Icesave In Court Win Over UK Bank Deposits

Iceland was right to refuse to repay billions to Britain and the Netherlands for bailing out depositors in a failed Icelandic bank, a European court has ruled.

After the collapse four years ago of Iceland's top lenders during the credit crunch, the British and Dutch governments stepped in to repay savers in the online "Icesave" account run by Landsbanki and wanted Iceland to pay them back directly.

Iceland did not comply, triggering a row between the governments and potentially complicating the island's bid to join the European Union.

But the court of the European Free Trade Association bloc (Efta) found Iceland did not break depositor protection laws by refusing to return the money.

Last week, Iceland's president told Sky News Economics Editor Ed Conway that his nation would "never forget" Gordon Brown for the treatment it was given by the then British leader.

Icelanders twice voted in referendums against repayment schemes drawn up by their government to satisfy the British and Dutch claims, leaving the estate of Landsbanki to pay back the funds, which it has steadily done.

Protesters outside the Icelandic parliament

"It is of considerable satisfaction that Iceland's defence has won the day in the Icesave case - the Efta court ruling brings to a close an important stage in a long saga," the Icelandic foreign ministry said in a statement.

The Efta court, a cooperation group of which Iceland is a member and which has links to the European Union, rejected the case brought by the Efta Surveillance Authority - the body which oversees the bloc's rules.

In a ruling on its website, the court dismissed all three of the claims brought by the Surveillance Authority against Iceland, partly on the grounds of the massive nature of Iceland's bank collapse.

It also said the depositor protection rules did not mean a country itself had to fund the deposit guarantee scheme.

The foreign ministry said in a statement that 660 billion crowns (£3.2bn) had already been paid out from the estate of Landsbanki, of which 585 billion crowns (£2.9bn) had gone to claims related to Icesave, or more than 90% of the total which the UK and Dutch authorities advanced to cover the minimum deposit guarantee for Icesave.

"It is important to bear in mind that payments from the estate of the failed Landsbanki will continue regardless of the ruling of the Efta court," the Icelandic foreign ministry added.

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Report: Youth Joblessness Rises Fastest In UK

Youth unemployment has increased in the UK at a faster rate than any other country in the G8 since the start of the recession, a new report has said.

A study by the Work Foundation found that the UK now lags only behind Spain and Greece for youth joblessness in OECD countries.

The problem cannot be attributed just to the recession because other countries have fared better, the research group said.

The Government was urged to follow the lead of countries like Germany and Denmark by taking measures including more apprenticeships and increased training.

Lizzie Crowley, the report's author, said: "In many other developed nations, youth unemployment has remained low despite the global downturn.

"However, in the UK youth unemployment as a proportion of 15 to 24-year-olds has increased at a faster rate over the course of the recession than both the European and OECD averages.

"While the reasons for this are complex, it's clear that the UK can learn from the experiences of those countries that have fared much better in terms of youth unemployment.

"The Government should focus on those policies that have been shown to work, cherry-picking the best responses from other countries and adapting them to the needs of the UK labour market."

Unemployment for people aged 15 to 24 had increased in the UK by 35% to 916,000 between 2008 and 2011.

That compares to an average of 15% in the other G8 countries Canada, France, Germany, Italy, Japan, Russia and the United States.

Germany, Russia and Japan had seen a reduction in youth unemployment in the same period.

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Sugary Drink Tax 'Could Pay For School Meals'

Sugary drinks should be taxed at up to 20p a litre, say health campaigners – with the proceeds helping to pay for free school meals.

Food and farming charity Sustain said the Government could raise £1bn a year from the duty, while also saving lives by cutting excessive consumption of unhealthy drinks.

The report has been backed by more than 60 organisations, including the Academy of Medical Royal Colleges, Friends of the Earth, the National Heart Forum and the Royal Society for Public Health.

Diet-related illness is now costing the NHS £6bn every year, said the report.

Sustain urged Chancellor George Osborne to introduce the duty in his March 20 Budget and to channel most of the cash raised into a Children's Future Fund for programmes to improve children's health.

Money could be spent on campaigns to encourage youngsters to eat more fruit and vegetables, the report said.

The group's campaigns manager, Charlie Powell, said: "Sugar-laden drinks are mini-health time bombs, contributing to dental diseases, obesity and a host of life-threatening illnesses which cost the NHS billions each year.

"We are delighted that so many organisations want to challenge the Government to show it has a public health backbone by including a sugary drinks duty in Budget 2013.

"It's a simple and easy-to-understand measure which will help save lives by reducing sugar in our diets and raising much-needed money to protect children's health."

Sustain chairman Mike Rayner, of Oxford University's Department of Public Health, added: "Just as we use fiscal measures to discourage drinking and smoking and help prevent people from dying early, there is now lots of evidence that the same approach would work for food.

"Our obesity epidemic causes debilitating illness, life-threatening diseases and misery for millions of people. It is high time Government did something effective about this problem."

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Christmas Boost Sees Ryanair's Traffic Rise

Ryanair has reported a 3% rise in traffic in the third quarter as strong pre-Christmas bookings boosted its profit.

The airline's average fares were up more than expected - by 8% over the period - leading the company to increase its full-year profit forecast.

Its profit after tax in the third quarter was up by over 20% to 18.1m euros (£15.4m), and it expects full year profits to be over 540m euros (£461m) - up from an earlier estimate of 520m euros (£444m) at most.

The airline carried a total of 17.3 million passengers over the third quarter - but is predicting that in the fourth, passenger numbers will fall as a result of higher fuel costs and airport fares.

Chief executive Michael O'Leary said: "Our Q3 profit 

More follows...

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Exclusive: Banks' Fury At Mis-Selling Probe

By Mark Kleinman, City Editor

The bosses of Britain's major banks have mounted a coruscating attack on their new regulator as they brace for the outcome of a new mis-selling probe that will result in another multi-billion pound compensation bill for the industry.

I have learned that the chief executives of some of the biggest high street lenders met for secret talks earlier this month, at which they shared profound concerns about the approach of Martin Wheatley, head of the new Financial Conduct Authority (FCA), to the mis-selling of interest rate-hedging products to small businesses.

The bank chiefs are understood to be concerned that Mr Wheatley will ignore recent victories for banks in mis-selling court cases and establish a compensation framework that could cost them as much as £10bn.

One bank executive said: "Repaying customers who have been mis-sold to is right and proper, but he [Mr Wheatley] seems to have an agenda to persecute the banks which goes way beyond that.

"It is getting to the point where investors will have to apply a 'Wheatley discount' to bank share prices."

The banking sector is braced for its latest bruising battle with Mr Wheatley to unfold this week when the Financial Services Authority (FSA) announces the results of a long-running pilot programme aimed at assessing the scale of redress owed to customers who were mis-sold interest rate swaps.

The FCA will be spun out of the FSA later this year.

I understand that Mr Wheatley has written in recent weeks to Royal Bank of Scotland (and possibly other major banks) to warn them that recent court victories will not determine the structure of the complaints resolution regime that will be outlined on Thursday.

In December, RBS won a case in the High Court, which dismissed a claim by a Lancashire hotelier and his business partner who had alleged that the bank had mis-sold them an interest rate swap in May 2005 as a form of insurance against their existing loan liabilities.

The attack by the bank chiefs on Mr Wheatley's handling of the swaps and other conduct-related issues was made during private talks, and is unlikely to be repeated in public.

At least one bank chief executive, however, plans to write to George Osborne, the Chancellor, to warn that the "over-zealous" FCA approach risks grave consequences for the wider economy by eating further into banks' capital reserves.

The interest rate swaps scandal comes in the wake of the payment protection insurance debacle, which has already cost the major banks well over £10bn, and with little prospect of an end to the rise in compensation costs.

Swaps are products which provide a form of insurance in the event that (in this case) there was a steep rise in interest rates during the period covered by the product.

After the banking crisis hit, deep cuts to interest rates left thousands of customers facing bills far larger than the interest they were having to pay.

The banking industry has argued robustly that the fact that some customers were left facing large bills provides in itself no evidence that the swap products were mis-sold.

To date, Barclays has set aside £450m for customer compensation, RBS £50m and HSBC a little over £130m.

Lloyds Banking Group has said the sums involved will be "not material" to it, but it could still involve a tab running to hundreds of millions of pounds.

The banks are not the only stakeholders concerned about the outcome of the swaps probe.

The Financial Times quoted Mike Cherry, national policy chairman of the Federation of Small Businesses, calling for the range of businesses eligible to apply for compensation to be expanded.

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Corporate Manslaughter Cases Up By 40% In A Year

The number of new corporate manslaughter cases opened by the Crown Prosecution Services has spiked by 40% in a year, according to newly released figures.

The research shows there has been an increase in charges from 45 in 2011 to 63 in 2012.

In total 141 cases have been opened since 2009, with 56 prosecutions currently ongoing, according to law firm Pinsent Masons.

But despite the rise in numbers, there have only been three convictions since 2008.

It said the figures hinted that the scale of potential corporate manslaughter cases may be much higher.

Since the Corporate Manslaughter and Corporate Homicide Act 2007 was introduced the following year,  large and medium sized companies can be found guilty of corporate manslaughter for deaths arising from management failures which constituted a gross breach of a duty of care.

Pinsent Masons' Simon Joyston-Bechal said: "High-risk industries and companies cannot be reassured by the current lack of convictions for corporate manslaughter.

"The three convictions so far are just the tip of an iceberg."

He added: "Corporate manslaughter cases are very complex and can take a long time to come to trial. We can now see from these figures that there are a rapidly growing number of cases in the pipeline.

The first corporate manslaughter conviction in 2011 related to a 2008 fatality.

The second conviction in 2012 related to a 2010 fatality, while the third conviction in 2012 related to a fatality four years prior, in 2008.

Complaints against the historic low number of corporate manslaughter convictions may be misplaced in light of these new figures.

However with firms under pressure to limit costs, Pinsent Masons warns that it may have implications for any possible legal action.

Mr Joyston-Bechal added: "Cutting corners on safety in order to save money is probably the most serious aggravating feature of an offence.

"All businesses need to have robust health and safety procedures in place."

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UK GDP Falls By 0.3% In Last Quarter

How GDP Is Compiled Really Matters

Updated: 10:21am UK, Tuesday 27 November 2012

By Ed Conway, Economics Editor

I've covered economics for a decade or so, but I confess that until very recently I didn't really know what GDP really is.

I mean, like most of you I knew it was the broadest and most widely-used measure of our economy's health - that it determines whether we're officially in recession or not (two or more quarters of shrinking GDP equals a recession).

I knew it was the sum of everything spent, earned or made in Britain.

What I didn't know was how it's actually put together.

I guess I vaguely assumed - and I don't think I'm entirely alone - that the Office for National Statistics had some kind of electronic hotline into British business, some privileged access to their numbers, which in turn became the Gross Domestic Product number.

Turns out I was monumentally wrong.

For it transpires that GDP - that big number we're all so focused on, the figure that tells us whether we're in a recession or booming, that can end a political career and swing an election - is actually a big, big survey.

I know this because earlier this month I spent some time in the ONS headquarters in Newport with the team who put together this most significant of all numbers.

For the first time, they allowed cameras into their offices to show how GDP really comes into being - and the genesis might well surprise you.

At this point it might be worth explaining why this matters so much: there is arguably no other number out there that can swing the financial markets quite so much, that can influence Britain's feelgood factor, that dominates the headlines and strikes fear into politicians.

And yet there are many people who question whether we can really rely on the numbers.

Some economists argue that the GDP figures in recent months have painted a far more negative picture of the UK economy than is actually the case.

Some argue that Britain never really experienced a double-dip recession - but that this reality will only ever be confirmed many years into the future when the ONS revises those initial estimates.

So how GDP is put together really matters. And it all starts with the pounds in your pockets.

The first estimate of GDP is created from data collected in surveys of tens of thousands of surveys from businesses around the country - whether they're manufacturers, construction firms, retailers or others.

Each month a large sample of them is asked by the ONS to tell them their turnover (how much money is going through the till), along with a few other industry-specific questions which form part of the retail sales, manufacturing output and other releases.

The turnover number is what matters from the perspective of GDP. They fill the relevant questionnaire in and post it to the ONS (they can also submit the data through an automated telephone system).

When those envelopes arrive there the questionnaires are scanned and the numbers go into the ONS' systems.

The problem is that by the time that first estimate needs to be produced, the ONS only has 44% of the relevant data (the rest arrives in dribs and drabs over the following months, hence later revisions). In particular, the ONS only has early responses for the final month of the quarter.

So there are some pretty big gaps to be filled, and the ONS has to make some estimates about what the other data will eventually say when it comes in.

It relies for this on computer models, backed up by assumptions and calculations from the ONS staff themselves. After they make these calls they meet and discuss them in so-called "balancing meetings" - the statisticians ask each other whether the data are reliable and their assumptions have foundation.

During this entire period, those GDP assumptions and the ultimate figure are kept locked up (quite literally - there are safes into which they are put) such that only a dozen or so statisticians actually know the number before it comes out.

So far as anyone knows, there has never been a leak of a number as sensitive as this from the ONS. But 24 hours before the figures are published, selected ministers and officials also get a look.

The figures are revised again a month after that initial release, and then again a month later. During that period, more information has come in from quarterly surveys which measure families' and businesses' incomes, and other spending data.

As I said, GDP can be measured in terms of what we spend, what we earn and what we make - they should all add up to the same number, since what one person buys another person sells. And the extra data furnishes that initial estimate and, occasionally, contradicts it.

The ONS maintains that its record of revisions is acceptable by international standards. It points out that its surveys have far more respondents than those put together by independent competitors.

But some, most notably Kevin Daly of Goldman Sachs, argue that it has a tendency to revise the more distant history so substantially that often periods we thought at the time were slumps were actually booms.

A case in point is the early 1990s - at the time, the ONS said the UK was suffering a double-dip recession.

But by the end of the millennium it had revised its assessment - far from slumping, the UK was actually bouncing back forcefully at that point. When Norman Lamont referred to "green shoots", it turns out he was absolutely right.

Today, the GDP figures have been telling an altogether different story to the unemployment figures, which seem to suggest there never was a double-dip. Based on precedent, we are unlikely to know the definitive story for years to come.

Which implies that the ONS, and the way it puts together this most important of all numbers, will remain in the spotlight for the foreseeable future.

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Payday Loan Sites' Dirty Tricks To Boost Traffic

By Jason Farrell, Sky Correspondent

A Sky News investigation has found that some payday loan brokers have benefitted from hacking into websites to divert the history and status of a legitimate business to their domain.

This increases their ranking on Google, and the tactic has given unregulated brokers access to online traffic worth millions of pounds.

The findings come as the Office of Fair Trading (OFT) prepares its report into dirty tricks in the market, due to be published in February.

Every month, tens of thousands of potential customers use Google to search for payday loans.

The search engine has a complex algorithm based on a website's history and credibility which tries to ensure that users are directed to the most appropriate websites.

However, Google's natural listings system can be tricked. Sky News found three payday websites that were stealing the credibility of other websites to boost their ranking. The target victim sites included a music business, a graduate website and even a church website.

In November last year, Sky News discovered established music licencing website Ricordi was one of several domains that began ranking highly for selling payday loans on the front pages of Google. Clicking on the link diverted the user to a payday broker's site.

Dr Joseph Somerhalder says brokers have been 'stealing identities'

Web analyst Dr Joseph Somerhalder from search optimisation company Chillicow explained what was happening.

He told Sky News: "They hack into the website. They optimise the website for something that it is not about such as payday loans. Then they wait for the right moment, and then they forward all the history and all the credibility from the old website, the legitimate business, into the illegitimate business."

He added: "It's a bit like stealing your identity online. They take the website's identity and history and they point it somewhere else."

Ricordi is owned by Universal Music Group. A spokesperson for the company said: "We recently discovered the unauthorised access to our Ricordi UK website. UMG takes the protection of its sites very seriously and has implemented measures to prevent a recurrence of this type of event."

But other companies may not be aware of the hacking. Using web analysis software, we found that over 10,000 websites have been compromised by this technique on one server alone.

Sky News spoke to the owners of UK graduate website Gradfunding which was also in the process of being hijacked.

Dr Luke Blaxill, director of the website, said he was also trying to deal with the problem.

"To get rid of this we are going to have to rewrite every bit of code on the website and transfer it to a new server."

The payday loan intrusion meant his company was starting to fall down the listings for its own business operations and it could lose years of building up an online reputation.

Dr Blaxill said: "It has taken years for us to get to the position that we are in this particular market and for that effectively to be almost rewritten overnight by a scammer, is a real problem."

Gradfunding was among the target victim websites

Raiham Islam from Jar Applications, which fixed the problem for Gradfunding, told Sky News: "What they did was inject a malicious code into the web server, and the files trick Google by the method of cloaking.

"They then bomb the site with payday loan links to increase its ranking for payday loans and redirect the traffic to their scam website. That's when the hacker starts making money."

During the investigation we found church website Canada had been hacked for this purpose. We also discovered 21,000 payday loan links had been pointed at a Bonsai society website.

There are concerns these tactics leave UK loan customers exposed to unscrupulous, unregulated brokers.

Over the last two months Sky News conducted test searches on Google for payday loans which produced websites high in the natural listings that were in breach of OFT regulations.

Several had no consumer credit licence, a requirement for any loan broker and lead generator.

Some websites claimed to be 100% secure, but actually had no data protection when customers entered their bank details. This exposes customers to fraud and identity theft.

We also found many websites broke legal requirements on transparency to customers, such as failing to prominently display a representative APR or an address where the company can be contacted.

Sky News found three payday websites involved in dirty tricks

Some legitimate lenders in the industry have told us they are aware of the problem. Many of them advertise on Google's pay per-click service as an alternative to the natural listings.

One lender who did not want to be identified suggested the price of Google's sponsored links have gone up because demand has increased with legitimate companies struggling to get on the natural listings.

"Google could solve this problem by tightening up their algorithm" he suggested. "But they have no incentive to do so. We're all having to use the sponsored listings to get any traffic to our websites."

He added: "But customers don't realise that some companies on the natural listings don't have a consumer credit licence, which means they don't have to tell the customer how much they're going to pay back, which feeds into some of the problems we're seeing at the moment of customers not able to pay back their loans."

Google says its key motivation is to try to direct customers to the best websites.

A spokesman told Sky News: "As part of our on-going effort to reduce webspam and return high-quality websites to our users, we are constantly improving our search algorithm to better detect and decrease rankings for sites that we believe are violating Google's quality guidelines and engaging in webspam tactics to manipulate search engine rankings."

For legal reasons we are not naming the websites linked to hacking but we have passed our evidence to the OFT, which told us: "The OFT is clear regarding the standards it expects from those businesses that it regulates and has publicised an extensive suite of guidance documents. We take very seriously any evidence tending to show that businesses are not meeting the standards set out in our guidance.

"The guidance for credit brokers and intermediaries states that creditors should satisfy themselves that persons they deal with are appropriately licenced. Accepting leads from unlicensed sources would raise concerns about a lender's fitness to hold a consumer credit licence."

At one point during our investigation we found the highest ranking website on Google was a four-day-old domain registered to a field in California.

Just a few days in this position can earn the web owner tens of thousands of pounds. Yet this site was in breach of several regulations and displayed nothing on the website to suggest it was licenced to sell loans in the UK.

Last November, the OFT opened formal investigations into the tactics used by an number of payday lenders. But if the regulator wants to properly police the market, it seems it is going to have to work with Google.

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EasyJet Chair Rake In Departure Lounge

By Mark Kleinman, City Editor

The chairman of easyJet, Britain's biggest airline by passenger numbers and revenues, is to step down this summer after a four-year tussle with the company's founder over its fleet size and strategy.

Sir Mike Rake will leave once a successor has been identified, about three-and-a-half years after he took on the chairmanship.

EasyJet brought forward the announcement of Sir Mike's departure on Saturday afternoon following a leak to Sky News.

A statement had been due to be issued by the company next week but a spokesman said the company had decided to confirm news of Sir Mike's departure after its City advisers were made aware of the leak.

In the statement, easyJet said it had already started a process to recruit a new chairman.

The news of Sir Mike's intention to quit comes days after shares hit an all-time high on the back of a surge in more profitable business travellers using the airline. It also benefited from capacity cuts by rival carriers during the winter months.

That solid performance has not appeased Sir Stelios Haji-Ioannou, who - alongside a number of family members - is easyJet's largest investor.

Last week he threatened to sell his shareholding if the company proceeded with a major new aircraft order.

EasyJet is poised to join the FTSE 100 following its next quarterly review in March, which will mean that Sir Mike chairs two companies in the blue-chip index.

He is also chairman of BT, and was a leading candidate to replace Marcus Agius at the helm of Barclays following the bank's £290m fine for Libor rate-rigging.

"In advance of the forthcoming [annual general meeting] I wanted to make my position clear," Sir Mike said. 

"easyJet has by any definition enjoyed a period of success and profitable growth in the last three years. 

"As this takes the airline to the threshold of entry to the FTSE 100 it is the right time for me to stand down.

"Carolyn McCall and her management team have developed and implemented the right strategy for the airline which is already bearing fruit wth record profits, a healthy share price and strong dividends.

"The airline is now well positioned to continue to deliver profitable growth and returns for all its shareholders."

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Latest GDP Drop Puts Pressure On Osborne

A lot of people suspected the news would not be good. It turns out it was even worse than expected.

Britain's economy is shrinking once again - and far deeper into negative territory than was anticipated.

That 0.3% decline in the fourth quarter of 2012 leaves Britain's gross domestic product 3.3% shy of its 2008 peak.

It's deeply embarrassing for the Chancellor, who told Sky News earlier today that despite this setback it was "a reminder that Britain faces a very difficult situation.

"We have problems at home but there are also problems abroad. You can either run away from them - and the British public understand there is no overnight solution and we are heading in the right direction."

But according to the Shadow Chancellor, Ed Balls, the figures are the "moment when David Cameron and George Osborne's complacency is completely exposed".

And it leaves the UK even further shy of its international counterparts. In Canada, the US, Germany, China and plenty of other major countries, GDP has already rebounded to the level it was before the crisis.

Britain, on the other hand, remains below that peak - even five years after the crisis started.

The National Institute for Economic and Social Research defines a depression as a "period when output is depressed below its previous peak."

IMF chief economist Olivier Blanchard said Osborne needs to change his plan

By that definition, Britain is still stuck in a depression - and this depression is longer than any in recorded economic history: even the 1930s.

In the end, this is the challenge for George Osborne. Britain's total capacity to produce wealth - which is in essence what GDP measures - has diminished substantially during this crisis. That, when it comes down to it, is what lies behind the squeeze so many families are facing on their incomes.

And the economy's inability to regain meaningful growth is something that should concern the Chancellor. There is now growing pressure (even more than the significant amount there was before) for him to reconsider his fiscal plans.

It isn't merely Nick Clegg: the International Monetary Fund's chief economist, Olivier Blanchard, believes that having warned Mr Osborne multiple times that he needs to be ready to change course if the UK economy disappoints, that moment has now come.

Whether this pressure will be enough to force Mr Osborne to change course is another question. He has been so forthright about the need for austerity all the way through the crisis that it would surely be politically humiliating to do an about-turn now.

And indeed, the evidence is that the austerity practiced in the UK hasn't actually been as aggressive as the Chancellor has made it sound.

However, the Chancellor refused to answer whether he agreed or disagreed with Mr Blanchard's advice.

Pointing to alternative support from the former IMF chief economist he said: "You're going to get economists disagreeing. I'm absolutely clear: we have the right plan. It was not a plan that was going to deliver results overnight." 

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