Miliband Promises 'Reckoning' With Big Banks

Is The Banking System Broken?

Updated: 12:36pm UK, Friday 17 January 2014

By Joel Hills, Business Presenter

Folklore at Tesco has it that any internal business pitch to the former boss Sir Terry Leahy which didn't include the word "customer" in the first sentence was bound to end in failure and, on occasion, humiliation.

Sir Terry's time at Tesco is in the process of being reassessed, but there's surely no doubting that the supermarket's spectacular growth in the late 90s was down, in great part, to Tesco's obsession with delivering what customers wanted (no quips about horse burgers, please).

The reason banks are so unpopular, of course, is that they have demonstrably failed to put their customers at the heart of what they do.

In fact they have, on the whole, treated us appallingly.

As Bill Michael of KPMG put it to a group of bank bosses at their annual conference in 2012, far from treating their customers like kings, banks had behaved as if we were "captive geese that can be force-fed, or sold more product to - whether appropriate or not".

Here's the remarkable thing though: the litany of recent scandals and abuses (Payment Protection Insurance, interest rate swaps, Libor-fixing, money laundering, tax avoidance) doesn't seem to have cost the big banks any customers.

Take Barclays. Broadly speaking, the bank has the same number of personal accounts and business accounts today that it did before the financial crisis.

Now the likes of Barclays, Lloyds, RBS and HSBC will tell you that's because ultimately we are all satisfied with the service we are getting from them. Ed Miliband believes it indicates there is something seriously wrong.

The Labour leader's view - that the market isn't functioning properly - is one some of the bosses of smaller banks share.

Last October, a month after the new seven-day switch guarantee was introduced, I chaired a session at the British Bankers' Association's 2013 conference.

Jayne-Anne Gadhia, the chief executive of Virgin Money, complained that the playing field was still horribly skewed in favour of her rivals. 

Paul Lynam, the chief executive of Secure Trust bank, also thinks he's kicking a ball uphill and struggles to steal business from his much bigger rivals as a result.

Interestingly, while both of them share Ed Miliband's diagnosis of the problem, they both also think his prescription of forced branch sales and market share caps are wrong-headed.

Mr Lynam's grumble is that bigger banks can lend more freely than he can because they can borrow more cheaply (they're still too big to fail and therefore continue to enjoy an implicit taxpayer guarantee) and they are not obliged to retain as much capital to protect themselves against losses as he is (Basel rules – don't worry, I'm not going there).

He also believes that the Payments System is deeply flawed.

Now stay with me, please, because his last point is important. Think of the Payments System like the National Grid, but instead of moving gas and electricity around the country the Payments System moves money.

If Mr Lynam wants to send a payment on behalf of one of his customers to a customer at another bank he has to use the Payments System. Here's the rub: the Payments System is effectively owned by the big banks and they charge Mr Lynam up to 40 pence to "clear" each transaction. He says the real cost is closer to 1p.

The whole issue of competition in banking is nuanced and fiercely contested, but it is also desperately important that it's resolved.

It is imperative that we all have faith that the banking system is working well and in our interests.

Perhaps Mr Miliband's suggestion of a full, independent competition inquiry, however long, isn't such a bad idea.

After all, the Competition Commission investigation into the supermarket sector in 2008 went some way to sorting fact from myth and, I would argue, helped to restore some public trust in the likes of Tesco. And public trust in our banks has surely never been so low.

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Fastest Growth In Retail Sales Since 2004

Brisk business for smaller retailers ahead of Christmas helped sales volumes grow at their fastest annual pace since 2004 in December.

Figures from the Office for National Statistics (ONS) measured 2.6% growth during December to show an annual increase of 5.3% - easily topping the forecasts of economists.

The performance suggests a bigger contribution to GDP growth from consumer spending in the fourth quarter of 2013, after the sector was credited with driving recovery during the previous three months.

However, it will also raise more concerns about consumer debt levels and the extent to which people are digging into savings.

The surge in business for small stores may have been a result of the storms ahead of Christmas - prompting consumers to shop locally.

Debenhams had a poor Xmas despite department stores seeing strong trade

Small stores were found by the ONS to have outperformed their bigger rivals, with the amount spent in them increasing by 8.1% against growth of 2.6% for larger stores, compared with December 2012.

The figures follow news of upbeat trading from the likes of Argos, Halfords, Primark and Next over the festive season, though Marks & Spencer and Debenhams struggled.

The extent of their woes was laid bare by the ONS, which measured department store sales volume growth of 11.7% in December - the highest year-on-year growth since January 2000.

The slew of results from major chains suggested retailers who embraced online and high demand for gadgets and cheap fashion enjoyed robust trading.

The ONS said internet sales increased 11.8% by value compared with the same month last year, with average weekly spending online standing at £675.4m.

The statistical body also reported that the 2.6% growth in sales volumes month-on-month equalled the previous high set in February 2010.

The overall amount spent in shops was up 3.6% compared with the same month last year, with food stores improving by 2.2% and non-food stores by 4.4%.

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Bingo Hall Burden: MPs Call For Tax Cuts

By Adele Robinson, Sky News Correspondent

The UK's bingo hall business will "stagnate" if the Government does not cut tax on it, campaigners say.

More than 50 MPs are backing calls to reduce duty and bring levies on the game in line with other forms of gambling.

Bingo hall profits are currently taxed at 20% compared with a 15% rate for most other gambling activities.

Campaigners estimate that reducing bingo duty is expected to raise around £40m for the Exchequer over four years.

Miles Baron, from the Bingo Association, says investment is vital for growth.

"By building new clubs and investing in new clubs, attendances would improve that would generate more income, that would generate new taxes, that would employ more people ... this is at the heart of the community, this is a vital and important part of some people's social repertoire."

Campaigners claim gambling taxes are forcing more and more clubs to close

The Government says it would have to carefully consider before reducing the rate because its priority is to cut the budget deficit.

Jim Cunningham, Labour MP for Coventry South, says if more support is not given then the "social service" side of bingo will be lost.

"The implications can be that some of these places may have to close because they're not profitable and if that happens then there is a problem for some of these elderly people, during the day in particular, to find somewhere else to go."

Nearly 400 bingo clubs across England, Scotland and Wales are hosting free bingo games this weekend to support the campaign to cut tax.

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Miliband Promises 'Reckoning' With Big Banks

Ed Miliband has promised to force the big five banks to give up "significant" numbers of branches to make way for new competitors if Labour wins the next general election.

In a keynote speech on the economy at the University of London, Mr Miliband will say the financial services industry has been "an incredibly poor servant of the real economy".

He will blame a lack of competition in the sector for misselling scandals and a £56bn drop in lending to business since 2010.

The Labour leader is attempting to flesh out his party's economic policy for the next Parliament.

Ed Miliband will set out the Labour Party economic policy

But he risks being overshadowed by Chancellor George Osborne's backing of a significant rise in the national minimum wage.

Mr Miliband will promise to introduce a legal maximum threshold for any bank's share of the market in personal accounts and small business lending, with powers to force the sale of branches and block mergers and acquisitions to prevent it being breached.

Under the proposals, the Competition and Markets Authority would report within six months of the May 2015 general election on the level the threshold should be set at and the timetable for the sell-off of branches, which would be completed by 2020.

He will say: "We need a reckoning with our banking system, not for retribution, but for reform.

"If we carry on as we are, we will end up stuck with the same old banks dominating our high street: the old economy.

"In America, by law, they have a test so that no bank can get too big and dominate the market. We will follow the same principle for Britain and establish for the first time a threshold for the market share any one bank can have of personal accounts and small business lending."

Earlier this week, Bank of England governor Mark Carney said a cap on banks' market share "would not result in substantial improvement to competition".

He told the Commons Treasury Committee: "Just breaking up an institution doesn't necessarily create or enable a more intensive competitive structure."

Business Secretary Vince Cable said he agreed with Mr Miliband's desire for increased competition but insisted that "many of the things he is calling for have actually happened".

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Minimum Wage: Britain 'Can Afford' To Pay More

Britain can afford to increase the amount its lowest-paid workers earn, the Chancellor has announced.

George Osborne said an above-inflation rise in the national minimum wage - currently set at £6.31 an hour - would "secure a recovery for all".

He has not revealed how much the wage could increase by, although he said it would need to rise by more than 10% to £7 an hour to match improvements to the economy.

"I believe Britain can afford an above-inflation increase in the minimum wage, so we restore its real value for people and make sure we have a recovery for all and that work always pays," he told the BBC.

The Chancellor says the minimum wage may need to rise to £7 an hour

Prime Minister David Cameron has also said the Conservatives have taken "difficult decisions" to "fix the economy" and could now afford to put "more money in people's pockets".

However, Labour accused Mr Osborne of "flailing around under pressure", while a Liberal Democrat source said the Chancellor had "dragged his feet" on making an announcement.

Chris Leslie, the Labour Treasury spokesman, said: "The Tories cannot hide from the fact that working people are on average £1,600 a year worse off since they came to office.

"We need action now to earn our way to higher living standards and tackle the cost-of-living crisis."

Any increase to the minimum wage would be set by the Low Pay Commission, which talks to businesses and looks at economic data before making its recommendations.

It has been handed the Government's latest analysis on jobs and the economy and is due to make its suggestions next month.

An increase to the minimum wage would likely take effect in the autumn.

The Federation of Small Businesses backed an increase to the minimum wage but said it should rise by no more than the rate of inflation - currently 2%.

Its national chairman John Allan said: "The Low Pay Commission will recognise that in some industries, such as retail and social care, small businesses operate very fine margins and are still struggling with rising costs in areas such as utilities and business rates.

"At the same time, the recovery remains on a fragile footing in certain regions of the UK."

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Cinema Shake-Up Goes On As Odeon Boss Exits

By Mark Kleinman, City Editor

The shake-up of one of Britain's biggest leisure industries will continue on Friday with the departure of the boss of Odeon UCI Cinemas.

Sky News understands that Rupert Gavin, who has run the privately-owned group for eight years, is to leave a year after its owner abandoned its latest attempt to sell the company.

Mr Gavin will be replaced by Paul Donovan, a former executive at Vodafone and Eircom, the Irish telecoms group.

The management change marks the latest significant move at the top of the cinema sector.

Steve Wiener, the chief executive of Cineworld, is leaving at the same time that the company embarks on a merger with Cinema City International, a Polish-based competitor.

Vue Entertainment, one of the other big players in the UK industry, was sold last year to a Canadian pension fund, while the much smaller Everyman chain floated on the London stock market.

Odeon UCI is owned by Terra Firma Capital Partners, the private equity group headed by Guy Hands.

Mr Hands bought and lost control of the music company EMI in acrimonious circumstances, but has enjoyed better fortune with some of his other investments.

A person close to Mr Hands said that Mr Gavin would become an adviser to Terra Firma and join the board of Garden Centre Group.

The outgoing Odeon UCI boss will also spend more time at Incidental Colman, his privately-owned theatre and entertainment group.

Terra Firma has tried to sell or float Odeon UCI on several occasions but buyers and stock market investors have refused to meet Mr Hands' asking price.

Insiders say the private equity group is now likely to hold onto the business for several more years.

During his time at the company, Mr Gavin has built it into the largest multiplex operator in Europe.

A statement announcing the changes is expected later on Friday. Terra Firma could not be reached for comment.

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Charter Bids $62bn For Time Warner Cable

Cable TV operator Charter Communications is planning to go direct to shareholders of Time Warner Cable in a bid to buy its larger rival in a deal worth over $62bn (£38bn), when debt is included.

The company said it was prepared to make an offer to investors after determining there was "no genuine intent" from Time Warner Cable's management to engage in merger talks.

Charter Communications said it has made repeated overtures to Time Warner for more than six months and had previously planned an offer below $135 per share, including $83-per-share in cash.

That values Time Warner at up to $38bn but the company had responded that the sum undervalued its business, Charter said.

Its statement said: "Time Warner Cable's response led Charter to determine there is no genuine intent from Time Warner Cable's management and Board of Directors to engage in a merger agreement, and that it is prudent to bring the matter to shareholders directly." 

Charter said in a letter to Time Warner Cable that the company had unrealistic price expectations and Goldman Sachs and Liontree Advisors were lead advisers on its bid.

Time Warner shares were up slightly from their closing price to $134.60 in after-hours market trades.

US cable television and internet titan Comcast is also seen as potential suitor of Time Warner Cable, which has been losing TV customers in a competitive US market.

A tie-up with Charter would create the third-largest pay TV operator.

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Lidl To Remove Sweets From Checkouts

By Poppy Trowbridge, Consumer Affairs Correspondent

I understand that Lidl will announce plans to remove all chocolate and sweets from the checkout queues in their supermarkets later this week.

The move is likely to be welcomed by consumer groups and parents alike, in the face of growing concerns about childhood obesity on the rise in the UK.

According to Sky sources, the discount retailer has been in consultation with customers for several months and the move is in response to preferences expressed by shoppers.

Parents face 'pester power' at the till while waiting with their children to pay for groceries.

Today, the National Obesity Forum said the UK is in danger of surpassing predictions of a 2007 report which estimated that 50% of the nation would be obese by 2050.

Lidl's action will likely increase the pressure on other supermarkets to take more definitive action.

All of the major supermarkets have committed to removing artificial 'trans fats' from their products.

But according to a Which? report published in December 2012, while Sainsburys and Tesco have banned sweets from supermarket checkouts, the policy does not apply to their smaller convenience stores.

Asda, Iceland and Morrisons all aim to 'limit' the sale of sugary treats near checkouts, but do not impose a blank ban like the one Lidl is proposing.

Waitrose does not have any policy in place on sweets at the checkout.

Last year, Lidl UK increased the number of 'healthy tills' in stores nationwide to 1,200.

The tills replaced 'treat' items such as chocolate with products of a higher nutritional value such as multivitamin juice and fresh fruit, as part of a healthy initiative to promote fresh fruit and vegetables to customers.

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Argos Owner Set To Name Walden As New Boss

By Mark Kleinman, City Editor

The owner of Argos is close to naming the chain's boss as its new group chief executive, a move that will also hand him oversight of the DIY retailer Homebase.

Sky News understands that Home Retail Group is poised to end a four-month search for a successor to Terry Duddy, the long-serving executive who announced last autumn that he would step down this year.

Insiders said on Monday that John Walden, who joined Argos as managing director nearly two years ago, was the board's preferred candidate to take the helm. An announcement could be made alongside Home Retail's Christmas trading update on Thursday, they said.

Mr Walden joined Argos as the company's managing director in February 2012

Argos is understood to have seen reasonable growth in like-for-like sales during the crucial festive period despite experiencing some problems with its website caused by an upgrade undertaken in mid-December, according to one insider.

If he does get the nod for the top job, it would reflect early signs of success in Mr Walden's efforts to reinvigorate Argos, the catalogue chain which has struggled in the face of competition from Amazon and other Internet-based retailers.

Last autumn, Home Retail announced the launch of a trial with eBay, the online auctioneer, that involves 150 Argos shops being used as collection points for selected eBay merchants.

Mr Walden previously worked at BestBuy, the US electrical goods group, and Sears. His nomination as group chief executive remains subject to final board approval and could be delayed beyond this week, another source said.

A Home Retail spokesman declined to comment.

Argos's Christmas sales performance is likely to mark it out as one of the high street's more successful general merchandise retailers during the period.

Major losers included Debenhams, which on Monday saw nearly 5% of its shares acquired by Sports Direct International, the chain led by Newcastle United owner Mike Ashley.

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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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Snow-Hit Sheep Farmers Fear Worse Is To Come

By Becky Johnson, North of England Correspondent

Farmers will have to prepare for the impact of more extreme weather on livestock and crops, according to the National Farmers Union.

The Union's deputy president has told Sky News he believes climate change may be to blame for unseasonal conditions like the damaging spring snowfall in 2013.

Meurig Raymond told Sky News: "The industry is facing the volatility of weather - maybe climate change. So feeding the world is going to be important going forward. We as farmers have to face up to that, but wake up for society as well."

His comments come as farmers say it will take years to recover financially from losses suffered during the coldest spring in 50 years.

Months on from snowfall that struck during lambing season, farmers have told Sky News their industry is still reeling from the heavy losses of livestock.

On the hills above Llanfairfechan in North Wales farmer Gareth Wyn Jones feeds the sheep that survived the heavy snow.

In March and April he spent weeks digging through feet of snow to recover the bodies of sheep and lambs that had perished.

Farmer Gareth Wyn Jones tends to his livestock in North Wales

Now, on a cold, sunny winter morning he surveys the surrounding hillsides that offer a stunning view across the Irish Sea.

He says the snow came at the worst possible time for sheep farmers. Most of the animals that died were new born lambs.

He estimates hundreds died on his farm alone.

"We lost about eighty breeding ewes and we lost a hundred ponies but we were fortunate - we dug eighty or ninety ewes out. A neighbour of ours lost half his hill flock overnight - gone," he said.

"There are some massive losses just in this little valley in North Wales."

Farmers in Northern Ireland, Scotland, Shropshire, Cumbria, Yorkshire and the Isle of Man also lost thousands of sheep and lambs.

The number of deaths forced the Welsh Assembly and Defra to temporarily relax strict EU rules that prevent farmers from burying dead animals. Usually farmers have to pay for carcasses to be removed.

Hundreds of sheep have been lost due to bad weather

Since the snowfall Defra says it has been working with farmers and  the insurance industry to ensure farmers are protected for future weather events.

They have also been working with the Met Office to publish detailed weather forecasts for farmers.

Joanne Briggs, from the National Sheep Association, told Sky News: "The time it will take for affected sheep farms to recover cannot be underestimated - it's not just the financial implications, which will take at least two or three years for business to overcome, but the loss of genetics from their flocks.

"Some bloodlines can never be replaced and that can mean a backward step of a decade or more for elite pedigrees.

"Like the animals that they care for, sheep farmers in general are incredibly resilient, but the spring of 2013 came at the end of an incredibly difficult 12 months and will leave a legacy for many years to come.

"But everyone can do their bit to support them, by making sure that when they buy lamb it is sourced from the UK."

Back on the farm in North Wales Mr Wyn Jones keeps an anxious eye on the long-term forecast.

He says he's not sure if they could cope with another spring snowfall. Most of his ewes are pregnant again and he's counting on the lambs due to be born this spring to help rebuild his livelihood.

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Ski Hosting Ban: British Company Leads Appeal

By Harriet Hadfield, Sky News Reporter

A British ski holiday company is leading an appeal against a ban on ski hosting in the French Alps.

The appeal comes after a court in Chambery in France said that the informal on-piste group tours led by ski reps are illegal.

The judge ruled that all future hosts must be fully qualified ski instructors certified by the notoriously tough French examining system.

Yorkshire-based Le Ski has joined forces with 12 other British tour operators to argue that the decision is in breach of European law.

Nick Morgan from Le Ski told Sky News: "I think that somebody somewhere has gone a little bit too far in the formation of the law and we are hoping that that is seen by the appeal court and if not is taken up by the European Court in Luxembourg."

In 2012 a ski rep was arrested on the piste and the company was then prosecuted for compromising safety.

Some British skiers say they miss the social side of skiing in a group

Simon Atkinson from the French Ski School says: "Even when they say they're only there to help them round the slopes, the people who are on holiday actually do think that they're responsible for them.

"So when they go on to the slopes, they put their whole confidence in that person to take them round and they follow them."

Some British skiers on holiday in Courchevel told Sky News they are missing the social side of skiing in a group this season.

Julie Tate said: "I miss the guiding more than I thought I would, it's really important to me because I come skiing by myself and skiing with a small group of people with a guide is a really good way to get to know people on the slopes."

John Willis explained: "Rather than spend all day looking at the map and planning my route, the guide used to be there and I could follow them. I'm totally lost without them."

The next step in the legal process will be an appeal heard in a French court in Albertville.

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