FSA Warns Banks On Bonus Culture

The City regulator has warned Britain's biggest banks that they need to demonstrate "a change in culture" when they unveil their bonus pots for 2012 in the new year, paving the way for one of the steepest reductions in payouts on record.

I have learnt that Andrew Bailey, head of the Financial Services Authority's (FSA) supervisory arm, has told the chairs of the major UK banks' remuneration committees that they should take into account the industry's reputation when they decide on bonuses.

He made the demand at a recent meeting with the chairs of the UK banks' remuneration committees at which they were told that overall levels of pay should show a sharp decrease for 2012.

They were also informed that the bonus cuts should go beyond the required evidence of banks clawing back pay awarded to executives and staff involved in mis-selling.

Among the attendees at the meeting, which took place several weeks ago, were Penny Hughes, chair of the remuneration committee at Royal Bank of Scotland; John Thornton, her equivalent at HSBC; Sir John Sunderland at Barclays; and Tony Watson from Lloyds Banking Group.

Major lenders have already begun consulting with shareholders on the shape of their pay pots for 2012, with Barclays' new management in particular signalling that the proportion of revenues paid to its investment bankers will fall sharply.

The warning from Mr Bailey about clawbacks will ultimately result in hundreds of millions of pounds in previously-awarded bonus payments being reclaimed from relevant staff, according to people close to the regulator.

The two taxpayer-backed lenders, Lloyds Banking Group and RBS, have imposed a ceiling on cash payouts of £2,000 for each of the last three bonus rounds, a restriction that is almost certain to be repeated in 2013.

In October, Mr Bailey wrote to the chief executives of major banks with operations in London to inform them that bonuses for 2012 must reflect the mis-selling and market manipulation scandals that have rocked the sector this year.

The FSA's intervention will be welcomed by the major investors in banks, who have argued since the financial crisis that the decline in pay levels has failed to keep pace with the diminishing returns distributed to shareholders.

HSBC is the only one of the major lenders with which City institutions have declared themselves satisfied with the relative distributions between investors and employees. Banks are also under pressure from regulator to retain more capital to strengthen their balance sheets.

The meeting has become a traditional fixture on the FSA's calendar ahead of the annual banking industry pay round.

The FSA declined to comment on specific meetings with banks but said it held discussions with them on a range of issues.

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Bank Staff 'Under Pressure To Sell', Which? Says

Staff at Britain's largest banks remain under pressure to sell products to customers, often regardless of whether they are appropriate, an investigation claims.

Two thirds of bank staff with a sales role said there is now "more pressure than ever" to meet their targets, according to a Which? survey of front line bank employees.

Almost half of the 500 people interviewed said they knew colleagues who had mis-sold products to meet their targets, and 40% reported that they are encouraged to sell even when it is not appropriate.

Which? interviewed branch and call-centre staff from HSBC, Royal Bank of Scotland, Lloyds Banking Group, Barclays and Santander, and found that even when incentives are removed, the practice prevails.

Although over 40% said incentives for sales have decreased, more than 80% said the pressure to meet sales targets has stayed the same or increased.

The research comes despite a string of mis-selling scandals over recent years, knocking customers' trust in UK banks.

The PPI mis-selling scandal has cost the big banks £10bn to date

The most high-profile - the mis-selling of payment protection insurance - has already cost the big banks more than £10bn in compensation claims, with that bill expected to rise.

Of the staff surveyed, over a third said they are not comfortable with the pressure they are under to sell products, and two thirds added that they are sometimes or always ordered to sell more.

Which? chief executive Peter Vicary-Smith called for "big change" across the banking industry, with customers - not sales - put first.

"Our survey reveals the stark realities of the sales culture that still exists at the heart of the banking industry," he said.

"Senior bankers say the culture is changing but this shows it just isn't filtering through to staff on the front line who remain under real pressure to put sales before service, even after incentives are taken away.

"We're calling on the banks to be much more transparent about their sales targets and incentives.

"We also want to see bankers meet professional standards and comply with a fully independent code of conduct."

A spokesman for the British Bankers' Association (BBA) said that any incentives for front line staff are now based on clear criteria related to customer service.

"Selling people products they do not need is not putting the customer's interests first and therefore is ultimately bad for the bank," he said.

"The banks will be looking at the findings of this small survey - along with their own internal research - to understand why any staff might feel otherwise."

Which? said it will provide a collection of evidence on the banking industry to the Parliamentary Commission on Banking Standards, the Government and opposition MPs, and the Financial Standards Authority (FSA).

Barclays and the Co-operative bank have already announced plans to refocus their incentives schemes on customer service.

A spokeswoman for Barclays said: "From this week all Barclays UK front line staff are rewarded solely on customer service.

"This follows our announcement in October which was welcomed by Which?"

An HSBC statement said the bank encourages its employees to act "with integrity in the best interest of our customers".

"No one in the UK retail bank, not just customer facing staff, can earn a bonus without meeting the bank's values and behaviours criteria," it said.

And a spokeswoman for RBS said that its staff are rewarded on the basis of customer service and the performance of their branch overall.

"This is part of our move to make sure that customer service is the top priority for all of our staff," she added.

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Starbucks Tax Row: Protests Planned Across UK

Coffee chain Starbucks is braced for protests over its tax arrangements despite announcing changes to its payments.

The US-owned giant said it expects to pay around £10m in UK corporation tax for each of the next two years, following the revelation that it paid just £8.6m in 14 years of trading in Britain and nothing in the last three years.

Activist group UK Uncut is planning more than 40 demonstrations across the country, "transforming" Starbucks stores into refuges, creches and homeless shelters.

The anti-cuts direct action group said the number of protests planned for today had increased since Starbucks made its announcement.

UK Uncut said it also wanted to highlight the "disproportionate" impact of the Government's spending cuts on women.

Sarah Greene, a UK Uncut activist, said: "It is an outrage that the Government continues to let multinationals like Starbucks dodge millions in tax while cutting vital services like refuges, creches and rape crisis centres.

"It does not have to be this way. The Government could easily bring in billions that could fund vital services by clamping down."

Hannah Pearce, a UK Uncut supporter, said that offering to pay some tax "if and when it suits" does not stop a company being a tax avoider, adding: "This is just a desperate attempt by Starbucks to deflect public pressure - hollow promises on press releases don't fund women's refuges or child benefits."

Union boss Mark Serwotka says Starbucks' tax stance is "scandalous"

She called on the Government to force Starbucks and other tax avoiding firms to "pay their fair share, instead of cutting welfare and tax credits for single mums and disabled women".

A spokesman from Global Women's strike, one of the women's groups supporting Saturday's action, said: "Women - in families, homes, communities and jobs - bear the brunt of austerity.

"At our Women's Centre we see more women cut off benefits, losing their jobs, being made homeless and going hungry.

"Already, 3.5 million children live in poverty, one in five mothers skips a meal to feed her children, and many walk miles to get food handouts because they can't afford the bus fare.

"Women are also expected to pick up the pieces as services disappear or turn people away, saying they are overwhelmed."

Mark Serwotka, general secretary of the Public and Commercial Services union, which is supporting the protests, said: "With hundreds of thousands of public sector workers having their jobs, pay and pensions cut, and people entitled to benefits being demonised and targeted in the most shameful way, it is utterly scandalous that some multinational companies believe they can get away with contributing little or nothing to our economy.

"We fully support this weekend's action which, along with previous campaigns by UK Uncut and others, will highlight the fact that if large companies like Starbucks paid their fair share it would change the debate about public spending overnight."

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Starbucks Tax Row: £10m Climbdown

Starbucks has vowed to pay more corporation tax than it is obliged to as the coffee chain denies hiding profits from the UK taxman.

The company's UK managing director Kris Engskov told Sky News that the decision to "take action" followed anger from its customers in recent weeks.

Starbucks will now pay around £20m in corporation tax over the next two years, after paying nothing last year.

The U-turn comes after the Government pledged to crack down on tax avoidance after public outrage over how little some multinational companies contribute to the UK Exchequer.

Mr Engskov told Sky's Jeff Randall: "We are paying corporate tax and we are going to do that beyond what is required by the law and whether we make a profit in the next two years and I think that is what we should do.

"We have reacted to our customers... We have seen that doing business responsibly is good for the bottom line and this is a good example of that."

In the same interview, he said the US coffee giant had not been profitable in the UK since it brought its brand to Britain 14 years ago.

Kris Engskov runs Starbucks in the UK

And he admitted their 2011 report and accounts may be wrong when they referred to the fact that the UK was making a "significant portion of the net revenue and earnings of our international operations". 

This could mean major penalties for the company.

Since arriving in the UK, Starbucks has paid just £8.6m in corporation tax despite taking billions of pounds in revenue from its shops, which now number more than 750.

The low bill has been explained by the practice of transfer pricing, which involves charges being made by companies in the same group based in different jurisdictions, with the effect of depressing profits in the higher-tax jurisdiction.

In Starbucks' case, that relates to the royalty fee paid to a sister company in the Netherlands for the right to use its brand and coffee recipe.

While the previous tax arrangements were legal, its actions were called into question amid a wider debate about tax avoidance which has also engulfed the likes of Amazon and Google.

The companies were accused of "immorally" minimising UK tax bills in a damning report by the Public Accounts Committee of MPs.

Its chairman, Margaret Hodge MP told Sky News the development was a "step in the right direction" which had been brought about by "people power."

The firm has argued that its UK operations already inject £300m into the UK economy annually.

Mr Engskov, speaking earlier in a speech to business leaders, admitted that the "emotion" surrounding the tax payments had "taken us a bit by surprise".

"Since we started doing business here, we have always organised our tax affairs according to the letter of the law - always," he said.

"We have used existing and agreed-upon measures to pay what is expected of us, but not more - just as most companies do and I am sure many of the people here today run their businesses in similar ways."

But in his remarks to the London Chamber of Commerce he admitted: "With the backdrop of these difficult times, in the area of tax, our customers clearly expect us to do more."

Mike Lewis, tax justice policy adviser for charity ActionAid UK,said: "Starbucks' tax back-down proves that companies do have a choice about where and how they pay taxes."

Other critics suggested the country should wait to see the colour of Starbucks' money.

Hannah Pearce, a UK Uncut spokesperson said: "Offering to pay some tax if and when it suits you doesn't stop you being a tax dodger.

"Starbucks have been avoiding tax for over a decade and continue to deny that it paid too little tax in the past. Today's announcement is just a desperate attempt to deflect public pressure.

"There's no money yet, and hollow promises on press releases don't fund women's refuges or child benefits."

An HMRC spokesman said: "Corporation Tax is not a voluntary tax. The public expects businesses to pay their fair share and we will challenge, through the courts if necessary, any structures or tax payments that do not comply with the UK tax law."

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West Coast Rail Debacle 'Cost Taxpayers £50m'

Taxpayers face a "significant" bill over the botched West Coast rail franchise process, a report from a government spending watchdog has said.

The Department for Transport's running of the West Coast bidding process lacked management oversight, with some staff "confused" by the system, the National Audit Office (NAO) report said.

The Government has already indicated that repaying bidding costs to the companies that competed for the franchise is likely to land taxpayers with a bill of around £40m.

Richard Branson's Virgin Trains has been handed the franchise for the next 23 months after the process that saw the route awarded to its rival FirstGroup was abandoned.

In its report, the NAO said staff and adviser costs, legal costs and money for the two reviews set up by the Government following abandonment of the West Coast bidding amounted to £8.9m.

NAO head Amyas Morse said: "Cancelling a major rail franchise competition at such a late stage is a clear sign of serious problems.

"The result is likely to be a significant cost to the taxpayer."

Margaret Hodge branded the bidding process a "fiasco".

Commenting on the report, House of Commons Public Accounts Committee chairman Margaret Hodge said: "The DfT's handling of the West Coast franchise was a first-class fiasco."

Ms Hodge, Labour MP for Barking, said the DfT had "blundered into this major and complex competition for one of the biggest franchises in the country without even knowing how key parts of its policy were to be implemented".

She went on: "The department's conduct was characterised by haste, confusion and weak internal and external communication.

"However, the ultimate failure of this competition was sealed by a rich mix of the department's feeble and forever changing management and almost non-existent oversight."

Bob Crow, general secretary of the RMT transport union, said the final cost of the West Coast fiasco could be as high as £100m.

He said: "This cost will not be borne by the ministers responsible for this debacle.

Bob Crow says the bid debacle could eventually cost £100m

"It will be carried yet again by the British people and will be paid for through cuts in investment and higher fares, with the train operating companies protected and cushioned in the same way as they have been since privatisation was first unleashed."

Michael Roberts, chief executive of the Association of Train Operating Companies, said: "The Government needs to grip the issues that led to the cancellation of the West Coast franchise competition.

"It must get the programme of franchising back on course and give passengers as well as train companies the confidence that new rail franchises will be awarded through a fair and robust process."

Transport Secretary Patrick McLoughlin said: "The NAO has made a number of recommendations that mirror many of the findings of the Laidlaw Inquiry in terms of the work we need to do to strengthen our organisation and the structures within it.

"I am pleased to say that we are already taking swift action on this front and I believe the plans we are putting in place to ensure future franchise competitions are conducted on the basis of sound planning, the rigorous identification and oversight of risk, and the right quality assurance, will prevent a repeat of these lamentable failures."

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Bank Staff 'Under Pressure To Sell', Which? Says

Staff at Britain's largest banks remain under pressure to sell products to customers, often regardless of whether they are appropriate, an investigation claims.

Two thirds of bank staff with a sales role said there is now "more pressure than ever" to meet their targets, according to a Which? survey of front line bank employees.

Almost half of the 500 people interviewed said they knew colleagues who had mis-sold products to meet their targets, and 40% reported that they are encouraged to sell even when it is not appropriate.

Which? interviewed branch and call-centre staff from HSBC, Royal Bank of Scotland, Lloyds Banking Group, Barclays and Santander, and found that even when incentives are removed, the practice prevails.

Although over 40% said incentives for sales have decreased, more than 80% said the pressure to meet sales targets has stayed the same or increased.

The research comes despite a string of mis-selling scandals over recent years, knocking customers' trust in UK banks.

The PPI mis-selling scandal has cost the big banks £10bn to date

The most high-profile - the mis-selling of payment protection insurance - has already cost the big banks more than £10bn in compensation claims, with that bill expected to rise.

Of the staff surveyed, over a third said they are not comfortable with the pressure they are under to sell products, and two thirds added that they are sometimes or always ordered to sell more.

Which? chief executive Peter Vicary-Smith called for "big change" across the banking industry, with customers - not sales - put first.

"Our survey reveals the stark realities of the sales culture that still exists at the heart of the banking industry," he said.

"Senior bankers say the culture is changing but this shows it just isn't filtering through to staff on the front line who remain under real pressure to put sales before service, even after incentives are taken away.

"We're calling on the banks to be much more transparent about their sales targets and incentives.

"We also want to see bankers meet professional standards and comply with a fully independent code of conduct."

A spokesman for the British Bankers' Association (BBA) said that any incentives for front line staff are now based on clear criteria related to customer service.

"Selling people products they do not need is not putting the customer's interests first and therefore is ultimately bad for the bank," he said.

"The banks will be looking at the findings of this small survey - along with their own internal research - to understand why any staff might feel otherwise."

Which? said it will provide a collection of evidence on the banking industry to the Parliamentary Commission on Banking Standards, the Government and opposition MPs, and the Financial Standards Authority (FSA).

Barclays and the Co-operative bank have already announced plans to refocus their incentives schemes on customer service.

A spokeswoman for Barclays said: "From this week all Barclays UK front line staff are rewarded solely on customer service.

"This follows our announcement in October which was welcomed by Which?"

An HSBC statement said the bank encourages its employees to act "with integrity in the best interest of our customers".

"No one in the UK retail bank, not just customer facing staff, can earn a bonus without meeting the bank's values and behaviours criteria," it said.

And a spokeswoman for RBS said that its staff are rewarded on the basis of customer service and the performance of their branch overall.

"This is part of our move to make sure that customer service is the top priority for all of our staff," she added.

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Virgin Trains Holds On To West Coast Line

Virgin Trains says it has reached an agreement to operate services on the West Coast Main Line for the next 23 months.

It comes after an embarrassing U-turn by the Department for Transport (DfT), which admitted it got its sums wrong after initially awarding the franchise to rival FirstGroup.

Sir Richard Branson, the founder of Virgin, described the bidding process as "insane" and mounted a legal challenge to the decision.

Transport Secretary Patrick McLoughlin said: "We are determined to ensure not only that passengers continue to experience the same levels of service they have in the past, but that services improve.

"There will be a new hourly service linking Glasgow and London and we will also work with Virgin Trains to explore other service improvements."

Virgin said there will be up to 28,000 more seats each day on the line because of the delivery of 106 new Pendolino carriages.

Its temporary deal will run from December 9 until November 9 2014, after which the West Coast line will be let under a long-term franchise.

DfT will be able to cut the 23-month period short "by up to six months if a subsequent franchise can be let on a shorter timescale", the Government added.

Three DfT officials were suspended after the bidding process was scrapped and Virgin was expected to be given the go-ahead to run the line for between nine and 13 months.

The new deal will see Virgin run the line on a temporary basis for far longer but does not involve an interim franchise as all existing bid processes were suspended pending the findings of an independent inquiry into the franchise system ordered by Mr McLoughlin.

The investigation, led by Centrica chief executive Sam Laidlaw, produced damning initial findings which listed a string of failings by the DfT.

The publication of the full report, expected later on Thursday, was delayed after one of the suspended department officials, Kate Mingay, mounted a legal challenge to her suspension.

More follows...

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Rolls-Royce Warns Of Corruption Investigation

Rolls-Royce says it has passed information to the Serious Fraud Office (SFO) relating to concerns about bribery and corruption overseas.

It follows a request for information from the SFO about allegations of malpractice involving intermediaries in Indonesia and China.

The aircraft engine manufacturer said it had "identified matters of concern in these, and in other overseas markets". 

In a statement, the UK-based company said it would cooperate filly with the regulatory authorities.

"It is too early to predict the outcomes, but these could include the prosecution of individuals and of the company," it said.

The chief executive of Rolls-Royce, John Rishton, added: "I want to make it crystal clear that neither I nor the board will tolerate improper business conduct of any sort and will take all necessary action to ensure compliance.

"This is a company with exceptional prospects and I will not accept any behaviour that undermines its future success."

It said it had boosted its compliance procedures in recent years, including a new ethics code and policy for intermediaries.

Rolls-Royce is due to hire an independent manager to lead a review of current procedures and report to the ethics committee of the board.

Shares in the company, which operates in more than 50 countries across the world, fell over 4.5% following the announcement.

More follows...

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Topshop Stake Sale Agreed By Sir Philip Green

Retail tycoon Sir Philip Green has confirmed the sale of a 25% stake in his Topshop and Topman chains for £500m.

The move, which was exclusively revealed by Sky's City Editor Mark Kleinman on Tuesday, values the two high street brands at £2bn.

Kleinman said the sale added credence to Sir Philip's ambition of becoming a global retail magnate as it was aimed at funding an expansion programme.

The buyer of the stake is Leonard Green & Partners, one of the joint owners of the American clothing business J Crew.

More follows...

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Sir Philip Green Sells Topshop Stake

By Mark Kleinman, City Editor

Sir Philip Green, the high street billionaire, is to sell a chunk of his burgeoning Topshop empire to outside investors in a move that will cement his reputation as one of Britain's most successful businessmen.

I can exclusively reveal that Sir Philip is in advanced talks about selling a stake of up to 25% of Topman and Topshop. The deal, which is not yet finalised, is expected to value the two chains at close to £1bn, confirming their status as the most lucrative franchises in British fashion.

If completed, the spectacular move will add credence to Sir Philip's ambition of becoming a global retail magnate and will represent the latest in a string of deals which have transformed him as the most powerful man in the UK fashion business.

The buyer of the stake in Topshop and Topman, which will be ring-fenced from the rest of Sir Philip's fashion businesses as part of the transaction, is understood to be one of the joint owners of J Crew, the American clothing business.

Sources close to the talks said the deal was yet to be finalised but that an agreement could be announced as early as this week.

J Crew is owned by Leonard Green & Partners (LGP) and TPG Capital, two big American private equity firms which between them have backed companies such as Debenhams, the department store chain, and Neiman Marcus, the upmarket American retailer.

People close to the situation said that LGP, which is based in Los Angeles, had been in talks with Sir Philip about making an investment in Topshop for some time.

LGP also owns companies in the banking, consumer products and healthcare industries, and this year announced that it had raised a fund of $6.25bn to invest in the coming years.

TPG and LGP bought J Crew for about $3bn in November 2010. J Crew is run by Millard 'Mickey' Drexler, the former chief executive of Gap, one of the most successful US fashion exports of the past 25 years.

The spectacular deal to sell a stake in Topshop will be Sir Philip's most significant business transaction since he failed with his second attempt to buy Marks & Spencer eight years ago.

Since then, the women's fashion chain has enjoyed a period of soaring growth fuelled by its knack of producing on-trend clothing at affordable prices. Its partnership with the supermodel Kate Moss has also kept Topshop in the tabloid headlines and raised the profile of Sir Philip's business.

Sir Philip's latest deal will also mark a decade since he created the Arcadia fashion business following an £800m takeover that set him on the path to becoming one of Britain's wealthiest people. The Sunday Times Rich List reported this year that Sir Philip and wife Tina, the legal owner of the business, were worth £3.3bn.

Arcadia's six other brands, which include Dorothy Perkins and Miss Selfridge, will not be included in the transaction, according to people close to the discussions.

The funds from the stake sale will be used to accelerate Top Shop's international expansion. Sir Philip has been in talks with a wide range of potential investors and partners for several years as he targeted growth in the US and Asia.

Topshop outlets in the US have performed well since flagship stores opened in Chicago, Las Vegas and New York, fuelling the billionaire's ambition to open shops in a much larger number of markets. Earlier this year, he struck a deal with Nordstrom, the New York-listed department store chain, to sell Topshop and Topman-branded clothing in up to 100 outlets.

Sir Philip is understood to be determined that his staff do not see the sale of a stake in Topshop as undermining his commitment to the rest of his brands.

Arcadia employs 43,000 people and is one of Britain's biggest private sector employers. Sir Philip has defended the company's tax arrangements amid the escalating row over corporate taxes because the business is owned by his Monaco-based wife.

He pointed out last month that Arcadia had paid more than £2bn in tax since he acquired the business, including £591m in corporation tax.

Announcing Arcadia's annual results last month, Sir Philip said pre-tax profit had increased before exceptional items from £133.1m to £166.9m in the year to August 25.

Sir Philip also owns the BhS chain, which has struggled amid tough trading conditions on the high street. He has explored a sale of the chain in the past.

Goldman Sachs, Sir Philip's long-standing City adviser, is understood to have been working on the deal to sell a stake in Topshop for at least six months.

Sir Philip refused to comment on the talks to bring a new investor into Topshop and Topman on Tuesday night. LGP could not be reached for comment.

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Autumn Statement: Osborne Tightens The Screw

Chancellor George Osborne will today warn there are no "miracle cures" as he admits more drastic action is needed to balance Britain's books.

Mr Osborne will confirm in a bleak mini-budget that Whitehall departments are being ordered to find another £5bn in cuts to fund projects aimed at kick-starting the economy.

He is also widely expected to concede that sluggish growth means it will take longer to tackle the deficit and that his key target of having public sector debt falling by 2015-16 may be missed.

Other key measures could include postponing the 3p fuel duty hike due in January, more benefits cuts, a fresh hit on the banks and a raid on the pension pots of higher earners.

The Chancellor's hands are largely tied because of weaker than expected economic growth and high borrowing, which have forced him to extend austerity well beyond 2015.

He has been battling to regain the upper hand since his Budget in March, which was heavily-criticised and led to a string of damaging U-turns over taxes on pasties, caravans and charitable donations.

Delivering his Autumn Statement this afternoon, he will argue that he is "confronting the country's problems, instead of ducking them" as he still seeks to show "we're all in this together".

"The public know that there are no miracle cures. Just the hard work of dealing with our deficit and ensuring Britain wins the global race," he will say.

Mr Osborne will confirm plans to use fresh cuts to fund capital projects in transport, schools, science and skills over the next two years.

They will include £1bn to build or expand up to 100 new academies and free schools over the next two years, with cash directed at areas experiencing a shortage in classroom places.

Departments will be forced to slash spending by 1% in 2013-14 and 2% the following year but health, schools, international aid, HM Revenue and Customs and nuclear decommissioning will be protected.

Treasury sources said the departmental savings amounted to less than the £3bn underspend by departments in the last two years and that the rest was coming from existing budgets.

But Labour claimed the move amounted to an admission that the reduction in infrastructure spending since 2010 had been "a catastrophic mistake" and weakened the economy.

The Chancellor is also expected to target the pension pots of higher earners by slashing the amount of annual tax relief earned on pension contributions from £50,000-a-year to £30,000.

Implementing the full cut could raise as much as £1.8bn for the Government.

A crackdown on people and businesses avoiding or evading tax is also likely, with a £77m boost for HM Revenue and Customs to track down those not paying their fair share.

Further plans to signal approval for up to 30 new gas-powered electricity power stations have already sparked controversy.

Mr Osborne will also float possible tax breaks and regulatory reforms to encourage investment in innovative "fracking" technologies for extracting gas from shale deposits.

• Follow Sky's live coverage of the Autumn Statement on Wednesday
•  9am-10am: Jeff Randall
•  10am-5pm: Dermot Murnaghan
•  5pm-7pm:   Live at Five

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Tesco Confirms It Could Pull Out Of US

Tesco has confirmed a review of its loss-making US operations with "all options under consideration" as it attempts to convince the City on its wider turnaround plans.

The move, which was exclusively revealed by Sky's City Editor Mark Kleinman last night, prompted a 4.6% surge in its share price in early trading.

The plan could see Britain's biggest retailer either close or sell all of its American stores, which trade under the Fresh & Easy brand

Tim Mason, the chief executive of Fresh & Easy, is to leave the company today after a career of over 30 years, Tesco said.

Tesco confirmed too that its battle to retain strong market dominance in the UK remained strained as like for like sales, excluding fuel and VAT, fell 0.6% in the third quarter - figures which pile more pressure on the supermarket giant's boss, Philip Clarke.

In his statement confirming the review, Mr Clarke said: "My role is to deliver long-term value for shareholders. Following a year in which my priority for Fresh & Easy was to improve its performance, I have now made a fully informed assessment of its long term potential.

"Whilst the business has many positives, its journey to scale and acceptable returns will take too long relative to other opportunities. I have therefore decided to conduct a strategic review of Fresh & Easy with all options under consideration."

Fresh & Easy currently operates approximately 200 stores employing 5,000 people.

The brand was launched in 2007 but has never made a profit, losing several hundred million pounds overall - £74m in the first half of this year alone.

Kleinman reported that Mr Clarke was already under pressure because of the group's sluggish performance in its home market which resulted in a £1bn transformation programme focused on improving customer service and the availability of fresh produce.

While Tesco had been treading water under its new boss, rivals including J Sainsbury and Waitrose have been performing strongly though there are signs of progress with grocery sales growth outperforming the market.

Regarding Tesco's turnaround attempts, Mr Clarke said today: "I am pleased with the performance of our food business in the UK.

"Our six-part plan is about improving the shopping trip for customers for the long term and this is a positive early sign. We've now refreshed nearly 300 stores, upgraded or introduced well over 3,000 products and added innovations such as Delivery Saver to our already successful online grocery business."

He described general merchandise sales as "not good enough."

Despite the tough non-food trading, Tesco's fightback against its resurgent rivals has not gone unrewarded as market share data from Kantar Worldpanel yesterday revealed that Tesco had seen the best sales growth of the "big four" players in the four weeks to November 25 and grew its market share.

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Autumn Statement: New Private Finance Scheme

Chancellor George Osborne is set to overhaul the heavily criticised Private Finance Initiative in a bid to boost the economy.

Mr Osborne will include plans for a "faster and more transparent" system of private funding for public infrastructure projects in his Autumn Statement on Wednesday.

It is understood that safeguards will be built into the system to make sure that the costs and risks to the taxpayer are minimised.

These will include limits on the type of services, such as maintenance, that can be incorporated into contracts and more flexible terms allowing the state to opt out.

Existing PFI schemes have been attacked for their generosity to private contractors, with one hospital reported to have been charged £333 by a firm to change a lightbulb.

The taxpayer will also take a minority shareholding in the delivery companies to ensure a share in any profits and allow closer oversight.

Some previous projects have taken up to five years but a new, strict 18-month limit will be imposed on the procurement process and cash reallocated if the deadline is missed.

Safeguards will be built into the new scheme to protect taxpayers

Efforts will also be made to make the scheme, more attractive to long-term investors like pension funds in a bid to reduce the amount of debt involved in the financing.

The reforms will promise more transparency over future liabilities facing the taxpayer, placing a cap on the total charges controversially going "off balance sheet".

The new system is expected to be named Private Finance 2 (PF2).

Mr Osborne ordered a review of what he said was the "discredited" PFI system last year and will claim up to £2.5bn savings have been identified in existing contracts.

Set up under John Major's government in 1992, PFI was expanded dramatically under Labour and has been continued under the present coalition administration.

It allows private firms to build, operate and maintain public facilities like hospitals, schools and courthouses under contracts lasting as long as 35 years.

But it has faced harsh criticism over escalating costs, inefficiency and "perverse incentives" to use it over more cost-effective funding methods.

David Cameron's main focus is restoring Britain's economy

More than £267bn is due to private firms in repayments over the coming years and MPs recently called for the liabilities to be recorded in the national accounts.

Among the first projects to be put out to firms under the new process is expected to be the recently announced £1.75bn school repair programme.

A review of 100 existing contracts to run schools and other government buildings has found £1.5bn in savings over the past 18 months with another £1bn identified in future savings, Mr Osborne is expected to tell MPs.

The bulk - £630m - came from bringing services in-house or ending them and £615m from renting out buildings, increasing occupancy and using more energy-efficient equipment.

Another £140m was shaved off by ending the "gold plating" of services - such as firms charging for washing windows more often than required.

This week's mini-budget is expected to deliver bleak news for welfare claimants as well as the wealthy in the form of a possible benefit freeze and big cuts to pension tax relief.

Economists also expect Mr Osborne to make an embarrassing climbdown over one of his key goals - to have debt falling as a share of national income by 2015/16.

He conceded at the weekend that it was "clearly taking longer to deal with Britain's debts, it's clearly taking longer to recover from the financial crisis than one would have hoped".

On the eve of the statement, the British Chambers of Commerce (BCC) became the latest respected body to slash growth forecasts.

It now expects the economy to grow 1.2% in 2013 and 1.8% in 2014, compared with previous estimates of 1.2% and 2.2% respectively.

The organisation demanded a "laser-like focus" from the Chancellor on growth-boosting measures such as delivering key infrastructure projects and creating a business bank.

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Xmas 'Nerves' For Nation's Retailers

There are signs that Christmas shoppers are adopting a 'wait and see' approach in the hope of a price war among retailers in the run-up to December 25.

The latest sales figures from the British Retail Consortium (BRC) show a rise of 0.4% during November, a figure the BRC said was flattered by weak comparisons with last year.

The organisation stated that shops were in a "state of nervousness" about the festive season, as a result.

Its survey quoted several toy retailers as saying that Christmas shopping was starting later this year, while online sales also delivered their third worst performance of the year.

Retailers had been hoping for stronger November trading after a battering the previous month when retail sales volumes dropped 0.8% month-on-month, amid declining consumer confidence and rising inflation.

David McCorquodale, head of retail at BRC's survey partner KPMG, said November had been a cautious month: "It appears that consumers know they have to spend before Christmas but are holding off for as long as they can to see if there might be bargains available in the next few weeks.

"Pricing throughout the month and strategic promotions will be fundamental in a key month," he said.

But the BRC said tablet computers were a strong driver of growth in the electrical goods market in November, which also benefited as people bought cooking items ahead of Christmas.

Clothing sales were boosted by the fashion for all-in-one pyjamas, known as "onesies".

Singers Rihanna and Robbie Williams were among the celebrities who have stepped out in their own versions of the adult rompersuits.

The colder weather helped boost winter clothing ranges and boots.

Food sales faded throughout the month but the launch of festive Christmas adverts helped boost sales of Christmas crackers and confectionery.

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Thomson Owner Paid No UK Corporation Tax

Tui Travel has paid no corporation tax in the UK over the last year, despite a hike of almost 40% in statutory profit.

The boss of the company, which owns Thomson and First Choice among others, told Sky News it was as a result of restructuring at the company. 

"Within the UK, because we have accumulated tax losses as a result of restructuring the business, there's little or no tax being paid in the UK," he said.

"But that's as a consequence of these carried forward losses that we have.

"Once those losses have been utilised, then we will pay tax in the normal way as we comply with all the laws of the lands that we operate in."

It came as the British company reported a rise in statutory profit before tax for the year to the end of September 30 to £201m, compared with £144m the previous year.

The underlying performance of the business - when one-off items are not included - also performed well, with pre-tax profit up 8% to £390m.

Bookings were up across Britain, Germany and Nordic countries, but fell 28% in France as the company reduced capacity in the country.

Mr Long described the year as "one of many successes".

"We have delivered record Group profits while the UK achieved outstanding results both in terms of profit and margin all against a backdrop of continued economic uncertainty," he said.

"Our proven strategy continues to evolve and drive strong trading momentum throughout the group."

He added that, with the exception of France, trading for both winter 2012/13 and summer 2013 was encouraging.

More follows...

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Executives' 12% Pay Rise 'Unacceptable'

Executive pay has trebled over the past 10 years, despite the UK's banking crisis and double-dip recession, according to an independent think tank.

Over the last financial year, the chief executives of Britain's top companies have seen pay increase by 12% on average to £4.8m - or 185 times the average wage - the High Pay Centre said in a report.

It blamed the Government's failure to act for the rise, which compares to a pay increase of just 2.8% for most British workers.

New measures that give shareholders the power to veto executive pay increases are "a step in the right direction", the report said, but a vote every three years is "unlikely to achieve significant change".

And over the course of the so-called shareholder spring - when investors had the opportunity to vote against boss' pay packages - only two in the FTSE 100 were were rejected, it highlighted.

Deborah Hargreaves, the High Pay Centre's director, said it was crucial to keep the issue in the spotlight.

"It's wrong that Britain's bosses are taking home more and more money as their companies shrink, their employees are squeezed and jobs are being lost," she said.

"Chief executives are hoping that their big bonus and their inflated rewards culture will escape attention, now that the banking crisis has passed."

She added that the pay increases were "damaging to the economy and to the morale of Britons struggling to make a living".

The majority of growth has not been in salaries, the report found, but in bonuses, grants of restricted shares, long-term incentive plans and new pay structures.

The think tank said a "dramatic simplification" of top pay packages was needed, because "in the vast majority of cases, the way leaders are rewarded remains complex and hidden from public scrutiny."

"High pay - with rewards that are out of kilter with results - is having a corrosive impact on our living standards, our economy and our society," Ms Hargreaves added.

"It damages public trust in businesses and it demoralises employees whose rewards for their efforts are tiny in comparison with their bosses."

A Department for Business spokesman said: "We have taken firm action to reform the framework for executive pay, so that shareholders have the right tools to challenge companies when pay is excessive."

Last month, HM Revenue and Customs (HMRC) ordered some JP Morgan workers to pay tax - or face legal action - over allegations the firm transferred salary payments offshore.

HMRC said the money as "disguised remuneration" and not retirement benefits as claimed.

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Mega Monday To Make Online Sales History

Online retailers in the UK are expecting today to be the busiest shopping day in history.

Recent years have seen online shopping figures consistently peaking on the first Monday in December, dubbed Mega Monday.

Visa Europe predicts £320m will be spent on its cards alone as online transactions top 6.8 million, an increase of 21% on last year, making December 3 this year the busiest online shopping day in history.

It said: "A combination of pay day for the majority of consumers falling on the last Friday of the month and a weekend spent browsing the shops results in shoppers logging on to buy their gifts online on the subsequent Monday.

"All of these factors will result in consumers spending £222,222 per minute, making 4,722 transactions every 60 seconds."

This month will also see more than £11bn withdrawn from cash machines, equating to more than £41,000 per second in the pre-Christmas peak.

Sainsbury's Bank predicts a 1.3% rise in cash withdrawals compared with December last year, to reach a total of £11.1bn.

Friday December 21 is expected to be the busiest day for cash withdrawals, as it is traditionally when shoppers rush to buy last-minute gifts, while this Monday could give online retailers boosts of up to 70%.

Visa Europe commercial director Dr Steve Perry said: "On Mega Monday, people across the UK will go online and use their Visa cards to make 6.8 million transactions, the most in a single day in UK history. That's 21% more than in 2011, signalling that consumers are becoming increasingly accustomed to the advantages of shopping online for everyday purchases and special items, especially in the lead-up to Christmas."

Amazon.co.uk also predicts Mega Monday to be its biggest single day, with orders set to peak at 9.20pm.

Christopher North, managing director of Amazon.co.uk, said: "Monday December 3 could be the busiest day in the history of Amazon.co.uk, and we're preparing for it by hiring more than 10,000 seasonal employees across our eight UK fulfilment centres."

Marks & Spencer says it is prepared for what it expects to be its busiest day of the year.

Online analyst Experian expects UK consumers to make 115 million visits to retail websites this Monday, an increase of 36% on last year.

The busiest shopping day on the high street often falls two days before Christmas Day, with the weekend of December 22 and 23 expected to draw peak numbers of shoppers this year.

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Tax: Starbucks, Google And Amazon 'Immoral'

By Darren McCaffrey, Sky News Reporter

Starbucks, Google and Amazon have been accused of "immorally" avoiding paying their fair share of tax in the UK, as the Chancellor prepares a blitz on tax dodgers.

MPs on the Public Accounts Committee criticised the companies for the "unconvincing and, in some cases, evasive" evidence they gave on why their corporation tax payments are so low.

Starbucks told the committee it had made a loss for 14 of the 15 years it has operated in the UK, a claim the committee said it found "difficult to believe".

In a report, the MPs added that Amazon's representative left them frustrated because he was "evasive and unprepared to answer legitimate questions".

They also said Google "undermined its own argument" that profits should be taxed in the countries where they are made because it transfers its non-US profits, including from the UK, to Bermuda, which has a more advantageous tax system.

Starbucks says it is reviewing its tax arrangements

Margaret Hodge, who chairs the Public Accounts Committee, said: "Global companies with huge operations in the UK generating significant amounts of income are getting away with paying little or no corporation tax here.

"This is outrageous and an insult to British businesses and individuals who pay their fair share.

"Corporation tax revenues have fallen at a time when securing proper income from taxes is more vital than ever.

"There is little credible information about what is going on. The evidence we took from large corporations was unconvincing and, in some cases, evasive."

Starbucks has now declared that it is preparing to change its tax affairs so that it pays more into Britain's coffers and there is growing pressure on others to follow suit.

The report was published as George Osborne prepares to unveil a £154m crackdown on wealthy companies and rich individuals who dodge tax.

Officials will be ordered to use the cash to draft in an army of investigators to target high earners who aggressively avoid or evade paying tax.

The money will also fund extra staff to speed up work challenging multinationals' transfer pricing arrangements to stop global companies using legal loopholes to shift profits out of the UK.

However, Mr Osborne has warned against pricing Britain out of the world economy.

"If we make our taxes less competitive, that will just mean more companies stay out of Britain," he said.

But Katja Hall, from Confederation of British Industry, told Sky News that tax avoidance is not a widespread problem.

"Companies pay £163bn in tax in the UK every year and the large majority of companies pay the right amount of tax," she said.

Mr Osborne's latest tax crackdown will be outlined in this week's Autumn Statement, which is also expected to contain bleak news for benefits claimants.

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Millions Of Households 'Feel Squeezed'

More than 10 million households are feeling financially squeezed and almost one in 10 have defaulted on a loan, bill or housing costs, a consumer group has said.

Releasing its findings ahead of Chancellor George Osborne's Autumn Statement this week, Which? urged the Government to ensure spiralling energy and food costs are kept under control.

The group's "squeezometer" found almost one in four people are feeling financially squeezed, equating to 10.2 million households.

Researchers found 9% of households have defaulted on a loan, bill or housing costs.

Some 6% of households have gone into an unauthorised overdraft or used a payday loan to tide themselves over.

Researchers highlighted consumers' top worries as the price of fuel, energy and food.

A string of energy firms have recently announced bill hikes, putting further pressure on families this winter.

Food costs are also on the increase, and last week the Office of Fair Trading said eight  supermarkets have agreed to a set of principles following concerns over special offers and promotions for food and drink.

The supermarkets have agreed not to artificially inflate prices to make a later "discount" look more attractive.

Which? executive director Richard Lloyd said: "With 10 million households feeling the squeeze and consumer confidence remaining low, the government has a job on its hands to convince people that everything possible is being done to keep unavoidable costs like energy and food bills under control.

"We're looking for further progress in reforming the energy market, an end to misleading food price promotions, and more competition in banking to take some of the pressure off hard-pressed consumers."

The research asked 2,100 UK adults in October if they had experienced a range of financial difficulties in the previous month.

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Osborne Eyes Tax Evaders And Pensions Of Rich

The Chancellor has promised to hunt down tax evaders and tax the wealthy - warning that everyone must make a contribution.

In his Autumn Statement on Wednesday, George Osborne is set to hit the pension pots of the wealthiest by slashing the £50,000 annual tax relief cap on pensions to as little as £30,000, according to The Sunday Times. That could raise between £600m and £1.8bn.

Tax evaders are also under the scanner of the Chancellor who told The Sun "we are hunting down those who evade tax wherever they try to hide".

The comments come as several leading football clubs face questions about their tax arrangements and amid an unprecedented public outcry over multinational corporations' tax avoidance through complex offshore mechanisms.

Starbucks, which recently came under fire from MPs over its tax affairs, is reportedly in talks with officials at Revenue and Customs about doing a deal.

In an article in The Sun, Mr Osborne said: "We are still all in this together. Everyone must make a contribution to dealing with our debts, from the richest in our society to those living a life on benefits.

"Every one of my Budgets has raised more from the richest. The situation under Labour where top people in the City were paying lower tax rates than their cleaners has been ended."

Meanwhile, shadow chancellor Ed Balls told the Sunday Mirror that a change of course was needed from David Cameron and Mr Osborne.

"When the medicine makes the patient sicker, you don't just take more of it. We need to change the medicine, or change the doctor."

Any form of mansion tax - or splitting council tax bands - is likely to be ruled out in the coming statement.

There is also speculation a planned 3p per litre rise in fuel duty planned for January may be delayed.

Some benefits are also expected to be frozen.

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Making Sense Of Britain's Lopsided Recovery

One of the most common observations you encounter here in London, where Sky News is based, is that despite all the headlines about recession - about the fact that this has been the worst slump in modern British history - it often doesn't feel as if there has been a recession at all.

And it turns out that this is quite right - London and the South East never experienced a double-dip recession at all.

And parts of London - particularly the east end of inner London - didn't even see a fall in their economic output in nominal terms during the deepest years of recession, in 2008/09, according to analysis of official statistics by Sky News.

Meanwhile, other parts of the country have seen the sharpest and deepest collapse in recent economic history. The double-dip recession was largely experienced by Northern Ireland and the North East of Britain, according to analysis from Capital Economics.

The difference in economic experience between London and other parts of the UK (it's not even necessarily just a North-South divide as parts of the South are also suffering) is greater than ever before on modern record. And the gap has widened more here in the UK than in any other major economy in recent decades.

With both the Labour and Conservative leaders trying to claim the mantle of being the "one nation" party, it's clear that in economic terms, Britain is anything but.

We have been travelling to postcodes all around the UK to see how the experience of the recession, and the fledgling recovery, has varied throughout.

We were disturbed by much of what we saw - families facing more hardship than ever before, while others in London are oblivious. Some households stuck deep in negative equity while others reap the benefits of a property boom.

We have produced a series of television and web pieces about the divergence in experiences depending on the postcode in which you live; we're calling it 'The Lopsided Recovery'.

The green line shows the double-dip recession

The first of those pieces concerns the overall growth picture. The official GDP figures show that Britain faced a very sharp recession in 2009, then recovered in 2010 and early 2011, only to face a double dip in 2012. But this masks an enormous divergence between regions.

The North East has had a far deeper recession than the broader UK. The size of its economy is still more than 5% below its 2008 peak. Meanwhile, London's economy has more than regained its pre-crisis peak. It never even saw a recession in 2012.

And if you look in nominal terms (in other words, before you adjust for inflation), East London expanded in 2008 and 2009. It was the only part of the UK to avoid a nominal-terms contraction in that year - aside from Aberdeen, home to the North Sea oil industry, which also grew throughout.

Eurostat said the disparity is greater in Britain than other EU nations

These kinds of divergences in experience are not unusual in an economy - there are always regional disparities in all countries as it's impossible for everyone to be growing at precisely the same speed all the time. But there is evidence that the gulf in experience is greater in the UK than elsewhere.

According to official EU figures, the disparity in real incomes between regions in the UK is greater than in any other European country.

An economic paper produced by the Department for Business, Innovation and Skills a couple of years ago found that while the regions of Britain converged economically more than other major countries between 1950 and 1985, between 1995 and 2007 they have diverged more than in other nations.

Convergence has been reversed in recent years

The worrying trend for the UK is that such disparities have only widened in the recent recession. This looks stark enough on paper - it is even more striking in person.

In Newry, Northern Ireland, where the economy is also more then 5% below the pre-crisis peak, Damien Quinn of one of the neighbourhood community associations, talks of a sharp rise in suicides.

Worn out by years of trying and failing to get work, young men (it is almost always young men) are killing themselves to escape the alternative: permanent unemployment, drug dependence and poverty. The latest funeral was just the week before he spoke to us.

In Hartlepool, Angie Wilcox of the Owton Manor Residents Association, sees a growing number of people coming through her doors for cheap food and help as they battle unemployment. She fears that welfare reforms will only make locals more desperate.

Meanwhile, in East London's Old Street, the area nicknamed 'Silicon Roundabout', Julia Fowler, who runs tech fashion start-up Editd, says she has barely seen any evidence of recession.

It is harder than ever to find decent employees; she has been expanding the business since it started in the depths of recession. For those in London, the main problems are that the cost of living - particularly when it comes to housing - just keeps rising, along with the local economy.

There's nothing inherently perverse about one part of the country performing better or worse than another. After all, a nation state is a union of different economic and cultural areas. However, the longer one part of the country remains so far shy of the rest, the more it will have to be subsidised by its richer regional neighbours.

This kind of regional redistribution already happens: according to the Centre for Economics and Business Research, London taxpayers pay a subsidy of around 20% which goes to its regional neighbours; Northern Ireland receives a subsidy of almost 30%.

The longer such imbalances persist, the more resentment is generated on both sides: one has only to look at Greece and the rest of the Eurozone, which is an analogous situation, except in a dysfunctional currency area.

And the longer certain parts of the country are excluded from economic success, their people consigned to more or less permanent unemployment, the more difficult they will find it to regain their feet at any point in the future.

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