House Prices: Bank Given New Help To Buy Role

By Ed Conway, Economics Editor

The Bank of England is to be given effective control over the loan-to-value ratios of mortgages eligible for the Government's new Help to Buy scheme, it has emerged.

As of next September, the Bank's Financial Policy Committee will be able to impose swingeing fees on high-debt loans in the Treasury's mortgage guarantee scheme, potentially ruling out 95% loan-to-value products.

The news came after the Chancellor announced that he will give the Bank the right to review the scheme on an annual basis, instead of only after three years, as had been originally intended.

Under the original conception of the scheme, in which the Treasury will part-finance deposits to help prospective homeowners onto the housing ladder, buyers would only have to provide a 5% deposit, with the Government helping provide a further chunk.

However, Sky News understands that in an annual review, starting next September, the Bank will also be able to call for a specific increase in the fees banks will have to pay if they want to lend out a 90-95% loan-to-value mortgage.

Although the Bank only has the power to recommend the fee changes, Treasury insiders say they would be highly likely to implement them.

The other lever the Bank can pull is to recommend lowering the price of properties eligible for the scheme from £600,000.

According to documentation sent out to mortgage lenders, banks will be charged three different fees depending on the scale of loans they plan to extend under the scheme: one for an 80-85% loan, one for a 85-90% loan and another for a 90-95% loan.

Should the Bank's FPC become concerned about households overextending themselves, they could recommend an inordinate increase in the fees for the highest debt mortgages, effectively ruling them out in the market.

The development underlines the scale of concern in the Treasury and Bank that the Help to Buy scheme could have the potential to overheat parts of the housing market which already look unaffordable.

Research by Sky News has found that the average property in Kensington & Chelsea is now worth almost 30 times the average salary of those living in the area; this compares to an average ratio of 6.1 times across England and Wales.

According to Nationwide house prices rose by 4.3% in Britain over the past year – though the increase in London was 10%.

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Church Consortium Wins RBS Branch Sale Race

Royal Bank of Scotland is to sell 314 branches to a consortium backed by the Church of England in a deal forced on the bank because of its taxpayer bailout.

It will see Williams & Glyn's, a bank brand that has been dormant for nearly 30 years, soon return to the UK high street to become a new competitor in the market.

The consortium includes Corsair Capital, Centrebridge Partners and the Church Commissioners for England - the church's pension fund.

The deal will give the church a role in high street banking after the Archbishop of Canterbury Justin Welby slammed controversial payday lenders for their rates before learning that the church had actually invested in Wonga, the country's best-known payday firm.

The Archbishop of Canterbury wants banking to have a moral compass

The new player, whose executives include former trade minister Lord Davies, has pledged to put lending to small business at its heart, give more funds to the community and cap its bonuses at 100% of annual salary.

RBS confirmed the investors would pay £600m for part of the business with the remainder being raised in a stock market listing at a future date.

RBS chairman Sir Philip Hampton said: "We are delighted to be working in partnership with these investors to establish a new challenger bank for UK customers.

RBS chairman Sir Philip Hampton

"Williams & Glyn's will play an important role in the UK banking landscape and will be an excellent new addition to the market, with a particular strength in small business banking - a sector that is so crucial to the UK's economic recovery.

"Much has been done already in building the standalone business, and today's announcement provides more certainty for our customers and employees ahead of a flotation."

Sky News revealed in July that the Corsair bid was being backed by the Church Commissioners for England in an attempt to establish an ethical dimension in the group's vision for the small business-focused bank.

An earlier deal to sell the network, codenamed Project Rainbow, which comprises all RBS-branded branches in England and NatWest branches in Scotland, fell through last year when Santander UK pulled out citing concerns about IT systems.

Santander had initially agreed to pay £1.65bn for the branches, which include £19bn of assets.

Lord Davies, who is vice chairman of Corsair Capital, said today: "We are delighted to have been selected by RBS.

"The Consortium views this as an opportunity to create a genuine challenger bank, which will be a vibrant, healthy competitive force in UK banking and a new financial services provider to the UK public and small and medium sized businesses.

"There is a great history in the Williams & Glyn's brand and the business has an opportunity to be at the forefront of the UK banking industry whilst making an active contribution to the community from its strong regional network."

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Marriage Tax Breaks For Four Million Couples

David Cameron says four million couples will benefit from the Government's new £1,000 marriage tax allowance.

Ahead of the start of the Conservative Party conference, the Prime Minister said the scheme - starting in April 2015 - will be worth up to £200 a year for married couples, including 15,000 in civil partnerships.

They will receive the benefit at the end of the tax year in 2016.

It will work by letting people transfer £1,000 of their personal tax allowance to their spouse or civil partner - an increase on the £750 allowance promised in the Tory manifesto, which would have seen couples gain £150.

The new allowance, which is not available to couples which include a higher rate taxpayer, is aimed at couples where one partner has not used all of their personal allowance or does not work at all.

Labour's shadow chief secretary to the treasury, Rachel Reeves, said that the marriage tax break would not even help two-thirds of married couples and said he was out of touch if he "thinks people will get married for £3.85 a week".

She said: "And even for the minority who might benefit, it will be far outweighed by what David Cameron's Government has already taken away in higher VAT and cuts to child benefit and tax credits. In most cases, the extra payment will be paid to men, even though it is women who have disproportionately lost out so far."

The PM says 'nothing would be possible' without his wife Samantha

The announcement comes after a trade-off that allowed the Liberal Democrats to announce free school meals for all children under eight earlier this month.

The proposal, which Downing Street said shows the Government values commitment by recognising marriage and civil partnerships in the tax system, makes good on promises Mr Cameron made when he was running for leadership of the party in 2005.

In an article in today's edition of The Daily Mail, he said: "I believe in marriage. Alongside the birth of my children, my wedding was the happiest day of my life.

"Since then, Samantha and I have been a team. Nothing I've done since - becoming a Member of Parliament, leader of my party or Prime Minister - would have been possible without her."

He said that the new measures would apply "if you're gay or straight - and in a civil partnership or a marriage. This summer I was proud to make Equal Marriage the law. Love is love, commitment is commitment".

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Jobless 'To Be Forced To Work' For Benefits

Work and Pensions Secretary Iain Duncan Smith will announce tough new conditions on the payment of unemployment benefits at the Conservative Party conference next week, according to reports.

The Daily Mail reported that the long-term unemployed will be told that they must do an unpaid full-time job or lose their benefits.

The paper said it was expected that claimants who go through the Work Programme - the Government's main back-to-work scheme - but fail to find a job will be required to take part in unpaid community work or work experience.

Mr Duncan Smith has said people should not live a life on benefits

Refusal to do so could mean the loss of welfare payments.

Mr Duncan Smith told the Mail: "It's not acceptable for people to expect to live a life on benefits if they're able to work."

He added: "Benefits should be a safety net - but not something that gives claimants an income out of reach of many hard-working families."

Mr Duncan Smith also announced the Government's benefits cap is now fully in place across Britain.

The controversial cap - which limits benefits to £500 a week for couples and lone parents and £350 a week for single adults - is a key plank of Mr Duncan Smith's welfare reforms. It is expected to affect about 40,000 households.

The cap covers the main out-of-work benefits - jobseeker's allowance, income support, and employment and support allowance - and other benefits such as housing benefit, child benefit and child tax credit and carer's allowance.

It was piloted in four London boroughs last April before being introduced across the country from July.

Mr Duncan Smith defended the cap, arguing that it restores fairness to the system, ensuring households where no one is working cannot claim more than the average family earns.

Critics say that it penalises out-of-work families in areas with high housing charges, forcing them to move out to cheaper areas.

But Mr Duncan Smith told the Daily Mail: "We have now successfully delivered a cap on benefits so that out-of-work households know they can no longer claim more than the average family earns and we have returned fairness to the benefits system."

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Chancellor Acts As House Prices 'Accelerate'

As a report highlights accelerated house price growth in September, it has been revealed that the Chancellor has asked the Bank of England to keep a closer watch for evidence of a price bubble.

According to the latest Nationwide House Price Index, UK prices rose 0.9% month-on-month, leaving them 5% higher than in September 2012 - the strongest pace of growth since July 2010.

The growth was largely fuelled by prices in London and South East England, Nationwide said.

Its chief economist Robert Gardner said: "There are also signs that the pickup is becoming increasingly broad-based.

"For the first time since 2007, all thirteen UK regions experienced annual house price growth in the third quarter of 2013.

George Osborne needs housing supply to rise

"However, the southern regions of England continued to see the strongest rates of growth – especially London, where the annual rate of growth reached double digits in the three months to September. 

"The gap between house prices in the North and the South of England reached a new high in the third quarter, rising above £100,000 for the first time.

"The typical property price in the South of England is now 74% above its Northern equivalent," he said.

On the prospect of a bubble, Mr Gardner added: "The acceleration in house price growth from the subdued pace prevailing throughout 2011 and 2012 has been surprisingly quick, though house prices are still some way below their previous peaks in most parts of the country.

"Overall, UK house prices are still around 8% below their 2007 highs.

"Only in London are prices at an all-time high, 8% above the previous peak."

It is against that backdrop that George Osborne has given the Bank of England greater powers to prevent the Government's Help to Buy scheme from causing a property boom - with borrowers over-stretching themselves.

From January the Help to Buy initiative will provide mortgage guarantees on properties worth up to £600,000 but the Bank's Financial Policy Committee (FPC) will now make annual reviews and could recommend that the cap is reduced.

It was initially due to only assess the scheme after three years.

The FPC could also make loans more expensive by recommending that the Treasury raises the fees paid by lenders for the guarantees.

The Business Secretary Vince Cable previously voiced concerns on Sky News over the second phase of Help To Buy.

But Mr Osborne insisted: "Let's not pretend there's a housing boom," saying it was important to "go on trying to fix specific problems in our financial system."

The Bank has previously said there is no evidence of a bubble but said it would be watching closely so it could intervene if necessary.

More follows...

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Royal Mail Sale To Be Completed Before Strike

The Government has confirmed a timetable for the Royal Mail privatisation to be completed ahead of any possible strike action by postal workers.

Shares are expected to be priced at between 260p and 330p, ministers said, giving a market valuation in the range of £2.6bn and £3.3bn.

The Government explained that it planned to sell between 40.1% and 52.2% of the company, which is expected to make its market debut on October 11, with 150,000 Royal Mail staff receiving free shares likely to be worth roughly £2,000 each at the valuation's mid-range.

It was confirmed that unconditional dealings in the stock will start on October 15, which is the day before voting closes in a ballot by the Communication Workers Union (CWU) over whether to back a campaign of industrial action on the sale.

Any strike action would start a week later.

Business Secretary Vince Cable said: "Today is an important day in the life of Royal Mail.

"People can now apply to buy shares in this iconic British brand.

"This will give Royal Mail access to the private capital it needs to modernise, as envisaged under successive governments, and enshrined in law by Parliament two years ago."

The Government envisages that 70% of the offering will be allocated to institutional investors.

Individuals can apply for shares from later today, with the deadline for the receipt of applications being October 8.

Further pricing details and share allocations will be confirmed when conditional dealings in Royal Mail start.

Retail investors based in the UK can buy shares at a minimum of £750 and can also apply through intermediaries.

Despite the prospect of the windfall for its members, the CWU says it fully expects the ballot to overwhelmingly back strike action unless the company provides guarantees on issues including pay, deliveries and future jobs.

A union communication being sent to CWU members today said: "Those who want to sell off the Royal Mail Group are motivated purely by short-term gain and vested interests.

"We cannot give the company a free hand to determine your future and the future of UK postal services."

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OFT: Children Pressured To Buy Online Games

Warning Over Smartphone Kids' Apps

Updated: 5:56am UK, Thursday 26 September 2013

By Niall Paterson, Media Correspondent

I've always tended to view video-gaming as something of a solitary pursuit, or at the very least one enjoyed with friends in my bedroom, out of sight of Mum and Dad.

This wasn't always necessarily to do with the violent or graphic content of the titles my parents unwittingly purchased - although if they'd seen the brutality of Speedball 2, the adult content of Leisure Suit Larry, or even the hundreds of mammals sacrificed as I attempted (in vain) to complete Lemmings, I imagine I'd have been shoved outside and back on the Space Hopper quicker than I could say "carpal tunnel syndrome". 

But at least the financial costs of my sweaty-palmed play were limited to the cost of the game itself (and, perhaps, the occasional copy of Computer & Video Games magazine).

Not so nowadays.

The Office of Fair Trading's investigation into in-game purchases of bolt-ons and bonus items makes for distressing reading if you've ever handed your iPad to an ankle-biter.

In essence, it concludes children are being encouraged or even made to feel pressurised into paying over and above the cost of the app, even in games which are specifically targeted at kids.

It also finds a blurring of the distinction between real-world and in-game currency; and unfair and aggressive commercial practices "to which children may be particularly susceptible".

There's also prima facie evidence consumer protection laws may already have been broken.

The industry will now mull over the OFT's eight key recommendations. But I imagine some will choose to resist.

After all, given the profusion of free apps and games, many people are increasingly unwilling to pay even a quid for what might, ultimately, only prove to be a couple hours of entertainment.

So, understandably, developers are seeking other revenue streams - and some will argue that encouraging kids to ask their parents for an in-game item is no different to the advertising campaigns that turn kids into pester-factories every Christmas.

And what of the parents in all of this? Isn't this just more evidence that mum and dad need to be a little more aware of what their kids are up to online?

There's a degree of validity in that argument, as there is when the case is made that parents need to educate their kids a lot better about when and where not to click.

But I know as well as any 1980s gamer that they can't always know what we're up to; nor are most sufficiently tech-savvy to educate their kids about the dangers, fiscal or otherwise, of life online.

But let's be clear - those behind these titles are savvy enough for all of us.

And, although not literally coin-operated, clearly many developers are so cash-motivated that they've chosen to turn a blind eye to the dangers of in-game purchasing.

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Mandelson Criticises Miliband Energy Plan

Ed Miliband's new energy policy risks taking the Labour Party backwards in the eyes of voters, Lord Mandelson has warned.

Labour's former business secretary said the party leader's pledge to freeze energy bills could undo the industrial policy he worked hard to shape under Tony Blair.

"At the business department I tried to move on from the conventional choice in industrial policy between state control and laissez-faire," Lord Mandelson said.

"The industrial activism I developed showed that intervention in the economy - government doing some of the pump priming of important markets, sectors and technologies - was a sensible approach."

But following Mr Miliband's speech yesterday at the party's annual conference, he added: "I believe that perceptions of Labour policy are in danger of being taken backwards."

Energy companies were unsurprisingly united in their criticism of the plan, which went down well with the party's grassroots at the conference in Brighton.

Mr Miliband's policy went down well with core Labour supporters

Neil Woodford, a fund manager at Invesco Perpetual, the biggest shareholder in British Gas owner Centrica, labelled the policy "economic vandalism."

He told Sky's Jeff Randall Live: "Any chance of a serious business investing in this sector has been killed by Miliband's statement.

This could destroy up to £200bn of much-needed investment. The political risk is simply too high. Worse still, there will be a huge negative impact on the wider UK economy."

Mr Miliband has defended the proposals, saying he was doing "the right thing by the country".

"My job is to stand up for the public interest, not the interest of any one company or any six companies but the whole of the public, the whole of this country, and that's what I have done in the policy I've talked about," he said.

"It makes me think of the banks. The banks used to threaten, the banks used to conjure up scare stories, the banks used to talk about the impact of regulation, and the Conservative Party supported them.

"Actually we should have had tougher regulation, and so it makes me think that actually we've got to do the right thing by the country, and that's what I'm going to do."

And the policy was supported by another fellow New Labour architect - Alastair Campbell.

The former party spin doctor said in a tweet: "Peter M wrong re energy policy being shift to left. It is putting consumer first v anti competitive force. More New Deal than old Labour."

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Rural Broadband Roll-Out A 'Raw Deal', Say MPs

The rollout of superfast broadband to homes in rural towns and villages will leave users paying more than they should to get online, according to a spending watchdog.

The Public Accounts Committee (PAC) said the programme represented a "raw deal" for consumers despite a "generous public subsidy".

MPs claimed the scheme had been mismanaged by the Government and said sole provider BT would end up "owning assets created from £1.2bn of public money".

They said the Department for Culture, Media and Sport (DCMS) should cease spending on the scheme until "proper competition and value for money" can be secured.

A spokesman for BT said it was "disturbed" by the report, claiming it was "simply wrong", and insisted the network it is building will be open to its rivals.

BT says it is willing to invest in rural broadband when others are not

"We have been transparent from the start and willing to invest when others have not," he said.

"It is therefore mystifying that we are being criticised for accepting onerous terms in exchange for public subsidy, terms which drove others away.

"The taxpayer is undoubtedly getting value for money."

However, Margaret Hodge, chairman of the PAC, said all of the 26 contracts awarded by June 2013 had gone to BT and claimed the remaining 18 "are likely to follow suit".

"The DCMS' approach to procurement failed to deliver any meaningful competition to drive down prices and maximize coverage," she said.

PAC chair Margaret Hodge

"Without that competitive tension, it is crucial to have full access to the single supplier's cost information to check that BT's bids are reasonably priced, but the department failed to negotiate that access with the company.

"We now have a situation where local authorities are contributing over £230m more to the programme than forecast in the department's business case, while BT is committing over £200m less."

Concerns about the programme were raised when the Government revised its initial target of 90% of the UK having superfast connections by 2015 to 95% by 2017.

The tender process was also criticised after Fujitsu, which later dropped out, and BT were named as the only approved bidders.

A DCMS spokesman said the PAC's report was "at odds" with the findings of the National Audit Office.

"They found our approach reduced the cost to the taxpayer and reduced risk," he said.

"We put in place a fair commercial process and encouraged different suppliers to bid.

"We are disappointed that the PAC fails to recognise that thousands of rural premises which have never had a decent broadband supply are now getting one, something that is vital for farmers, rural businesses and all those who live outside major cities."

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eBay And Argos Strike 'Click & Collect' Deal

eBay and Argos have joined forces to offer a "Click & Collect" service as retailers rush to cash in on the growth of online shopping.

At least 50 merchants using the online marketplace will participate in a trial of the service, which will enable eBay customers to collect their goods from a choice of 150 Argos stores.

The companies said the trial - which is expected to last six months - would deliver what customers wanted in terms of choice, convenience and speed as a study reported a continuing decline in store numbers on the UK's high streets.

Its statement cited research from Econsultancy that 40% of UK shoppers used some form of Click & Collect service over Christmas 2012.

Devin Wenig, the president of eBay said: "At eBay we continue to find new ways to connect buyers and sellers.

Argos has been transforming itself towards a stronger online offering

"Traditional retail isn't going away, it is transforming. Smart retailers are innovating, re-imagining the store and what it means to shop."

John Walden, managing director of Argos added: "Few companies move as many products as effectively as Argos through a national network of local stores, served by friendly and well-trained colleagues.

"Having pioneered Click & Collect in the year 2000, it now accounts for around a third of our business and continues to grow.

"eBay, an innovator in digital and leading online marketplace connecting sellers and consumers, is already a strong partner with Argos and a logical partner for the trial."

John Walden and Devin Wenig see strong demand for 'click & collect'

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