Interest Rate Rise 'Signals End Of Crisis'

George Osborne Acts To Curb Housing Bubble

Updated: 1:25am UK, Friday 13 June 2014

By Jon Craig, Chief Political Correspondent

Barely a few minutes into his Mansion House speech, George Osborne said: "So while I know this is my fifth speech to you as Chancellor, I hope it is not my last."

I'll bet he does!

But whether he's back this time next year addressing the bankers and City money men and women, or listening to Ed Balls make it, could depend on the success or not of the measures he announced in this year's speech.

He wouldn't admit it. But the Chancellor now appears to accept that the threat of a "housing bubble" in London and some other parts of the country is a potential problem.

He doesn't want interest rates to rise before next year's general election to curb house price inflation. We know that from no lesser source than Her Majesty the Queen last week.

"To strengthen the economy and provide stability and security, my ministers will continue to reduce the country's deficit, helping to ensure that mortgage and interest rates remain low," she said right at the outset of her speech at the State Opening of Parliament.

So instead, the Chancellor plans to give the Bank of England powers to curb big mortgages being offered to people who can't afford the repayments.

Excuse me, though. Aren't many of the big lenders doing that already? Some lenders are limiting loans to four times salary and scrapping loans of more than £500,000. There has been a clampdown on interest-only mortgages too.

But the price of an average house rose by £223 a day last month and by 16% over the past year. It's not as if Mr Osborne hasn't been warned.

For months, the Liberal Democrat Business Secretary Vince Cable has been warning about a "housing bubble". But until now he has been slapped down by the Tory Chancellor.

Not any more. Mr Osborne told his City audience: "If London prices were to continue growing at these rates that would be too fast for comfort."

In other words, the Chancellor now recognises what critics of his Help to Buy scheme have been telling him: there is a problem in the capital, particularly, and elsewhere.

It doesn't take a genius to work out why: demand massively outstrips supply. So Mr Osborne is proposing to relax planning laws on so-called "brownfield sites", while protecting the green belt in those Tory constituencies in the shires.

Relaxing planning laws? How many times have we heard that before from senior Conservative politicians? The "Nimbys" in the leafier parts of Britain have other ideas.

To tackle the supply and demand problem in the capital, the Chancellor is promising "new housing zones across London backed by new infrastructure". Thousands of new homes for London families is the promise. We've heard a lot about that before, too.

No wonder Ed Balls MP, Labour's Shadow Chancellor, said: "George Osborne is still failing to tackle the root cause of the housing crisis which is that we are not building enough homes to match rising demand.

"And the danger of the Chancellor's failure to act on housing supply is that we see a premature rise in interest rates to rein in the housing market which ends up hitting millions of families and businesses."

A rise in interest rates before the election? No chance, Mr Balls.

But despite Mr Osborne's attempts to cool the housing market to avoid a rate rise before voters go to the polls in May 2015, I predict the so-called "housing bubble" will lead to interest rates going up after the election.

Whoever it is delivering the Mansion House speech this time next year.

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Carney Boosts Lloyds Plan For £1.3bn TSB Float

By Mark Kleinman, City Editor

The state-backed Lloyds Banking Group is this weekend considering increasing the price at which it sells shares in TSB, its high street subsidiary, amid strong demand from investors.

Sky News has learnt that Lloyds could announce early next week that it is revising the 220p-290p range for the flotation of TSB by raising the bottom end to approximately 240p.

Investment banking sources said Lloyds would make a decision after consulting its advisers during the next couple of days.

One insider said that the Mansion House address by Mark Carney, Governor of the Bank of England, had bolstered sentiment among City investors for TSB shares, with further interest registered on Friday.

Mr Carney said it was conceivable that interest rates would rise from their historic low of 0.5% sooner than markets expected, implying that a rate hike could come before the end of this year.

That would potentially benefit TSB, the profitability of which is geared to interest rates to a greater degree than most of its high street rivals.

One insider said the City's assumptions about TSB's profitability, outlined in its prospectus last week, might need to be revised given the boost to margins on mortgages and current accounts which could result from an early rate rise.

At the 255p mid-point of the 220p-290p range announced last Monday, TSB would be valued at £1.275bn, roughly 15% below its book value of just over £1.5bn.

The expectation that shares in the UK's seventh-largest lender will be sold for less than its book value disappointed some City analysts.

Yet even at that level, Lloyds would still attract a price for TSB that is significantly higher than the £750m which the Co-operative Group planned to pay for the 631-branch network before a deal collapsed last year.

The prospectus revealed that TSB made an after-tax profit of £172m last year on revenue of £798m, although the earnings figure included a £105m tax gain.

Banking sources also said that approximately 60,000 retail investors had applied for shares, lured by the offer of free bonus stock.

That figure could increase significantly by Tuesday, when the window for retail applications closes.

Lloyds is selling between 25% and 27.5% of TSB in the flotation.

It is required to offload the remainder by the end of next year under a state aid deal agreed with Brussels following the bank's taxpayer bail-out in 2008.

Lloyds, which is being advised by Citi, JP Morgan, UBS, Investec, Royal Bank of Canada and Rothschild, declined to comment.

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Retailers Set Goals On World Cup Success

By Emma Birchley, Sky News Correspondent

England fans are not the only ones hoping the players can find the back of the net as their World Cup campaign finally gets under way.

Retailers too are banking on success.

The Centre for Retail Research has estimated that every time England scores - shops, restaurants and pubs will benefit to the tune of almost £200m.

At Sainsbury's, designers started working on the merchandise more than a year ago.

Corporate affairs director Alex Cole said: "The longer England stays in the tournament, the more excuse we have got for parties as a nation.

"But also the sun is really important so the sunnier it is the more likely we are to say, yes, we will have a BBQ and get some people round to watch the match with us."

The further in the competition England progress, the better for retailers

But it is not just sales of sausages and beer that soar. TVs are selling well. So too are souvenirs and sportswear.

Takeaway pizzas are expected to sell in their millions but many people will head straight from work to bars or restaurants to watch the matches.

Phil Collinson, manager at Rileys Sports Bar in central London, is expecting 30,000 fans to come through the doors during the tournament.

"It's our responsibility to make sure everyone from all the different nations has the chance to see the matches," he said. "It will be an incredible atmosphere and great to be part of."

Reaching the final 16 is expected to see the takings by retailers, bars and restaurants rise by more than £1.3bn while a place in the final would be worth almost £2.6bn to the economy.

Michael Jarman says success equals spending

With England taking on Italy in their first game, it can mean split loyalties if you are running an Italian business in the heart of London.

But while there is no surprise who Lorenzo Mariotti, manager of the restaurant Little Italy in Soho, wants to win, he knows the importance of the home nation staying in the competition.

"We really need both teams to play well and go (as) far as they can and hopefully meet in the semi-final or final," he said. "It will be the most great game of the World Cup."

Former footballer and city trader Michael Jarman says success in the tournament will see football fans out spending.

"You find the general morale and momentum of the UK consumer is going to be more upbeat, a bit more optimistic," he said.

"You then have the new football season starting. Naturally there will be a better feel-good factor."

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Google In Talks To Take Virgin Galactic Stake

By Mark Kleinman, City Editor

Google is in talks with Virgin Galactic about a deal that will hand it crucial access to satellite-launch technology and an equity stake in Sir Richard Branson's $2bn (£1.2bn) space tourism venture.

Sky News can exclusively reveal that the discussions with Virgin Galactic are part of Google's ambitious project to put hundreds of satellites in low-Earth orbit in an attempt to extend internet access to billions of people.

Negotiations between the two companies have been taking place for months, and are said to be at an advanced stage.

The talks are likely to lead to a deal with two main elements, according to insiders.

Sir Richard Branson plans to be on the first commercial flight

The first will see Google inject hundreds of millions of dollars into a joint venture, with Virgin Galactic folding in the technology it has developed as part of its efforts to build the world's first space tourism business.

The second component will involve Google spending roughly $30m (£17.8m) in return for a small stake in the Virgin Galactic holding company.

The terms of the alliance have not yet been finalised and could yet be altered before a deal is struck.

A person close to Google said, though, that its £17.8m investment could value Virgin Galactic at as much as £1.2bn, equating to a shareholding of approximately 1.5%.

The deal could be reputationally valuable for Virgin Galactic, which has had to defend itself against frequent suggestions that problems with its development will curb its viability.

The company has insisted that flights should begin this year, although there is no firm date, while rivals such as Elon Musk, the billionaire businessman, are developing competing projects.

Celebrities including Ashton Kutcher, Katy Perry and Sir Richard himself are said to have paid $200,000 (£119,000) to secure seats on the venture's inaugural flights.

News of the talks with Virgin Galactic comes a day after Google said it was buying Skybox Imaging, a start-up satellite venture, for $500m (£297m).

SpaceShipTwo's first rocket-powered test flight took place last year

Skybox has developed small, comparatively cheap satellites which are capable of taking high-quality photographs and videos of the Earth.

Google is engaged in a race with internet rivals to extend web access to the billions of people who do not currently have it, by using balloons, drones and satellites.

Doing so contains powerful commercial incentives for Google, which would see usage of its services and advertising revenues benefit from a significantly-enlarged customer base.

Google has bought solar-powered drone maker Titan Aerospace

Its other acquisitions aimed at broadening internet access include Titan Aerospace, which it bought in April with the aim of building jet-sized drones which would utilise solar power to fly uninterrupted for years. The drones could be used to provide online access in remote parts of the world.

Virgin Galactic is about one third-owned by Aabar Investments, an Abu Dhabi-based group, which paid about $280m (£166m) for a 32% stake in the venture's holding company.

That deal valued Virgin Galactic at approximately $900m (£535m), meaning that the transaction with Google, if it is completed, would mean that the company's equity value had more than doubled since 2009.

Sir Richard and Larry Page, Google's co-founder, are close friends, and have registered the name Virgle for use on potential future business collaborations.

Google and Virgin Galactic both declined to comment.

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Carney Upstages Chancellor At Mansion House

George Osborne Acts To Curb Housing Bubble

Updated: 1:25am UK, Friday 13 June 2014

By Jon Craig, Chief Political Correspondent

Barely a few minutes into his Mansion House speech, George Osborne said: "So while I know this is my fifth speech to you as Chancellor, I hope it is not my last."

I'll bet he does!

But whether he's back this time next year addressing the bankers and City money men and women, or listening to Ed Balls make it, could depend on the success or not of the measures he announced in this year's speech.

He wouldn't admit it. But the Chancellor now appears to accept that the threat of a "housing bubble" in London and some other parts of the country is a potential problem.

He doesn't want interest rates to rise before next year's general election to curb house price inflation. We know that from no lesser source than Her Majesty the Queen last week.

"To strengthen the economy and provide stability and security, my ministers will continue to reduce the country's deficit, helping to ensure that mortgage and interest rates remain low," she said right at the outset of her speech at the State Opening of Parliament.

So instead, the Chancellor plans to give the Bank of England powers to curb big mortgages being offered to people who can't afford the repayments.

Excuse me, though. Aren't many of the big lenders doing that already? Some lenders are limiting loans to four times salary and scrapping loans of more than £500,000. There has been a clampdown on interest-only mortgages too.

But the price of an average house rose by £223 a day last month and by 16% over the past year. It's not as if Mr Osborne hasn't been warned.

For months, the Liberal Democrat Business Secretary Vince Cable has been warning about a "housing bubble". But until now he has been slapped down by the Tory Chancellor.

Not any more. Mr Osborne told his City audience: "If London prices were to continue growing at these rates that would be too fast for comfort."

In other words, the Chancellor now recognises what critics of his Help to Buy scheme have been telling him: there is a problem in the capital, particularly, and elsewhere.

It doesn't take a genius to work out why: demand massively outstrips supply. So Mr Osborne is proposing to relax planning laws on so-called "brownfield sites", while protecting the green belt in those Tory constituencies in the shires.

Relaxing planning laws? How many times have we heard that before from senior Conservative politicians? The "Nimbys" in the leafier parts of Britain have other ideas.

To tackle the supply and demand problem in the capital, the Chancellor is promising "new housing zones across London backed by new infrastructure". Thousands of new homes for London families is the promise. We've heard a lot about that before, too.

No wonder Ed Balls MP, Labour's Shadow Chancellor, said: "George Osborne is still failing to tackle the root cause of the housing crisis which is that we are not building enough homes to match rising demand.

"And the danger of the Chancellor's failure to act on housing supply is that we see a premature rise in interest rates to rein in the housing market which ends up hitting millions of families and businesses."

A rise in interest rates before the election? No chance, Mr Balls.

But despite Mr Osborne's attempts to cool the housing market to avoid a rate rise before voters go to the polls in May 2015, I predict the so-called "housing bubble" will lead to interest rates going up after the election.

Whoever it is delivering the Mansion House speech this time next year.

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Interest Rates May Rise 'Sooner Than Expected'

George Osborne Acts To Curb Housing Bubble

Updated: 1:25am UK, Friday 13 June 2014

By Jon Craig, Chief Political Correspondent

Barely a few minutes into his Mansion House speech, George Osborne said: "So while I know this is my fifth speech to you as Chancellor, I hope it is not my last."

I'll bet he does!

But whether he's back this time next year addressing the bankers and City money men and women, or listening to Ed Balls make it, could depend on the success or not of the measures he announced in this year's speech.

He wouldn't admit it. But the Chancellor now appears to accept that the threat of a "housing bubble" in London and some other parts of the country is a potential problem.

He doesn't want interest rates to rise before next year's general election to curb house price inflation. We know that from no lesser source than Her Majesty the Queen last week.

"To strengthen the economy and provide stability and security, my ministers will continue to reduce the country's deficit, helping to ensure that mortgage and interest rates remain low," she said right at the outset of her speech at the State Opening of Parliament.

So instead, the Chancellor plans to give the Bank of England powers to curb big mortgages being offered to people who can't afford the repayments.

Excuse me, though. Aren't many of the big lenders doing that already? Some lenders are limiting loans to four times salary and scrapping loans of more than £500,000. There has been a clampdown on interest-only mortgages too.

But the price of an average house rose by £223 a day last month and by 16% over the past year. It's not as if Mr Osborne hasn't been warned.

For months, the Liberal Democrat Business Secretary Vince Cable has been warning about a "housing bubble". But until now he has been slapped down by the Tory Chancellor.

Not any more. Mr Osborne told his City audience: "If London prices were to continue growing at these rates that would be too fast for comfort."

In other words, the Chancellor now recognises what critics of his Help to Buy scheme have been telling him: there is a problem in the capital, particularly, and elsewhere.

It doesn't take a genius to work out why: demand massively outstrips supply. So Mr Osborne is proposing to relax planning laws on so-called "brownfield sites", while protecting the green belt in those Tory constituencies in the shires.

Relaxing planning laws? How many times have we heard that before from senior Conservative politicians? The "Nimbys" in the leafier parts of Britain have other ideas.

To tackle the supply and demand problem in the capital, the Chancellor is promising "new housing zones across London backed by new infrastructure". Thousands of new homes for London families is the promise. We've heard a lot about that before, too.

No wonder Ed Balls MP, Labour's Shadow Chancellor, said: "George Osborne is still failing to tackle the root cause of the housing crisis which is that we are not building enough homes to match rising demand.

"And the danger of the Chancellor's failure to act on housing supply is that we see a premature rise in interest rates to rein in the housing market which ends up hitting millions of families and businesses."

A rise in interest rates before the election? No chance, Mr Balls.

But despite Mr Osborne's attempts to cool the housing market to avoid a rate rise before voters go to the polls in May 2015, I predict the so-called "housing bubble" will lead to interest rates going up after the election.

Whoever it is delivering the Mansion House speech this time next year.

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Osborne's Market Clean-Up: Too Little Too Late?

Another year, another probe into the misbehaviour of City bankers.

Thursday's announcement by George Osborne, the Chancellor, of a review called "Fair and Effective Markets" marks the fourth significant inquiry into the banking sector since the Coalition Government was formed in 2010.

The first three paved the way for profound reforms to the structure of the UK banking industry, and - to a lesser degree - of Royal Bank of Scotland, the state-backed lender.

Mr Osborne's latest review has less to do with structure and more to do with standards.

In the wake of the Libor-rigging inquiry, which has seen a handful of banks fined with more to come, the Chancellor believes there is further political capital to be generated from trying to stamp out errant behaviour.

His crosshairs are focused on the foreign exchange and commodity markets, where arcane price-setting mechanisms based on cosy huddles of bankers predominate.

The head of the City watchdog has already said that forex abuse may have been committed on a grander scale than efforts to manipulate Libor.

Under plans to be announced by the Treasury, legislation to regulate Libor will be extended to other financial benchmarks, with criminal sanctions among possible punishments.

The City's senior managers regime will be extended beyond UK-headquartered lenders to cover all banks with a British presence, while the Chancellor will create another dividing line with Brussels by not opting into EU rules covering criminal sanctions for market abuse.

The Treasury wants the new review to be complete within 12 months.

"The integrity of the City matters to the economy of Britain," Mr Osborne is expected to say in his annual Mansion House speech.

"Markets here set the interest rates for people's mortgages, the exchange rates for our exports and holidays, and the commodity prices for the goods we buy.

"I am going to deal with abuses, tackle the unacceptable behaviour of the few and ensure that markets are fair for the many who depend on them."

The Chancellor will, nevertheless, face the charge that he is closing the stable door long after the horse's departure.

Evidence of misconduct has, after all, been apparent since the financial crisis, with little concerted effort to tackle it until now.

Cathy Jamieson MP, Labour's Shadow Financial Secretary to the Treasury, said: "This review is too little, too late.

"We pressed Ministers to regulate commodities markets and the full array of financial benchmarks back in 2012, but the Chancellor failed to act."

Potentially more troubling for the Chancellor is that he will require widespread international backing to impose an effective clampdown on trading practices.

He may find that without it, his latest attempt to regulate the banking sector looks like little more than tinkering around the edges.

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Osborne To Crack Down On Money Markets

By Jon Craig, Chief Political Correspondent

New moves to clean up money markets and stamp out abuses like the Libor interest rate-fixing scandal are to be announced by George Osborne in his annual Mansion House speech later.

The Chancellor plans to bring in criminal sanctions with tough penalties for rigging financial markets and opt out of EU rules on market abuses because they are not tough enough, he claims.

Addressing the City's top bankers, investors, economists and analysts, Mr Osborne will vow to raise standards of conduct in the London's financial system by beefing up the regulatory and enforcement regime.

He will also launch a joint review by the Treasury, the Bank of England and the Financial Conduct Authority (FCA) into the way key wholesale financial markets operate.

In his speech, Mr Osborne will say strong and successful financial services that set the highest standards are an essential part of building a resilient economy.

"The integrity of the City matters to the economy of Britain," he is expected to say. "Markets here set the interest rates for people's mortgages, the exchange rates for our exports and holidays, and the commodity prices for the goods we buy.

Mr Osborne plans to get even tougher on market abuse

"I am going to deal with abuses, tackle the unacceptable behaviour of the few and ensure that markets are fair for the many who depend on them."

His pledges will include:

:: Extending legislation the Government put in place to regulate Libor to cover foreign exchange, fixed income and commodity markets, including bringing in new criminal sanctions;

:: Extending City banking rules to cover all banks that have a presence in the UK, bringing in foreign banks that have branches here;

:: Expanding the tough UK criminal regime for market abuse. As part of this, the UK will not opt in to EU rules, says Mr Osborne.

"Our own rules will be as strong or stronger than those of the EU, but will preserve flexibility to reflect specific circumstances in the UK's globally important financial sector," Mr Osborne will claim. He says the Government will consult on these steps in the Autumn.

Labour says the Chancellor's proposals are 'too litttle, too late'

The review of markets proposed by Mr Osborne comes at a time of serious allegations of misconduct in the financial markets, in foreign exchange, commodities and fixed income. The review will consider the scope of regulation, the role of industry standards and the need for additional resources, he says.

The review will run for 12 months and make recommendations for further action to strengthen the operation of fair and effective global financial markets, some of which may require international agreement, the Chancellor will say.

The review will be led by the Bank of England's new Deputy Governor for Markets and Banking, Minouche Shafik, with Martin Wheatley, Chief Executive Officer, FCA, and Charles Roxburgh, Director General Financial Services, HM Treasury as co-chairs.

A panel of market practitioners will also be appointed, to involve and reflect the views of the financial services industry in the Review. This panel will be chaired by Elizabeth Corley, CEO of Allianz Global Investors.

Dismissing the Chancellor's proposals, Cathy Jamieson MP, Labour's Shadow Financial Secretary to the Treasury, said: "This review is too little, too late. We pressed Ministers to regulate commodities markets and the full array of financial benchmarks back in 2012, but the Chancellor failed to act."

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Regulator 'To Reverse Car Insurance Hikes'

The competition regulator has announced a series of measures it says will help bring down the costs of insuring a car.

The proposals outlined by the Competition and Markets Authority (CMA) include imposing a cap on replacement vehicle costs passed on to an 'at fault' driver following an accident - estimated to currently total up to £180m annually.

It also wanted to ban price parity agreements between price comparison websites and insurers which stop insurers from making their products available to consumers elsewhere more cheaply.

The CMA called too for better information for consumers about their rights following an accident and on the benefits of no-claims bonus protection.

The CMA did not examine the impact of personal injury claims on premiums

It recommended the Financial Conduct Authority (FCA) examine how insurers inform consumers about other private motor insurance add-on products.

The CMA investigated after a previous study suggested many drivers were paying unnecessary costs arising from a "complex chain", inflating insurance premiums by as much as £200m a year. 

Alasdair Smith, chair of the private motor insurance investigation group and CMA deputy panel chair, said: "There are over 25 million privately registered cars in the UK and we think these changes will benefit motorists who are currently paying higher premiums as a result of the problems we've found."

The CMA said it did not consider the impact of personal injury claims in its investigation, citing recent changes implemented by the Ministry of Justice including the banning of referral fees for claims and other changes being considered.

The reforms are said to have already had a significant impact on premiums.

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Tycoons To Argue Case For Scottish Tax Revamp

By Mark Kleinman, City Editor

Scotland could become one of the world's five leading advanced economies if it adopts tax reforms designed to promote long-term investment, a group of economists and businesspeople will argue this week.

Sky News understands that N-56 will set out on Wednesday its argument for a series of measures that should be implemented regardless of the outcome of September's independence referendum.

Established by Dan Macdonald, the chief executive of property developer Macdonald Estates, N-56 is a new pro-business organisation which has consulted prominent researchers including Capital Economics about the viability of its proposals.

In a report called Scotland Means Business, the new group will call for the removal of tax disadvantages for equity versus debt financing in an attempt to promote long-term investment.

"(This would make) Scotland an attractive location for equity providers and other financial institutions; suppor the equity model of long term business finance, so providing long term patient finance; help to address the impact in pension funds of the removal of advance corporation tax in the UK; and encourage increased equity investment in growing Scottish businesses," according to a source with knowledge of the report.

Such a system could be structured through a 'dividend imputation system' such as that used in New Zealand which avoids the double taxation of dividend income.

N-56, which is named after Scotland's latitudinal position, is understood to be keen to remain distant from the politics of the intensifying independence debate.

One source said that the brother of Sir Nicholas Macpherson, the permanent secretary to the Treasury, was among those consulted about the new group's proposals.

Sir Nicholas was at the centre of a political row in April about a letter he wrote to rebuff Nationalists' claim that an independent Scotland would continue to use the pound.

He denied the SNP's suggestion that the Chancellor, George Osborne, had put pressure on him to argue against a continued currency union in the event of a 'Yes' vote.

"I would advise you against entering into a currency union with an independent Scotland. There is no evidence that adequate proposals or policy changes to enable the formation of a currency union could be devised, agreed and implemented by both governments in the foreseeable future," Sir Nicholas wrote in his letter.

N-56 will say in its report that it has examined the policy-making approach of successful economies including Denmark, Norway, Singapore and Switzerland.

A full list of founder supporters is likely to be published this week, which marks the milestone of 100 days until September's vote.

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