US Sees Weak New Job Gains In December

The US economy added 74,000 new jobs in December, a level far below analysts' expections.

The figure takes unemployment to a five-year low, but industry experts had expected the US economy to add 197,000 new jobs last month.

The job creation figure, released by the Labor Department, is watched closely as a sign of the economy's health.

Meanwhile, the unemployment rate in the world's biggest advanced economy dropped to 6.7% - because fewer people were seeking work.

Foreign currencies, such as sterling, immediately strengthened against the dollar.

Analysts played down fears that the lower than expected rate of growth was a sign that the economy is stalling.

Joel Naroff, president of Naroff Economic Advisors, said: "I don't think the Fed is going to be panicked by this."

Dan Greenhaus, chief global strategist at brokerage firm BTIG, said: "We stop short of making larger observations based on this number.

"The economy, based on any number of other indicators, has been picking up steam of late which makes today's number ... curious."

The leisure, manufacturing and services sectors all added jobs in December.

But the construction sector shed 16,000 jobs - the biggest drop in 20 months - during a month when much of the country experienced bad weather.

The overall outlook for the US economy remains positive, with recent figures for consumer spending and industrial output strong.

The economy is predicted to grow by 3% in 2014, up on 1.7% last year.

The Federal Reserve responded to recent positive signs by announcing last month that it would start "tapering" its monetary stimulus programme by $10bn, from $85bn to $75bn.

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Wall Street Giants To Aid £1bn Travelex Sale

By Mark Kleinman, City Editor

The foreign currency provider Travelex has enlisted a pair of Wall Street titans to aid a plan that will involve a £1bn sale or flotation during 2014.

Sky News understands that Travelex has drafted in Goldman Sachs and JP Morgan to work on a deal that could value the stake held by the company's founder, Lloyd Dorfman, at £300m or more.

While a transaction is not imminent, insiders said that the appointment of the two investment banks was a signal that one was likely this year.

Apax Partners, the private equity group, has owned a controlling stake in Travelex since 2005 and is keen to offload its stake, on which it will augment an already handsome profit.

City sources said that JP Morgan was focusing on an initial public offering that would see Travelex make its stock market debut, while Goldman Sachs has been asked to field approaches from potential buyers of the company in addition to assisting with a flotation.

Rothschild was brought in last autumn to help evaluate options for the business.

A stock market listing, which would probably see Travelex join the FTSE-250 index of the public companies ranked between 101 and 350 by size on the London markets, remains the company's preferred route, the sources added.

Travelex was set up in 1976 by Mr Dorfman, who remains its chairman and second-largest shareholder. Mr Dorfman is one of Britain's most successful entrepreneurs, and is thought likely to remain on the board if it decides to pursue a listing.

Travelex has been reshaped since Peter Jackson, its chief executive, was recruited from Lloyds Banking Group in 2010, with the sale of its card management and global payments operations for an aggregate total of nearly £1bn.

Mr Jackson said last year that trading during the crucial summer period had been strong, and the business is understood to have continued to perform well since then.

A Travelex spokesman declined to comment.

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Teachers 'Should Pass MoTs Or Face The Sack'

Teachers should be licensed and will face the sack if they fail to pass checks on their abilities, the Labour party has said.

Shadow education secretary Tristram Hunt said he wants teachers to be reviewed every few years to improve standards in England's state schools.

A similar proposal was floated by the previous Labour government - and dubbed "classroom MoTs" by former schools secretary Ed Balls - but was opposed by some unions and dropped before the 2010 general election.

Mr Hunt told the BBC: "Just like lawyers and doctors they should have the same professional standing which means re-licensing themselves, which means continued professional development, which means being the best possible they can be.

"If you're not a motivated teacher - passionate about your subject, passionate about being in the classroom - then you shouldn't really be in this profession."

Mr Hunt went on to tell The Times: "If we want to re-professionalise the teachers it would be crazy not to do it. If teachers are not re-licensed they will not be allowed to teach."

The Opposition has previously said it would insist on all teachers having Qualified Teacher Status, with staff already working in academies given a deadline to acquire a formal qualification.

A Conservative Party spokesman said the Government was willing to look any proposals which will "genuinely improve the quality of teaching".

He said: "We have already taken action by allowing heads to remove teachers from the classroom in a term, as opposed to a year previously, and scrapping the three-hour limit on classroom observations.

"We are improving teacher training, expanding Teach First and allowing heads to pay good teachers more. Thanks to our reforms, a record proportion of top graduates are entering the profession.

"Fixing the schools system so young people have the skills they need is a key part of our long-term economic plan."

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Record Online Xmas Sales Boost Festive Figures

Increasing use of tablets and smartphones and speedy delivery times are the major factors behind a sharp rise in online shopping before Christmas.

Web sales growth accelerated to 19.2% compared with the same month in 2012 - the fastest rate for more than three years.

However, overall UK retail sales grew by just 0.4% on a like-for-like basis.

The data from the British Retail Consortium (BRC) survey carried out by KPMG showed online trade represented 18.6% of total non-food sales in December, up from 16.5% the year before.

BRC director general Helen Dickinson said: "More of us clicked into Christmas than ever before, with online non-food sales growth putting in its best performance since March 2010 and accounting for nearly 20% of spending.

"The surge in the use of tablets and smartphones last year, together with the ever-faster delivery times achieved by an increasing number of retailers, has provided a new spur of growth to online shopping."

David McCorquodale, KPMG head of retail, said: "Whilst store sales continue to flatline, online sales remain the main driver of growth for the sector, contributing nearly three quarters of the uptick in non-food sales in the last quarter of 2013.

"The winners this Christmas were those retailers with slick multichannel operations, who could offer consumers the flexibility to shop how, and when, they wanted to."

In clothing, online purchases represented 21.2% of sales in December, up from 18% in 2012, while furniture and flooring products bought on the internet represented nearly a third of all sales, at 32.4% - though this was down a little on 32.6% last year.

The figure for electrical goods and toys was 14.4%, up from last year's 11.9% but a fall on the 15.5% who shopped online for these goods in November.

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China 'Overtakes US' As World's Top Trader

China's annual trade in goods passed the $4trn (£2.4trn) mark for the first time in 2013, official data has revealed, confirming its position as the world's biggest trading nation.

Exports from the world's number two economy rose 7.9% to $2.21trn (£1.34trn), while imports increased 7.3% to $1.95trn (£1.18trn), the General Administration of Customs (GAC) announced.

The trade surplus stood at $259.75bn (£157bn), up 12.8% from 2012.

Total trade came to $4.16trn, an increase of 7.6%, just below the government's 8% target.

The total was a record high and effectively confirmed a historic geo-economic shift, making China the world's biggest trader of physical goods, not including services.

Reports last February said the United States' total trade in goods was lower than China's in 2012, but GAC said due to differences in calculation methods the change happened for the first time in 2013.

Further confirmation of the new status is expected to come when the full US data for the year is released.

"It is very likely that China overtook the US to become the world's largest trading country in goods in 2013 for the first time," Customs spokesman Zheng Yuesheng said.

The European Union was China's biggest trading partner, GAC said, followed by the United States, the Association of Southeast Asian Nations (Asean), Hong Kong and Japan.

Between them the traditional markets of the EU, US and Japan accounted for 33.5% of China's trade, down 1.7%, suggesting emerging markets' share of business was growing.

China's Xi Jinping has been courted by President Barack Obama

"Generally speaking, the environment for trade to grow in 2014 is likely to be better than 2013," Mr Zheng said, citing improvements in international demand and domestic economic factors.

However, China's trade surplus in December fell 17.4% to $25.64bn (£15.5bn), below expectations.

Exports increased 4.3% to $207.74bn (£125bn) last month, while imports climbed 8.3% to $182.1bn (£110bn).

China's 2013 trade performance came as the economy turned in a mixed performance, slowing during the first half of the year before showing some vigour in the final six months.

A government report last month cited in state media suggested GDP grew 7.6% in 2013, from the 7.7% in 2012, which was the worst performance in 13 years.

President Xi Jinping, who assumed office in March after becoming head of the ruling Communist Party in November 2012, wants to transform the economy to one in which domestic demand is the key growth driver, rather than public investment.

China's yuan currency gained more than 3% against the dollar last year, hitting a series of record highs since Beijing launched its modern foreign exchange market in 1994.

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Heathrow Slams Price Cap Put On Airline Fees

The operator of Heathrow airport has slammed a price cap limiting how much it can charge airlines to use the west London site.

The Civil Aviation Authority (CAA) has imposed a far greater price cap on the amount it can charge airlines than it originally proposed.

From April, prices can only rise by 1.5% below the retail prices index (RPI) measure of inflation at Britain's busiest airport.

Heathrow, whose owners include Spain's Ferrovial and the sovereign wealth funds of Qatar, China and Singapore, described the cap as draconian.

It is now reviewing a planned investment programme to see if it is still financially viable.

The CAA said the -1.5% cap would mean price would fall for passengers and service for customers would be increased.

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'Project Cook' Signals Huge RBS Cost Cuts

By Mark Kleinman, City Editor

The new head of Royal Bank of Scotland (RBS) is preparing to take another axe to the lender's cost-base in a move which could herald thousands more job cuts.

Sky News has learnt that Ross McEwan is working on the plans, to be announced alongside the taxpayer-backed bank's annual results in six weeks' time, under the codename Project Cook.

The name is understood to be a reference to Captain James Cook, the English explorer who sailed along the coast of Australia in 1770, and is a nod to the RBS chief executive's success in cutting costs at Commonwealth Bank of Australia, where he ran its retail operations for five years.

Mr McEwan's plans for RBS will not be finalised until next month, when he will announce the details to the City, but he has told colleagues that he expects "very substantial" cost cuts to be identified as part of his review.

The bank's workforce is already one-quarter smaller than the 161,000 people who were employed by it when taxpayers injected £45.5bn to rescue it in 2008.

More than 40,000 people have left RBS since then, many through redundancy, with others leaving as part of the sale of dozens of businesses by Stephen Hester, Mr McEwan's predecessor.

People close to Project Cook said that Mr McEwan would further shrink RBS's markets and international banking operations, as well as setting out plans for greater automation of high street banking services.

Over time, this would result in far more cost-effective operations that would require a smaller headcount, they said.

About 120,000 people now work for the Edinburgh-based bank.

In RBS's third-quarter results statement in November, the bank said that Mr McEwan was launching a review of its operations in an effort "to capture the full potential of its customer businesses".

"The review will aim to improve the bank's performance and effectiveness in serving its customers, shareholders and wider stakeholders.

"This will include detailed plans to realign the Group's cost base, with a cost:income percentage target in the mid 50s, down from 65% currently."

Even if RBS's income remained constant, that shift would entail slicing hundreds of millions of pounds from RBS's cost-base, but the sale of Citizens in the US and other business units will reduce the bank's profitability in the short term.

"The aim is to put more capital and resource into areas where they generate income, and that will be one focus of the review next month," said one source.

Since the November announcement, RBS has been hit by a series of further IT systems breakdowns which have inconvenienced millions of NatWest, RBS and Ulster Bank customers.

George Osborne, the Chancellor, is being kept informed about the progress of Project Cook, as is UK Financial Investments, the agency which manages taxpayers' 81% stake in RBS.

RBS, which declined to comment on Wednesday, is not alone among UK banks seeking to reduce its workforce.

Barclays, HSBC and Lloyds Banking Group have each either carried out or signalled plans to cut tens of thousands of roles as retail banking customers increasingly frequent use online and mobile-based services.

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M&S Christmas Clothing Sales Fall 2.1%

Extended pre-Christmas discounting by Marks & Spencer has failed to spark sales growth in the company's troubled clothing lines.

M&S confirmed to the City that it had suffered its tenth consecutive quarter of falling sales in its general merchandise division, dropping 2.1% on a like-for-like basis in the eight weeks to December 24.

The group admitted that a series of discounts to drive seasonal sales - which included a pre-Christmas "Mega Day" with reductions of up to 30% on clothing lines - would hit profit margins when full-year results are reported later this year.

Total UK sales fell by 0.2% over the same period on a like-for-like basis - with its popular food offering propping up its performance with growth of 1.6%.

In the quarter ending December 28, total sales rose by 1.5%.

Chief executive Marc Bolland said: "We delivered an improved performance in General Merchandise over the important Christmas period, with sales up 1.5% in a highly promotional market.

"However, an exceptionally unseasonal October, which saw General Merchandise sales down strongly, has resulted in a quarterly performance below our expectations."

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Tesco UK Sales Decline 2.4% Over Christmas

Tesco is blaming "further weakness" in the UK grocery market for a fall in sales over Christmas.

The UK's biggest supermarket chain said sales at British stores open over a year, excluding fuel and VAT, fell 2.4% in the six weeks to January 4.

The company - led by chief executive Philip Clarke - is 21 months into a turnaround plan for its main UK business that has seen over £1bn invested in store revamps, more staff, new product ranges and pricing initiatives.

Mr Clarke confirmed the investment amid plunging sales and complaints it had taken its eye off the ball in the UK, focussing too heavily on its foreign operations.

Tesco said today that despite the fall in UK sales, it still expected to report full year results within the range of current market expectations.

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Co-Op: Regulator Stands By Flowers Decision

A senior City regulator has told MPs he stands by his decision to approve the appointment of disgraced former Co-op Bank chairman Paul Flowers, arguing it was "correct at the time".

Clive Adamson, director of supervision at the Financial Conduct Authority (FCA), said the Methodist minister seemed to be the right person to control the "unruly" board at the bank, despite him later becoming embroiled in a drugs scandal and displaying a lack of knowledge about banking.

He said that Mr Flowers was "not the same individual" as he seemed at a later meeting before the Treasury Select Committee last year, when gave a stumbling performance and seemed unable to give basic facts and figures.

Mr Adamson was quizzed by MPs on the same committee about a 90-minute meeting he and two colleagues at the now-defunct Financial Services Authority held with Mr Flowers ahead of his appointment in 2010.

At the meeting, it was agreed two deputies would be needed to assist Mr Flowers as chairman because of his lack of banking knowledge.

Mr Flowers gave a stumbling performance when he appeared before MPs

He told the Treasury Select Committee: "I stand by the decision I made at the time.

"I am as surprised as all of us as to the events that surrounded Mr Flowers' apparent misdemeanours."

Following close questioning by MPs, Mr Adamson eventually agreed that the FSA overall made a mistake, but insisted he stood by the decision on Mr Flowers.

"With the benefit of hindsight, yes we did get it wrong," he said.

But committee member Jesse Norman likened it to a doctor saying: "The operation was a success but the patient died."

The Co-op Bank last year had to be rescued after a £1.5bn hole was discovered in its finances.

Regulators have announced the launch of investigations that could see former senior managers fined or banned from working in the industry.

Mr Adamson told the committee he was surprised by the former chairman's answers during his appearance before MPs last year, and that at his own meeting with Mr Flowers he had been "much more cogent".

But committee chairman Andrew Tyrie told him: "It is an extraordinary state of affairs that you are asking us to believe."

He criticised the decision to put Mr Flowers in place to oversee the board, saying: "Your solution was to put a financial illiterate in charge of it."

Mr Adamson said he was disappointed that no one "in public life or indeed his other associations" who may have "known more about some of his misdemeanours" ever alerted regulators.

But he admitted that he had never before approved a chairman with such little experience, telling MPs: "There was no hiding the fact that he didn't have sufficient experience so the decision was around how that could be mitigated."

Mr Adamson said Mr Flowers' 1981 conviction for gross indecency was disclosed but it was not considered relevant and he was not questioned about it. He said a separate drink-driving conviction was not known.

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Treasury Takes Step Towards £19bn Lloyds Sale

By Mark Kleinman, City Editor

The agency which manages taxpayers' £19bn stake in Lloyds Banking Group has asked Britain's biggest high street lender to work on plans for a share sale to the general public.

Sky News has learnt that UK Financial Investments (UKFI) wrote to the Lloyds board during the Christmas break to ask it to write a prospectus that would accompany a major retail offering.

The development underlines the Treasury's intention to sell a large chunk of its remaining 33% shareholding in Lloyds this year, although an insider said the timing had not yet been decided.

A formal announcement from the Treasury about a new share sale will not take place until after Lloyds' full-year results at the end of next month.

Antonio Horta-Osorio, its chief executive, is likely to signal then that he has been given regulatory approval to resume dividend payments to ordinary shareholders.

George Osborne, the Chancellor, believes that a sale in which the public can participate could be politically useful as well as delivering a financial boost to the Treasury.

He is understood to be undeterred by the controversy surrounding the privatisation of Royal Mail, which saw some private investors excluded from buying shares.

Shares in Lloyds closed on Tuesday at 82.51p after a trading session in which the stock reached a new 12-month high.

The bank now has a market value of £57.17bn, having risen by more than 63% during the last year and meaning that the Government's remaining 33% stake is worth roughly £19bn.

Analysts believe it will be possible to sell a substantial chunk of Lloyds at a premium to the 73.6p taxpayer break-even price, especially after Mr Horta-Osorio sets out a generous dividend policy.

Mr Osborne has made plain his interest in a sale of Lloyds shares to the public and reiterated that ambition in his autumn statement last month, although he stopped short of spelling out details such as the timing or size.

Institutional investors will also be asked to participate in the sale of the remaining stake given its sheer scale.

The Government offloaded a 6% stake in Lloyds in September in a deal which the National Audit Office concluded had resulted in loss to the taxpayer of more than £200m but which nevertheless represented good value.

That transaction, which yielded £3.2bn for the Government, saw the taxpayer's stake reduced from 39% to 33%.

Insiders said that a team of executives at Lloyds were beginning work on a prospectus and that it was likely to be "broadly ready" within weeks.

Lloyds declined to comment on Tuesday.

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Xmas Discounting 'Strongest For Seven Years'

The scale of the discounting deployed by stores to attract Christmas shoppers has been laid bare in a report which identified a 'double whammy of good news' for consumers.

According to a survey by the British Retail Consortium (BRC) and researchers Nielsen, prices fell at their fastest rate for at least seven years last month.

It found that high street shops and supermarkets resorted to aggressive discounting to boost festive sales - a sign that many chains were concerned about business volumes in the run up to Christmas.

The BRC said overall shop prices fell by 0.8%, dropping for the eighth consecutive month and at the fastest pace since its survey began in December 2006.

Households were offered some welcome respite as food price inflation slowed to its lowest level for more than three years - at 1.7% - while widespread discounting in the wider retail sector saw non-food prices fall by 2.3%.

Mike Watkins, head of retail and business insight at Nielsen, said: "This will have brought a festive cheer to shoppers filling their trolleys with food and drink at supermarkets, especially as Christmas fell later this year.

"With the continuation of price cuts and promotions across all of retailing, and with many shoppers holding back on shopping to the last week, there will have been bargains and some great savings for the savvy Christmas shopper."

But plunging prices are likely to have taken their toll on many retailers, with food chains in particular expected to have seen their profits hit.

The BRC said weak sales in the lead-up to Christmas led to higher than normal promotional activity as retailers fought over market share.

"While inflationary pressure in the supply chain remains benign, deep and widespread discounts have come at the expenses of profit margins," it said.

Trading figures so far from retailers have revealed the pressure to discount in a highly competitive Christmas.

Debenhams last week issued a profits warning after disappointing festive sales forced it to slash price tags, while Marks & Spencer also launched a major sale, rolling out its "Mega Day" on the Saturday before Christmas, with 30% reductions across clothing lines.

The BRC-Nielsen data showed prices fell across clothing and footwear, electricals and furniture and floorings, while the cost of books, entertainment and home improvement products also dropped to attract shoppers preparing for the festive break.

But the non-food price figures were also impacted by the inclusion of Cyber Monday early last month, which led many high street stores to follow the lead of their online rivals with hefty promotions.

In food shops, the best deals were found on alcoholic and soft drinks.

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Bank Regulators Kick Off Formal Co-Op Probes

By Mark Kleinman, City Editor

Banking watchdogs are poised to kick off formal probes into last year's crisis at the Co-operative Bank in a move which could lead to significant fines or bans for former directors of the lender.

Sky News understands that the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) are likely to confirm this week that they are commencing enforcement investigations into the circumstances which led to the Co-op Bank requiring a £1.5bn rescue package.

An insider said that statements confirming the widely-expected decisions by the two regulators could come as soon as Monday, although they could yet be delayed.

The move to begin formal enforcement investigations could result in substantial financial penalties being imposed on the Co-op Bank as well as former directors if they are deemed to have been reckless in their stewardship of the lender.

The recapitalisation of the bank, which was approved by bondholders last month, saw hedge funds take majority ownership and the Co-op Group left with a 30% stake.

The FCA and PRA inquiries are among a host of investigations launched into the crisis at the previously mutually owned bank, which was left saddled by hundreds of millions of pounds of toxic assets, partly as a result of its merger with the Britannia Building Society in 2009.

The Treasury Select Committee will continue to take evidence on Tuesday about the ill-fated effort by the Co-op to acquire 630 Lloyds Banking Group branches.

A separate probe commissioned by the Treasury and undertaken by an as-yet unidentified figure from the world of banking or law will also take place.

In a statement in November, the Treasury said its inquiry would "cover the actions of relevant authorities (regulators and government) and the institution itself, including prudential issues, governance (including the appointment of senior staff) and acquisitions".

That investigation will not, however, begin until after any PRA and FCA enforcement action has been concluded. A shortlist of candidates to oversee the probe has been drawn up with an announcement about the chosen individual expected in the coming weeks.

The FCA said in November that it "fully agrees that the investigation should be led by an independent person, and looks forward to supporting them in their work. The FCA will make its full resources available to support the investigation".

It said: "The timing of the investigation must not prejudice any other criminal or regulatory proceedings. The FCA is already undertaking work to establish whether it should commence a formal enforcement investigation and expects to reach a conclusion shortly."

The PRA, the arm of the Bank of England which is responsible for maintaining financial stability, issued an identical statement.

Euan Sutherland, the Co-op Group chief executive, has also paved the way for two further reviews.

One, led by Sir Christopher Kelly, will examine historical events at the mutual, while Lord Myners, the former City minister who recently joined the group's board, will assess the need for future corporate governance reforms.

Neither the FCA nor PRA would comment on Monday.

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Scottish Power To Cut Dual-Fuel Energy Prices

Energy firm Scottish Power is to reduce dual-fuel prices by 3.3% from January 31, as it passes on savings from the Government's green levy shake-up.

The change will benefit 2.2 million households and reduce typical bills by around £42 to £1,199 a year for those paying by direct debit.

There will also be a £12 rebate to all customers for the Warm Home Discount, which the Government has said will be funded through general taxation instead of through levies on energy bills.

The tariff cut will only partly reverse increases of 8.5% and 9% for gas and electricity respectively that Scottish Power hit customers with a month ago.

And 97% of customers on fixed-price products will not see their bills fall as the company said they were already protected from the rising cost of green levies.

The cut comes a week after Labour called on Scottish Power and rivals npower and SSE to immediately reduce prices for households after the Government cut the cost of the Energy Company Obligation.

It also asked electricity distribution companies to take action to reduce network costs.

British Gas has already reduced prices in response, announcing in early December that it would cut bills by 3.2% on New Year's Day.

British Gas scaled back hikes that saw prices go up by 10.4% for electricity and 8.4% for gas in November.

EDF and E.ON took the levy changes into account in the recent round of price rises, increasing tariffs on average by 3.9% and 3.7% respectively - far less than the increases announced by rivals.

SSE and npower are expected to follow Scottish Power by passing on levy savings.

They have already committed to cutting bills, but have yet to confirm how much or when the changes would take effect.

Scottish Power said it would try to avoid any further price rises in 2014, but said this will depend on whether there are increases in wholesale energy prices or other costs outside of its control.

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Janet Yellen: Federal Reserve Boss Is Revealed

Federal Reserve vice chair Janet Yellen will be the new head of the world's most powerful central bank - the first woman to hold the position.

The 67-year-old was Barack Obama's choice and she earned cross-party support in the bitterly divided chamber.

"The American people will have a fierce champion who understands that the ultimate goal of economic and financial policymaking is to improve the lives, jobs and standard of living of American workers and their families," the President said in a statement.

"As one of our nation's most respected economists and a leading voice at the Fed for more than a decade - and vice chair for the past three years - Janet helped pull our economy out of recession and put us on the path of steady growth."

However, the 56-26 vote was still among the closest in the 100-year history of the institution.

"Americans should feel reassured that we will have her at the helm of the Fed as our nation continues to recover from the Great Recession," said Senate Banking Committee chairman Tim Johnson.

"Dr Yellen's leadership will also be critical as the Fed completes Wall Street reform rulemaking and continues to enhance the stability of our financial sector."

Dr Yellen was President Obama's choice

Dr Yellen will replace Ben Bernanke who steps down on January 31 after eight years in the job.

She has built a strong reputation as an academic economist, and as a veteran policymaker at the Fed she is not expected to veer far from the central bank's existing policies.

She has a long-term interest in the impact of joblessness on the economy, and has helped keep Fed policy focused on bringing down the unemployment rate.

She has also been closely identified with the Fed's opening up of its policy thinking, with the central bank communicating what it sees in the economy and the expected direction of monetary policy far more openly than 10 years ago.

Her nomination was contentious even among some Democrats.

Joe Manchin of West Virginia, had been "troubled by the unchecked quantitative easing policies" of the Fed.

"In light of recent news that the Fed will begin to taper its easing by $10bn a month starting in January, I now feel comfortable supporting Vice-Chair Yellen's nomination," he said in a statement.

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Osborne: More Cuts Are Needed In 2014

George Osborne will paint 2014 as "the year of hard truths" by warning voters that only more austerity measures can pay for tax cuts and better job prospects.

In a speech setting out his priorities for the next 12 months, the Chancellor is to warn that despite an improved economic outlook there is "still a long way to go".

He will suggest that Labour wants to take Britain back to "borrowing and spending and living beyond our means - and let the next generation pay the bill".

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Prime Minister David Cameron kicked off an economic offensive on Sunday by committing to sustained rises in the state pension until 2020 and emphasising his desire to offer more tax cuts.

He said that easing the burden on lower earners was his priority, but faced Labour claims of planning a new "tax cut for millionaires" after failing to rule out cutting the 45p top rate of income tax.

In Birmingham later today, Mr Osborne will tell voters that tax cuts can only be afforded if further significant reductions are made in the public spending the revenues paid for.

"As a result of the painful cuts we've made, the deficit is down by a third and we're borrowing nearly £3,000 less for every one of you and for every family in the country," he will say.

"That's the good news. The bad news is: there's still a long way to go.

"We're borrowing around £100bn a year - and paying half that money a year in interest just to service our debts. We've got to make more cuts.

"That's why 2014 is the year of hard truths. The year when Britain faces a choice.

"Do we say 'the worst is over; back we go to our bad habits of borrowing and spending and living beyond our means - and let the next generation pay the bill'.

"Or do we say to ourselves 'yes, because of our plan, things are getting better. But there is still a long way to go and there are big, underlying problems we have to fix in our economy'."

But shadow chief secretary to the Treasury Chris Leslie said: "George Osborne should admit his policies have failed and led to a cost-of-living crisis.

"While millions of ordinary working people are worse off under the Tories, he and David Cameron are paving the way for yet another top-rate tax cut for millionaires.

"The reason more spending cuts are needed after 2015 is because his failure on growth and living standards since 2010 has led to his failure to balance the books.

"What we need is Labour's plan to earn our way to higher living standards for all, tackle the cost-of-living crisis and get the deficit down in a fairer way."

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Watchdog: No Win, No Fee Promise Is False

So many claimants are facing unexpected or illegitimate bills from "no win, no fee" law firms that the phrase should be scrapped, a watchdog has said.

In a damning report, the Legal Ombudsman said it dealt with around 600 cases last year where "no win, no fee" lawyers wrongly billed clients for "significant and unexpected costs".

As a result, it ordered firms to pay almost £1m in compensation.

It blamed an "increasingly aggressive" market for encouraging firms not to vet cases properly and then to resort to "unethical practice".

Lawyers were "tempted to try and pass the risk to on to a customer or simply go back on the terms of the agreement to get out of a problem they created", the report said.

Others failed to explain complex contracts sufficiently clearly to clients.

One victim was handed a £24,000 costs bill for a successful outcome to his case - despite the law firm having withdrawn and left him to represent himself.

The system was introduced in 1995 as a replacement for taxpayer-funded Legal Aid to enable people to afford to pursue civil claims such as car crash injuries, employment disputes or medical negligence.

Abuses were not yet widespread, the report concluded, but swift action was needed by professional bodies and regulators to ensure it was stamped out before it spread.

Chief Ombudsman Adam Sampson told Sky News: "'No win, no fee' is an apparent promise that lawyers and claims manage. That promise in many cases is just not real - it's a false promise and what happens is that lawyers exploit the loophole in conditional fee arrangements."

He said the report raises genuine questions as to whether the "no win, no fee" label should be used at all.

Warnings have previously been issued by the Advertising Standards Authority about "misleading" commercials which fail to explain that clients can become liable for some costs.

:: Watch Sky News live on television, on Sky channel 501, Virgin Media channel 602, Freeview channel 82 and Freesat channel 202.

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December Online Sales Boom As Stores Struggle

Online stores saw a boom in December sales while high street retailers with low web presence struggled for customers, a new report suggests.

Figures from accountancy firm BDO showed December non-store sales leaping 31.1%, rising to growth of 55.7% in the week before Christmas.

However traditional high street sales dropped by 2.2% last month in an "underwhelming" Christmas for many retailers.

The online boom has been supported by research by independent retail consultant Richard Hyman.

He told the Financial Times that online purchases accounted for almost 20% of total retail sales - up 5% on 2012 - with non-food online sales accounting for around a third of all Christmas sales.

The figures showed the sales surge hoped for by many shops failed to materialise in the crucial trading period.

Like-for-like sales - excluding online trade - dropping by as much as 6.7% in the week to December 22.

BDO said even a 3.5% surge in the week to December 29 failed to boost the overall performance for the month which was down 2.2% on December 2012.

December 2012 had seen a 1.9% rise compared with the same month in 2011.

In a statement the accountancy firm said: "Following on from what was a solid month of trading in November, many retailers will have been left disappointed by a month of lacklustre consumer demand in the crucial Christmas trading period."

"Pent-up demand was expected to play a larger role as we moved closer to Christmas day but in reality it never fully took hold."

Bad weather amid the pre-Christmas storms hit trading for many, with fashion sales in particular suffering, down 4.6% last month.

Figures so far from major retailers have confirmed it was a mixed Christmas.

Debenhams issued a shock profit warning last week after suffering dismal trading and resorting to aggressive discounting.

But figures showed robust performances from fashion chain Next and department store rivals John Lewis and House of Fraser.

Marks & Spencer, which also slashed prices in the run up to Christmas, is expected to reveal the results of a tough season for the group when it reports on Thursday.

Data from Barclaycard highlighted a marked trend for shoppers to target discount days for the best deals, with the value of transactions falling by 3.5% last month as shops cut prices to lure in consumers.

BDO track sales across 85 mid-tier retailers with around 10,000 stores, showed while it was an "underwhelming Christmas for most", there were robust performances for some.

Closely watched sales figures from the British Retail Consortium are due on Friday, which will also shed further light on how the sector performed over Christmas.

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Alicia Keys And BlackBerry Part Company

Grammy-winning Alicia Keys and BlackBerry are cutting ties just one year after the singer was hired as a 'creative director' for the struggling smartphone maker.

The Canadian company partnered with the singer-songwriter in January 2013 when it launched its much-delayed BlackBerry  Z10.

The relationship between it and Ms Keys got off to a bad start when early on some technology blogs alleged that a tweet from the star appeared to have been sent from an iPhone. 

The Z10 was BlackBerry's first full touch-screen phone but proved unpopular with customers who preferred to hold onto earlier models with their easy-to-use keyboards. And even the glamour of a worldwide popstar was not enough to tempt people to flock to the new model. 

In a statement BlackBerry thanked Ms Keys for her part in the year-long collaboration:

"We thank Alicia for her many contributions including providing creative direction for the BlackBerry Keep Moving Project which attracted more than 40m visits."

BlackBerry, which once dominated the corporate smartphone arena, has struggled in recent years to stop rapid market share losses to the likes of Apple and Samsung. 

In September, the smartphone maker announced it would slash 4,500 jobs worldwide in a desperate attempt to cut costs. And in December, it reported a loss of £2.7bn ($4.4bn) in its third quarter.

The company is now retreating from the consumer market to focus on businesses, governments and other large organisations.  

:: Watch Sky News live on television, on Sky channel 501, Virgin Media channel 602, Freeview channel 82 and Freesat channel 202.

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House Prices 'Jumped 1.4% In December'

House prices in the UK rose by the biggest amount in more than four years in December, according to mortgage lender Nationwide.

It measured a 1.4% increase in the month - its best performance since August 2009 - leaving annual growth in the year to December at 8.4%.

The surge, Nationwide calculated, raised the average house price to £175,826 but London continues to outperform the rest of the country.

Prices in the capital are now 14% above their 2007 peak with the price of a typical London home at £345,186.

The North of England remains the weakest performing region though each region achieved growth in the three months to the end of December.

The latest data will further fuel concerns that the second phase of the Government's Help To Buy scheme is only likely to raise prices but it appears it is helping the construction industry that was hammered by the financial crisis.

Official figures have shown that new home-building boosted Britain's construction industry in December.

It reported its second-fastest month of growth in more than six years - although it was slightly lower than the previous month.

Construction PMI fell to 62.1 in December from November's reading of 62.6, the index's highest level since August 2007. 

And the upward trend looks set to continue. The number of people attempting to get on the property ladder using the Government's Help to Buy scheme has trebled in the last two months.

In November, figures showed in the first month of the scheme's launch more than 2,000 people had put in offers on homes and applied for a Help to Buy mortgage.

Prime Minister David Cameron has said the scheme led to 6,000 extra mortgage applications between October and December.

Separate figures from the Bank  of England showed the number of mortgage approvals at their highest level since January 2008 with almost 71,000 loans handed out in November. 

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Cameron's Pledge To Guarantee State Pensions

Voters 'Won't Back Tories' In 2015

Updated: 1:13am UK, Sunday 05 January 2014

More than a third of people who voted Conservative in the last general election say they would not vote for the party in the next election, according to a poll carried out by Lord Ashcroft.

The former Tory Party deputy chairman's findings revealed around half of the 'defectors' had switched allegiance to the UK Independence Party, with a fifth aligning themselves with Labour or the Lib Dems and a third undecided.

But in a more positive message for the Tories, 56% of those 'defectors' believe David Cameron is the best of the three main party leaders and say their preferred outcome in 2015 would be a Conservative majority.

The poll showed the 'defectors' significantly outweigh the number of new backers from other parties since 2010, making it more difficult for David Cameron to win an overall majority in 2015.

Commentary on the research, Lord Ashcroft said: "This research shows it is far from impossible for the Tories to win outright. But to do so they will need the votes of everyone who supported for them last time, plus practically everyone who is even prepared to think about doing so next time."

The poll found many voters in all camps gave at least a grudging recognition that the coalition had done well in dealing with the economy.

Mr Cameron and George Osborne were more trusted than Ed Miliband and Ed Balls to manage the economy in the country's best interests by a margin of 57% to 43%.

But it would be "hard" to persuade people that they were feeling the benefits of improved growth rates in their own lives given that the Government had no scope for large giveaways.

In fact a small majority 54% said they expected no improvement or a slight worsening in the economy over the next one or two years - with 46% anticipating a significant improvement.

The findings are from Project Blueprint: Phase 4, the latest round of Lord Ashcroft's research into the Tories' prospects of winning the next election outright.

The Tory peer said the Conservatives need to offer a clear direction to win the next election, not simply highlighting Labour's weaknesses and relying on progress achieved since 2010.

"Drawing a contrast with Labour and highlighting progress on welfare, immigration and the macro economy, important though they are, will only take the Tories so far," he said.

"It needs to be clearer what would be on offer under a new Conservative government. It is one thing to say don't turn back, but we also need to know where we're going."

The poll interviewed 8,053 adults online between November 4 and 10.

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