clawback arrangement because the bank's remuneration committee did not conclude that he had been personally responsible for the compliance failings.

The effort to demonstrate pay restraint will be reflected in a lower bonus pool than the £2.8bn that was paid out for 2011, less than a quarter of which was paid to UK employees. HSBC will say on Monday that there has been an across-the-board reduction in the payout pot because of the US fine, although it is still understood to be paying out roughly £2bn in bonuses to staff around the world.

HSBC is also expected to pay a healthy final dividend, with its payouts to shareholders an increasingly-important source of income to UK investors in the context of a banking sector which has seen dividend expenditure shrink dramatically since the financial crisis.

In the UK, HSBC has abandoned a structure for paying staff that saw it impose a £50,000 cap on cash bonuses last year. The scheme involved the bank issuing shares that were then sold immediately in the market to hand executives larger cash sums.

HSBC bosses felt the initiative, devised with the Bank of England and Financial Services Authority, was "cosmetic". Instead, payouts will not include a cash ceiling but larger sums will have to be deferred for several years and won't pay out until employees leave or retire.

Analysts expect HSBC's full-year results to show continued progress under Mr Gulliver at accelerating the pace of change of what had historically been seen as a sluggish supertanker.

He has sold scores of businesses which did not meet internal targets for generating returns and has prioritised growth in the world's fastest-growing economies.

"HSBC has made excellent progress in its strategy to simplify the business and refocus it on growth markets and markets that benefit from international connectivity," analysts at Shore Capital said.

They predict underlying full-year profit of £12.5bn, against £11.8bn in 2011.

HSBC, which declined to comment, is also expected to outline a further provision for compensating customers who were mis-sold payment protection insurance.

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Obama Signs Order To Start Spending Cuts

President Barack Obama has signed an order authorising $85bn cuts in domestic and defence spending following the failure of efforts to strike a deal with Republicans on cutting the US deficit.

Mr Obama and Republican leaders in the House and Senate declared themselves still deadlocked after a last-minute White House meeting last night.

The two sides are at odds over the president's insistence on increasing tax revenue as part of any plan to tackle the country's $16.6trn debt.

Mr Obama signed the order which officially enacts the across-the-board reductions - known as a "sequester" in government budget language. Under the law, the president had until midnight.

The $85bn cuts apply to the remainder of the 2013 fiscal year, which ends on September 30. But the legislation that requires the spending reduction will continue slashing government spending by about $1trn more over a 10-year period.

Speaking after the White House meeting, Mr Obama said: "Let's be clear, none of this is necessary."

He blamed the deadlock on Republicans who he said refused to close tax loopholes that benefit the wealthy, adding that "the pain will be real" for the American people.

"I am not a dictator. I'm the president," Mr Obama said, warning he could not force his Republican foes to "do the right thing," or make the Secret Service barricade Republicans leaders in a room until a deal is done.

"These cuts will hurt our economy, will cost us jobs and to set it right both sides need to be able to compromise," Mr Obama added.

US Speaker of the House John Boehner walked out of the meeting

Republican John Boehner, speaker of the House of Representatives, walked out of the meeting to say there would be no compromise as long as Mr Obama insisted on higher tax revenue.

Republicans are standing fast against further increasing taxes and will not compromise on achieving debt reduction through spending cuts alone.

The opposition party is still feeling the sting from its most conservative members after agreeing at the end of 2012 to allow the expiration of Bush-era tax cuts for Americans earning $400,000 or more a year.

Friday's meeting was the first the two sides have held this year on the budget battle, and it lasted less than an hour.

The immediate impact of the cuts on the public is uncertain, but they will carve 5% from domestic agencies and 8% from the Pentagon between now and October 1.

Defence officials say they will be forced to reduce the working week of 800,000 civilian employees, scale back flight hours of warplanes and postpone some equipment maintenance.

The deployment of a second aircraft carrier to the Persian Gulf has also been cancelled.

The US Navy will gradually stand down several hundred planes starting in April, the Air Force will curtail flying hours and the Army will cut back training for all units except those deploying to Afghanistan.

Several major programmes will be unaffected, including the Social Security pension programme, the Medicaid health care programme for the poor and food stamps.

Pentagon chief Chuck Hagel warned that the budget cuts will endanger the US military's ability to conduct its missions.

"This will have a major impact on training and readiness," he said. "Later this month, we intend to issue preliminary notifications to thousands of civilian employees who will be furloughed."

Mr Hagel also acknowledged that the budget cuts "will cause pain, particularly among our civilian workforce and their families".

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