Ofgem Changes: Warning Over New Energy Tariffs

More than three million households could be paying more than they need to under new energy tariffs proposed by Ofgem, according to new research.

The consumer group Which? estimates energy customers could face bills of an extra £55m in total.

Ofgem's proposed tariff comparison rate aims to simplify energy tariffs and allow consumers to compare tariffs across the market.

Consumers will be advised on their best deal based on medium usage of gas and electricity, but only 26% of consumers use this level of energy.

The remaining 74% will be directed to tariffs which could be unsuitable for their usage and would cost them more, Which? claimed.

Which? estimates around 500,000 low energy users, who tend to be on the lowest incomes, could be advised on the wrong tariffs.

Richard Lloyd, executive director at Which?, said: "Rising energy bills remain one of consumers' top financial concerns yet six in 10 of us have never switched supplier as people are left baffled by the vast array of complicated tariffs.

"These current proposals are far too complicated and will fail to achieve their aim of making it easier for people to find the best deal, with three-quarters of people being asked to compare prices that are not based on their energy usage.

"The Government should introduce single unit prices for each energy tariff so people can easily see the best deal for them at a glance. Only then will people have the confidence to switch, injecting much-needed competition into the broken energy market."

But an Ofgem spokesman said the reforms would "deliver a simpler, clearer and fairer energy market for consumers and will make it much easier for consumers to choose the right deal for them".

He added: "Which? is misrepresenting the purpose of the tariff comparison rate and how it fits into the full scope of Ofgem's reform package. The tariff comparison rate acts as a prompt to consumers to take a look at comparative deals.

"The tool is similar to the 'typical APR' used in financial services marketing. But it is partnered with personalised consumption information necessary to make a full and accurate cross market comparison, which every supplier must provide via bills and annual statements. Ofgem's reforms will also see suppliers' cheapest deals on your bill.

"We share the desire with Which? to see an at-a-glance tariff comparison. We are taking forward our innovative proposals to put the market cheapest deal on consumers bills - even if it is from a rival supplier - and this will remove the need to compare tariffs altogether. We hope Which? will respond positively to our invite to them to join this next stage of our work."

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Mediterranean Resort Holiday Costs 'Plunging'

Prices have plunged in popular Mediterranean resorts, according to a holiday cost-comparison report.

The tumbling prices mean favourite spots in Portugal and Spain are more affordable for Britons despite the weakness of the pound against the euro, the report from Post Office Travel Money showed.

The survey looked at in-resort prices, such as meals and drinks, at 20 locations, including Bournemouth and Blackpool in England.

Judged on 10 items, Albufeira in the Portuguese Algarve had the lowest prices, with the items costing £46.34.

Torremolinos in southern Spain was the second cheapest on the list

The most expensive resort on the list was the Jumeirah region of Dubai in the United Arab Emirates, where items cost £103.23.

A cup of coffee in a bar or cafe in Albuefeira was 93p, but as much as £3.91 in Dubai.

Albufeira was only fractionally cheaper than in Torremolinos in southern Spain, where the items cost £46.50, and Javea on Spain's Costa Blanca (£47.14)

Prices at these three resorts are between 15% and 20% lower than this time last year.

Andrew Brown of Post Office Travel Money said: "The pound may be worth less in Europe than a year ago but fierce competition means that lower prices in several of the resorts we surveyed can easily offset the falling value of sterling.

The survey found Jumeirah region of Dubai the most expensive

"Taking some time to check out resort costs and add them to package prices to find the best overall deal will pay dividends this summer. "

Back in the UK, Blackpool, where the items cost £65.96, ranked 11th cheapest in the 20-strong list, with Bournemouth (£78.01) 14th.

And Italy is still proving an expensive place to visit. Sorrento (£101.79) and the region of Tuscany (£94.92) were the second and third dearest destinations.

While a three-course evening meal for two, with wine, was just £20.56 in Albufeira, it was as much as £70.09 in Tuscany.

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Pub Industry Gets New Code Of Conduct

New plans to protect pub landlords against high rent and beer costs to try and shore up the ailing industry have been unveiled by the Government.

Under the proposals, a code of practice and an independent adjudicator with the power to investigate and settle disputes would be introduced.

The Department of Business claims the moves will ensure fair treatment and could save landlords £100m a year.

The new code would contain mandatory rules for all pub companies who own more than 500 pubs, who are the source of 90% of complaints.

It will particularly focus on stopping firms abusing the beer tie, under which landlords are forced to buy beer from the pub owner instead of on the open market.

Ministers hope the changes will also boost small British beer and ale manufacturers by opening up pubs to select independent beers.

The adjudicator would be able to impose sanctions and fines in cases of abuse - ending the self-regulation which has been in place since 2004.

The Government is putting the plans out for consultation and wants to look at whether the ownership threshold is fair.

Business Secretary Vince Cable said: "We gave pub companies every chance to get their house in order. But despite four select committee reports over almost a decade highlighting the problems faced by publicans, it is clear the voluntary approach isn't working.

"Pubs are small businesses under a great deal of pressure, many of which have had to close. Much of that pressure has come from the powerful pub companies and our plans are designed to rebalance this relationship."

It is claimed that more than 3,500 pubs have shut since 2009 because of overcharging for rent and beer.

Figures cited by the Department of Business suggest almost half of tied pubs - which make up 48% of all the pubs in the UK - earn less than £15,000-a-year.

At the Devonshire Arms in the affluent village of Dore in Sheffield's commuter belt, licensee Tina Gage says the new code cannot come soon enough.

The pub is a bustling community hub, but she says her landlord charges £150,000 each year for rent and the drink she sells, leaving her with no salary at all.

"There's no other business in the world where you would rent a building from somebody and they would force you to buy their product," she said.

Ten years after taking on the lease she has won a rent reduction after going to court, but says unless she makes a profit soon, this year will be her last behind the bar.

"I've got to try to turn it road this year or I will have to call it a day," she warned. "And if I go, someone else will come in and take the pub and the same thing will happen to them."

The Liberal Democrat MP Greg Mulholland, who leads the all-party Save the Pub group, has campaigned for legislation to stop what he calls wholly unacceptable rents.

"The problem here is the large pub companies in this country are based on a business model of taking more than is fair and reasonable in pub profits," he said.

"The code will address that, and the key phrase is the Government have committed that a tied licencee will not be worse off than a free-of-tie licencee."

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Fitch Strips UK Of AAA Rating On Debt Outlook

Ratings agency Fitch has stripped the UK of its AAA rating, citing a "weaker economic and fiscal outlook".

The agency placed the UK on an AA+ rating, following Moody's downgrade of UK debt in February.

A Fitch statement said: "The downgrade of the UK's sovereign ratings primarily reflects a weaker economic and fiscal outlook and hence the upward revision to Fitch's medium-term projections for UK budget deficits and government debt."

The downgrade will place further pressure on the Government ahead of next week's first quarter GDP figures, which will reveal if Britain has managed to avoid an unprecedented triple-dip recession.

The agency now expects Government debt to peak at 101% of GDP in 2015-16, only declining gradually in 2017-18. That is worse than its previous forecast of debt peaking at 97% of GDP and declining in 2016-17.

Fitch, which waited until stock markets had closed before announcing the downgrade, had already warned that Government failure to stabilise debt below 100% of GDP and set it on a firm downward path would trigger a downgrade.

Chancellor George Osborne had pledged to retain the UK's AAA status

The statement said: "Despite the UK's strong fiscal financing flexibility underpinned by its own currency with reserve currency status and the long average maturity of public debt, the fiscal space to absorb further adverse economic and financial shocks is no longer consistent with an AAA rating."

Fitch slashed the UK's growth forecast to 0.8% this year, from its earlier expectation of 1.5%. Next year it expects the UK economy to grow by 1.8%, down from its previous 2% forecast.

Earlier this week, the International Monetary Fund also cut the UK's growth forecast growth from 1% to 0.7% this year and 2014's projection from 1.9% to 1.5%, noting the recovery was "progressing slowly".

IHS Global Insight economist Howard Archer said the downgrade was "no surprise" and is likely to have minimal market impact.

"Nevertheless, Fitch's move is another slap in the face for the government - particularly as the Chancellor (George Osborne) made keeping the AAA rating a key focus for the UK," he said.

Fellow ratings agency Standard & Poors held the UK's debt rating steady at AAA earlier this month, but warned over the economy's "negative outlook".

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George Osborne Urged To Rethink Economic Plan

Lagarde's Support For Osborne

Updated: 4:29pm UK, Saturday 20 April 2013

By Ed Conway, Economics Editor

A few weeks ago, eagle-eyed Twitter users would have noticed a rather unusual tweet from one household name to another.

"Welcome to Twitter @George_Osborne," read the public message from @Lagarde, "see you in two weeks at the 2013 IMF/WB spring meetings in Washington, DC".

It was, it turns out, the only personal tweet that Christine Lagarde sent to any other finance minister in the run-up to this past week's Spring Meetings in Washington DC.

This is no coincidence. Lagarde and Osborne really are good friends. They talk regularly (and not just on Twitter); they have a genuinely warm personal and professional relationship.

Osborne was the first major finance minister to endorse Lagarde for her post as managing director of the International Monetary Fund and she, in turn, has always been steadfastly and publicly supportive of his economic policy.

Last summer, Lagarde made a personal appearance at the UK Treasury to unveil the Fund's annual assessment of the British economy, and endorsed the Osborne economic plan.    

She memorably said that when she tried to imagine what the public finances would have looked like without the Chancellor's austerity measures, "I shiver."

Even as the Fund's professional assessment of the UK economy's health turned negative, Lagarde's support for Osborne has remained unwavering.

Earlier this week in Washington, the IMF chief economist, Olivier Blanchard (who, like Lagarde, is French) said Osborne would have to reduce the pace of his spending cuts, adding that the Chancellor was "playing with fire".

The World Economic Outlook said, in black and white, that "greater near-term flexibility in the path of fiscal adjustment" was necessary in the UK – economese for "you need to consider plan B".

And yet when asked about Britain, Lagarde offered a far more equivocal verdict: there was "nothing new" in the Fund's assessment that the UK should be ready to change course if and when economic growth disappointed - though she conceded that "the growth numbers are not particularly good."

This difference in tone has been useful for the Chancellor. When asked in a press briefing about Blanchard's criticism, Osborne quoted Lagarde's comments at length, saying that the chief economist was "just one voice".

However, the reality, according to a range of Fund insiders, is quite the contrary. They point out that the institutional IMF view is far closer to Blanchard's opinion than Lagarde's. That it is Lagarde who is the outlier.

In fact, some Fund officials were privately aghast when they heard Lagarde claim in that press conference that there was "nothing new" in the Fund's position on the UK.

One told me that within the Fund some were muttering that Lagarde's good relationship with the Chancellor - and her consequent efforts to be diplomatic - were undermining the overall message: that Britain must change course.

However, if there were any doubt about the Fund's true position, it has now been laid to rest by Lagarde's deputy, David Lipton. In an interview with Sky News, he said, explicitly, that when it comes to Britain's budget, "the pace of consolidation ought to be reconsidered".

The precise numbers, he signalled, would have to wait until the Fund's official survey begins next month, but the verdict could hardly be clearer.

The intervention is particularly significant given who it has come from. Lipton is not a household name; he is not on Twitter. But not only is he Lagarde's deputy, he is the man who will take her place to unveil the ominous findings of the IMF assessment in London next month. It's enough to make George Osborne shiver.

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Arsenal Co-Owner Is Now UK's Richest Man

Britain has a new richest man - Russian co-owner of Arsenal Football Club Alisher Usmanov has taken the top spot from the previous Rich List number one Lakshmi Mittal.

Mr Usmanov, who has a near-30% stake in Arsenal, is worth £13.3bn, putting him into the top spot of the 25th annual Sunday Times Rich List.

Researchers found the 1,000 richest people in Britain have wealth totalling almost £450bn.

There are now a record 88 billionaires among the country's wealthiest 1,000 individuals and families, up from 77 billionaires in 2012 and just nine in 1989.

The combined wealth of the top 200 people in the 2013 Sunday Times Rich List is £318.2bn, a more than eightfold rise on the £38bn for the combined wealth of the 200 people featured in the first Rich List in 1989.

In 1989, the Queen was Britain's richest person.

Russian businessman Mr Usmanov started off making plastic bags, but went on to found a business empire with numerous interests.

As well as Metalloinvest, the country's biggest iron ore producer, he owns a stake in mail.ru, the largest internet company, and has a big holding in MegaFon, a mobile phone operator that listed on the London and Moscow stock markets last year.

Uzbekistan-born Mr Usmanov, 59, also owns Sutton Place, the former Surrey home of the late oil baron J Paul Getty, as well as a £48m mansion in north London.

He shares a passion for sport with his wife, Irina Viner, 64, head coach of Russia's rhythmic gymnastics team, whom he met when he was a young fencer.

Second in the list is Ukrainian Len Blavatnik, the highest riser in the list in wealth terms.

Mr Blavatnik is now worth £11bn, an increase of £3.4bn on last year.

Odessa-born Mr Blavatnik, who owns Warner Music, received £2bn last month for his stake in TNK-BP, when company was sold to state-owned Russian oil company Rosneft.

After eight years at the top of the Sunday Times Rich List, steel magnate Lakshmi Mittal has dropped down to fourth place.

Mr Mittal is now only worth £10bn, making him the biggest faller in wealth terms.

The 40% stake Mr Mittal and his wife Usha hold in the steelmaking giant ArcelorMittal has plummeted from £28bn at its peak to £5.95bn.

The highest placed UK-born person in the 2013 Sunday Times Rich List is The Duke of Westminster, ranked eighth and worth £7.8bn. The Duke's interests are mainly in London land and property.

Chelsea Football Club owner Roman Abramovic was fifth with £9.3bn.

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Osborne Issues Legal Challenge To EU Bank Tax

By Ed Conway, Economics Editor

George Osborne has launched an unprecedented legal challenge against European plans for a financial transactions tax.

The move, which will be seen as a further sign of fraying relations between the UK and the rest of the continent, is designed to force the European Commission to reconsider the levy on Europe-related financial activity.

The Chancellor revealed the details on the fringes of the International Monetary Fund meetings in Washington.

Mr Osborne told Sky News: "What I am against is the European Commission coming up with a financial transaction tax that damages Britain. I want to make it clear Britain doesn't want to be a part of that and doesn't want to be affected by a European financial transaction tax even if we're not directly part of it.

"And so we've mounted a legal challenge in the European Court of Justice - that is the correct way to handle these things - the challenge went in yesterday."

According to insiders, this is the first time the UK has challenged legislation of this kind. Under the Commission's current plans, there will be a small charge (0.1% for shares and bonds and 0.01% for derivatives) on all financial transactions within the 11 members of the European Union which have signed up to the tax.

This alone is forecast to knock 0.25% off economic growth according to the Commission's official assessment, although some economists fear this could be an understatement.

It is feared the EU tax plans will adversely affect banks in the UK

The Chancellor said the reason for the legal challenge was that the tax will also hit Britain itself in two ways: first because it will affect any euro-denominated transactions – many of which happen in London.

Second, the tax will apply to all transactions of banks with headquarters in the signed-up EU nations, even if they are in London or outside Europe.

Treasury insiders said the worry was that it could knock significant value off British pension funds and investments.

They characterised the legal challenge, which may take years to be heard, as an important insurance policy in the legislative battle to get the tax amended.

However, analysts said that the move marked a significant escalation in tension between the UK and the Commission.

Mats Persson of think tank Open Europe said: "The economic, legal and political implications of this move for future EU-UK relations are huge… Legally, it could set out the parameters for how a 'flexible Europe' involving different levels of participation in the EU – which Prime Minister David Cameron has said he champions – will be governed.

"Politically, it's a test of the extent to which the UK – as a non-eurozone member - can halt or change EU measures with a profound impact on its national interest. Therefore, it will be a key issue in the on-going debate about the UK's continued EU membership."

The Chancellor also defended Britain's economic reputation, which has been dealt a blow this week by comments by the IMF chief economist Olivier Blanchard that Mr Osborne is "playing with fire" with his fiscal policy.

The Fund is due to come to the UK next month to carry out its annual survey of the economy. It is expected to advise the Chancellor to slow the pace of his austerity program.

"When the IMF comes to town we will make it absolutely clear that what we're doing is both enhancing the credibility of the United Kingdom by dealing with our debts and deficits but also supporting the British economy,"  Mr Osborne said. 

"For example, through the new housing scheme - the help to buy scheme which I launched at the Budget, through the work we're doing on funding for lending, through the work we've done on tax, for instance to increase the personal allowance."

Asked about criticisms of the Help to Buy scheme, under which the Government will guarantee mortgages for homebuyers, Mr Osborne said: "We are at a period of real weakness in the housing market, so the risks of a housing bubble are pretty non-existent.

"The key thing is that this scheme is time limited and we've given the keys to it to the [Bank of England's] Financial Policy Committee so it can turn it off in the future."

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Virgin Active Eyes £2bn David Lloyd Merger

By Mark Kleinman, City Editor

Virgin Active is mulling a takeover bid for David Lloyd Leisure that would create a £2bn health and fitness empire, and entrench Sir Richard Branson as the industry's most important British stakeholder.

I have learnt that Virgin Active has been undertaking detailed work on the structure of a possible offer for David Lloyd, which has been put up for sale by its consortium of shareholders.

The Virgin-backed chain is now deliberating over whether to submit a formal offer for the tennis-based network of fitness clubs ahead of a new deadline, which is thought to have been set for next month.

If successfully completed, a deal would create a group of more than 200 venues in the UK, with many more in a host of overseas markets, including Belgium, Ireland and South Africa.

People close to the process said that Virgin Active did not participate in the initial round of bidding for David Lloyd earlier this month, and cautioned that it may yet decide not to make an offer at all.

David Lloyd's advisers at UBS, the investment bank, are said to be seeking a sale worth £900m, although some insiders suggested on Friday that a lower valuation was likely.

Virgin Active, which is chaired by the former Boots boss Richard Baker, would have little trouble financing a deal.

A controlling stake in the business was sold in 2011 to CVC Capital Partners, the buyout firm behind Formula One motor racing, in a deal thought to have valued the gyms chain at £900m.

According to unaudited results published last summer, Virgin Active recorded a profit of £127m in 2011, up 11% on the previous year.

The company is understood to have concluded that a takeover of David Lloyd, which made around £100m last year, would not raise significant competition concerns.

The health and fitness market remains reasonably fragmented, with other significant players including a diminished Fitness First, which now operates around 80 clubs following a financial restructuring that saw many sites sold or closed.

A number of other gym chains are also on the market, with several private equity firms looking at a combination of Pure Gym and the Gym Group at the value end of the sector.

Even if Virgin Active does decide to pursue an offer for David Lloyd, it will face stiff competition to secure a deal. Private equity firms including Blackstone and KSL Capital Partners, which owns the Belfry golf resort, are reported to have submitted offers.

David Lloyd is controlled by London & Regional, the vehicle of the property tycoons Ian and David Livingstone, and Caird Capital, a firm created by former HBOS bankers responsible for many of the bank's biggest corporate deals before it required a rescue in 2008.

Virgin declined to comment, while David Lloyd could not be reached for comment.

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Fitch Strips UK Of AAA Rating On Debt Outlook

Ratings agency Fitch has stripped the UK of its AAA rating, citing a "weaker economic and fiscal outlook".

The agency placed the UK on an AA+ rating, following Moody's downgrade of UK debt in February.

A Fitch statement said: "The downgrade of the UK's sovereign ratings primarily reflects a weaker economic and fiscal outlook and hence the upward revision to Fitch's medium-term projections for UK budget deficits and government debt."

The downgrade will place further pressure on the Government ahead of next week's first quarter GDP figures, which will reveal if Britain has managed to avoid an unprecedented triple-dip recession.

The agency now expects Government debt to peak at 101% of GDP in 2015-16, only declining gradually in 2017-18. That is worse than its previous forecast of debt peaking at 97% of GDP and declining in 2016-17.

Fitch, which waited until stock markets had closed before announcing the downgrade, had already warned that Government failure to stabilise debt below 100% of GDP and set it on a firm downward path would trigger a downgrade.

Chancellor George Osborne had pledged to retain the UK's AAA status

The statement said: "Despite the UK's strong fiscal financing flexibility underpinned by its own currency with reserve currency status and the long average maturity of public debt, the fiscal space to absorb further adverse economic and financial shocks is no longer consistent with an AAA rating."

Fitch slashed the UK's growth forecast to 0.8% this year, from its earlier expectation of 1.5%. Next year it expects the UK economy to grow by 1.8%, down from its previous 2% forecast.

Earlier this week, the International Monetary Fund also cut the UK's growth forecast growth from 1% to 0.7% this year and 2014's projection from 1.9% to 1.5%, noting the recovery was "progressing slowly".

IHS Global Insight economist Howard Archer said the downgrade was "no surprise" and is likely to have minimal market impact.

"Nevertheless, Fitch's move is another slap in the face for the government - particularly as the Chancellor (George Osborne) made keeping the AAA rating a key focus for the UK," he said.

Fellow ratings agency Standard & Poors held the UK's debt rating steady at AAA earlier this month, but warned over the economy's "negative outlook".

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Ex-FSA Chief Drops RBS Branch Consortium Role

By Mark Kleinman, City Editor

The former chief executive of the City regulator has withdrawn from a consortium bidding to buy more than 300 branches being offloaded by Royal Bank of Scotland (RBS).

I have learnt that John Tiner, who was chief executive of the Financial Services Authority (FSA) between 2003 and 2007, is to play no further formal role in an offer for the branch network being led by Corsair Capital, the private equity firm where he works as a senior adviser.

His decision to step back from the bid comes amid expectations that two forthcoming reports about various aspects of Britain's banking sector will level robust criticism of the FSA's performance in the period before the crisis.

Corsair had planned to install Mr Tiner as chairman of the RBS business if it succeeds with its offer.

But people close to the situation say that Corsair has now informed both RBS and the Treasury that he will no longer assume this role. This decision is understood to have been made by Mr Tiner himself and without any external pressure from the Government or regulators.

"John is a first-class guy, and there has been no external effort to remove him from the bid, but with everything else that is happening now, he thought it better not to proceed," an insider said.

Mr Tiner's withdrawal follows the tirade of criticism which engulfed Sir James Crosby, the former chief executive of HBOS and ex-deputy chairman of the FSA, when a Parliamentary Commission on Banking Standards report accused him of being the architect of HBOS's disastrous expansion.

The Commission is likely to make further critical remarks about the performance of the FSA in its final report in the summer.

More importantly from Mr Tiner's perspective, insiders said, the Financial Conduct Authority - the FSA's successor body - will publish in the autumn its account of the failure of HBOS in the autumn of 2008. That account will be extremely self-critical and lay some of the blame at Mr Tiner's door, regulatory sources said.

Lord Davies, the respected former trade minister who is a vice-chairman and partner of Corsair, could take the chairmanship of the RBS branch network on a temporary basis, they added.

In addition to his advisory role at Corsair, Mr Tiner is a non-executive director of Credit Suisse, the Swiss-based banking group, and of Lucida, a pension insurance firm.

He was awarded a CBE in 2008 for services to the finance industry, although there have been no calls for him to follow Sir James' gesture and voluntarily forfeit the honour.

Corsair has secured backing for its bid for the RBS branches from Lord Rothschild's investment firm, RIT Capital Partners, and Centerbridge, another private equity group.

Its bid is thought to be well-placed but is up against competition from a consortium of City institutions as well as a potential bid from Virgin Money.

Mr Tiner was unavailable for comment, while RBS declined to comment.

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