Economic Crisis: What Is The End Game?

The cycle of woe and uncertainty surrounding the economic crisis continues, with gloomy surveys predicting a double dip, and even fears of a ‘Great Depression'. Sir Mervyn King, Governor of the Bank of England, believes this could be the worst financial crisis ever - even beating the 1930s for gloom - and the economy is in breakdown, so what we want to know is:



















How grim are things going to get?

Yesterday various reports told us the UK was bottom of the global confidence league, 43% of finance directors were preparing for a second recession while companies had delayed or cancelled £4.7bn of spending, reports the Daily Telegraph. "Today we report the OECD's leading indicator falling for the seventh month in a row, pointing to a slowdown, and the British Chambers of Commerce warning on stagflation."

Mindful Money asks commentators what they think will happen:

While we don't know if the recent injection of more QE will do any good, we do know that it automatically invites stagflation into our economy by pushing the pound down, say commentators.

According to Mindful Money economist blogger Shaun Richards, the most likely outcome if both politicians and central banks continue with the policies that they have now is, indeed, stagflation.

But he adds: "Those who look at the past I think miss an important point which is that it doesn't have to be 10% inflation to hurt people. A continuation of 5% a year combined with wages only rising say 2% will gradually turn the screw. Let's face it this has been happening already for the last couple of years so in general people are poorer."

Investors Chronicle says that Andrew Sentence, a former member of the BofE MPC believes that inflation is a bigger concern for the UK economy than a recession."High inflation and slow growth are inextricably linked."

What happens if stagflation hit?

Stagflation is a term which is formed by joining the words stagnation and inflation. It is used in modern macroeconomics to give a description of a period of uncontrollable price inflation combined with sluggish output growth. Stagflation raises unemployment.

The last time stagflation held the western world in a seemingly lethal grip was 30 years ago in the 70s and 80s, and it is threatening to emerge from the shadows again. Such fears are dismissed as irrelevant by those in favour of pumping money into the economy through quantative easing (QE), which they think will stimulate growth and avoid the dreaded ‘double-dip' recession. But so far, this policy has failed to prompt the necessary growth.

Thursday's announcement of another £75billion worth of QE played well with the stock market, but it is unlikely to cause much cheer for long. On the contrary it threatens to stoke inflation even higher, and meanwhile, there is the threat that growth stagnates.

"Stagflation" remains a word not uttered in the polite company of the financial world.

"But there remain only a few more tumblers to fall into place for a return to that awful word that conjures up images of the "malaise days" of the late 1970's and early ‘80s, where rising inflation and slumping employment tramped down economic growth," says CNBC,

However, some economists believe stagflation isn't something to fear at present.

Azad Zangana, European economist at Schroders, says: "While the current environment feels like a typical stagflationary environment, this is set to be temporary. The outlook is more positive as we expect inflation to fall from its current level back down to below 3%, mainly due to the passing of the VAT effect from the start of 2011.

"Meanwhile, we forecast growth to improve in the second half of 2012, and so the balance between real and nominal growth will improve. To conclude that we are entering a fully fledged stagflationary period, we would need to see significantly stronger inflation and wage inflation, and a continuation of weaker growth as seen in the 1970's. In our view, this is unlikely to occur."

What other threats may there be?

Another danger, however, is the rising threat of hyper-inflation. Shaun Richards says: "Whilst the self proclaimed "financial geniuses" persist in buying every gilt they can find there is a danger of this. Also it is the nature of things that when problems happen these days with the speed of trading it happens so fast that it is better not to run the risk at all. But I see this as rising but still low.

"So for now the danger is the silent drip drip of inflation and this is the enemy. The biggest problem of all is that as I keep pointing out it should not be a problem at this stage of the economic cycle and furthermore is being inflicted on us by individuals whose own contracts protect them against it.."

And if we're being warned that this crisis beats the 1930s, what happened then?

What happened in the 1930s, given the governor believes the gloom beats this decade? This was the ‘Great Depression', where in America millions were genuinely destitute, and unemployment hit a staggering 25%. Two million Americans tramped the country, sleeping rough as they looked for nonexistent work, and malnutrition was widespread.

Southern England escaped reasonably lightly, but in the North there were pockets of extreme hardship. On Tyneside the collapse of shipbuilding left unemployment standing at 70%, prompting the famous Jarrow march.

There were soup kitchens on the streets and millions of families were subsisting on bread and margarine. In Germany, economic misery that had begun with hyperinflation in 1923 helped another world leader to power in 1933: Adolf Hitler.

So is there any cause for hope with growth and falling inflation?

Henderson's chief economist Simon Ward gives his opinion: "Assuming that an EMU break-up is avoided, the global economy may start to regain momentum from early 2012. Such a scenario depends on the US economy doing better next year, as suggested by recent money supply strength...

"Another reason for thinking global growth could revive from early next year is a fall in headline inflation due to recent weakness in food and energy commodity prices. Rising inflation has been a major contributor to the recent economic slowdown by squeezing consumer spending power and forcing monetary policy restriction in emerging economies."

And anyway, nobody knows.

Mindful Money's resident psychologist Kim Stephenson says: "Let's assume that Shaun's right..

"Afterwards, lots of people who said that we wouldn't get stagflation but something else (hyperinflation or whatever) will say - "ah, well, it depends on how you define stagflation (or hyperinflation, or whatever)", they'll twist it round to show that they were right when they were actually wrong. Or they will point to some action or event - from the Bank of England, IMF, German Government, something, and say "if that hadn't happened, it would have gone the way I predicted". Human beings don't like being wrong and they will selectively remember what they want to remember to avoid having to admit they were wrong.

"Similarly, human beings like being able to predict and control their world . The economy isn't just out of our personal control, it's clearly out of control (or even prediction) of anybody like the Chancellor, the EU etc. that are supposed to be able to control it. That is very scary. It's like when you're a child and you realise for the first time that your parents don't know everything, can't solve every problem, can't ease the pain, stop the bully or get you on the team every time. It hurts and it makes us afraid, so we desperately cling to the belief that somebody can predict it (if not control it) and that we can have some measure of understanding of what is going on. To contemplate the fact that actually nobody controls it, nobody really understands it or can predict it and that most of our predictions are going to be wrong is simply too much to take."

Will The Increased Offer Of Declining Pound Save British Economy?

Forex news. World economy is under the threat of crisis, which can become the most difficult ever and have more large-scale consequences than the Great Depression in the 20th century. This is how the current situation is viewed by Mervyn King, the Governor of the Bank of England.










The decision to expand the quantitative easing program, which was taken by the Bank of England on Thursday, is predetermined exclusively by the difficult economic situation worldwide, particularly in Britain.

Drawing historical parallels, Mr. King claimed that the current condition of world economy is characterized by the total deficit of money supply. Therefore, Central Bank emission is aimed at solving this problem, and the Bank of England decision to increase money supply is to be regarded exclusively from this point of view.

However, global crisis can only be overcome provided that there is a consensus at the highest level.


It is predicted that the entire sum of emission, ₤75 bln., will be directed at stimulating economy and increasing money offer. At the same time, Mr. King assured that inflation is unlikely to result from held recession. In general, he predicts that inflation will increase up to 5 percent in the nearest future; however, next year it will stop increasing and start declining rapidly.

Meanwhile, the rate of British pound has stopped forming long-term wave А(С) or reduced wave С(С) within long-term bear motion, which will be proved by passing pivot Mf at the point of 1.5665. Experts of the Department of Masterforex-V Trading System claim that subsequent FZR will start long-term correction wave В(С). Passing the bottom line of 1.5271 will continue long-term decline; however, before this happens GBPUSD pair will meet support at the points, where pivots MF are placed, namely, 1.5468 and 1.5296.

Dustbowl Britain: The New Depression

YES, it’s official: this could be worse than the Great Depression of the 1930s – men slumped on street corners and kids with bare feet.

Inflation, fascism and economic war in Europe. “This is the most serious financial crisis we’ve seen at least since the 1930s, if not ever,” says Sir Mervyn King, governor of the Bank of England.












Now, I may be missing something, but isn’t this just the kind of alarmist headline-grabbing remark that central bankers are supposed NOT to make in case it spooks the markets? It’s people like me who are usually criticised for resorting to sensational forecasts about Great Depressions and the like. The commentariat is being done out of a job by the godfather of prudence. Whatever happened to “Keep Calm And Carry On”?

The Prime Minister, David Cameron, is said to be livid. Only 24 hours before King forecast the end of civilisation as we know it, Cameron had told the country to “bring on the can-do optimism”. Well, not in the Bank of England, clearly.

It’s hard not to read this as an implicit condemnation of government economic policy. At the very least, the PM and his Chancellor look as out of touch as the Labour PM, Jim Callaghan, when he said “crisis, what crisis”, just as the International Monetary Fund was about to take over the reins of the British economy in 1976.

So what has spooked Mervyn? Well, it’s the Greeks isn’t it, stupid? Actually, it isn’t the Greek default – it’s us. Mervyn’s panic attack coincided with the news that ratings agency Moody’s had downgraded the status of a raft of British banks just as inter-bank lending was seizing up.

Essentially, Moody’s is warning people with money in banks including Royal Bank of Scotland, Santander, Lloyds and so on that they might not get it all back. Why? Because the banks are becoming stressed again, just like 2008, and there is no chance that this time the Government will have the will or the means to bail them out. There’s very little public money left and the economy is slowing to a halt, which will make it hard for the Government to pay its own debts, let alone that of the banks.

The bailout of the UK banks in 2008-09 required £1.3 trillion, according to Mervyn King’s own figures. And what did we get for putting up all that money? Well, Stephen Hester of RBS got £11 million last year. Bank bonuses accounted for another £13 billion. The rest disappeared into the bowels of our rapacious financial institutions.

So what now? Well, if there isn’t any public money, let’s just print some. The last round of quantitative easing – creating more money – placed £200bn in the banks’ accounts in 2009.

What happens is this: the Bank of England electronically creates money, which it uses to buy bonds from the banks. This injects funds directly into the banks’ balance sheets, wiping out their losses and “restoring the health of the financial system”. The money is supposed then to be loaned to small businesses and people wanting mortgages, thus boosting economic growth.

Except that this didn’t happen. The banks hoarded it instead and paid themselves huge bonuses. All QE1 really succeeded in doing was increase inflation to 5%, which is generally what happens when governments print money. This has eroded people’s savings, pensions and salaries, meaning that they haven’t been buying much in the shops. Which in turn is why the economy is sliding back into recession. Britain has one of the lowest growth rates in the OECD and has one of the highest fiscal deficits. Stick that in your budget, Mr Osborne.

So why on earth is the governor printing another £75bn of QE? It looks like the economic equivalent of blood-letting: a pointless medical procedure that only weakens the patient. This is the great unanswered question of the age: why are policy-makers unable to see any solution to economic crisis that doesn’t involve stuffing the mouths of bankers with gold?

When historians look back at this period they will criticise governments for inactivity, short-termism and denial. But they will condemn them utterly for throwing oceans of public money at the very people who caused the crisis and were least to be relied upon to resolve it.

Instead of handing money to banks, in the vain hope that it will boost economic activity, why doesn’t the government hand it to poor people?

I’m not joking. At least lower-income groups can be relied upon to spend the cash in the high streets – in shops like Tesco, which has just announced its worst sales figures for 20 years. Give them VAT rebates, interest-free loans, tax “holidays”, elderly care grants, home improvement loans – anything to get money into the system.

Giving liquidity to people who don’t have it is the surest possible way of boosting economic activity. QE is like trying to get the car started by giving money to oil sheiks in Saudi Arabia.

Of course, the bankers would respond that, yes it’s all very well giving money to people other than us. But if you don’t hand over your cash, we’ll just go bust like Lehman Brothers, and that will cause a global financial and economic collapse. Ha ha.

And of course, they’re right – they are too big to fail. If, say, RBS went under, the shockwaves would be so great that bank lending would halt overnight. This means that companies which depend on short-term loans from banks to manage their accounts would go under too. International trade would freeze because there would be no credit for exporters.

There would also be a run on the banks, as happened in October 2008, when people and businesses withdrew their cash from banks like Northern Rock and HBOS because they didn’t believe their funds were safe. In 2008, according to the then chancellor, Alistair Darling, Britain was 24 hours away from the ATMs closing and people being denied even cash withdrawals.

Could we really be going back to all that? Well, yes – the Belgian-French bank, Dexia, has just gone bust for the second time in three years because people started withdrawing funds at an unsustainable rate and its share price collapsed. It could be the first of many, and governments cannot bail them all out.

Which means that if you are lucky enough to have more than £85,000 in any one bank – the limit of the deposits guaranteed by the government’s deposit insurance scheme – then you’d be well advised to get it out sooner rather than later.

I know that sounds alarmist,

inflammatory, but listen closely, and that’s what the Guv’nor is saying.

But there is an alternative. Instead of pouring more printed money into the banks, why not nationalise them completely? We already own RBS and most of Lloyds. The nationalised banks could be used to set up smaller, more responsible banks with a remit to lend to industry rather than speculate on derivatives and the commodities market, which is what they have been doing since 2009.

If the financial crisis really is as bad as King says it is, and we are about to drown in a hyperinflationary sovereign debt crisis, then the Government would be able to freeze asset deposited in the banks and conduct a kind of debt “triage”.

Those with more than £85,000 in deposits would be required to accept a proportionate reduction in the value of their deposits in order to stabilise the financial system and remove the debt burden on the state. This could be done by converting bank deposits into government bonds, redeemable at a later date. This is rather like QE in reverse. Needless to say, all bank bonuses would be scrapped, and bankers put on civil servants’ salaries.

There would be howls of anguish from the rich at their wealth being hijacked in this way. But they should be told that the alternatives are much worse: a run of bank failures, which means they would lose ALL their funds over £85,000. Bondholders would not just have a haircut – they would be decapitated by default or by hyperinflation.

There is still a great deal of wealth in Britain – £7 trillion in household assets alone, according to the Office for Budget Responsibility – but this is largely held by the very wealthy and “sterilised” in property and other assets. If we are facing the ultimate crash, the Government will have no choice but to commandeer these resources and use them constructively to manage the national finances. President Franklin D Roosevelt did something similar in 1933 when he ordered all the gold held by individuals to be deposited with the government.

I doubt if any politician has the cojones to put this kind of scheme forward right now – most of them are intellectually in hock to the City of London anyway. But what is not in doubt is that the Bank of England is already thinking the unthinkable.

Various schemes for crisis debt restructuring are surely already being run through the Bank of England’s computer models, and though they can’t admit it, this will inevitably involve some control of bank deposits and an orderly run down of debt. The Government will probably opt to raid pension funds first, because they are harder to move offshore. This is what the Argentine government did in 2001 when it defaulted.

What the Bank of England governor is warning of is a truly apocalyptic financial event. The Government has already seized large parts of the banking system and resorted to money printing. It may not be long before it breaks into people’s accounts directly. You have been warned.

Students End Stage Sit-In Over Fees

A group of students protesting against Scotland's leading arts academy's decision to charge fees of £9,000 to students from England, Wales and Northern Ireland ended their sit-in this afternoon.









A spokeswoman for the group said it was "neither practical nor effective" to stay in the foyer of the Royal Conservatoire of Scotland overnight.

Around 30 students started occupying the building at around 11.30 this morning.

They said the protest was part of a rolling programme of "wildcat" occupations over Scottish universities' plans to charge fees to students from the rest of the UK (RUK).

The RCS, which recently changed its name from the Royal Scottish Academy of Music and Drama, is to charge students from elsewhere in the UK £36,000 for four-year degree courses and £27,000 for three-year courses from 2012/13.

The Glasgow-based institution has said the charge reflects the exceptionally high cost of programme delivery in conservatoires, which substantially exceeds the £9,000 fee.

The sit-in at the conservatoire ended shortly after 3pm.

A spokeswoman for the protesters said: "By facilitating fee increases for RUK students the RCS is setting a dangerous precedent in Scotland.

"Despite promises from the SNP Government that Scottish students will not pay fees, we believe that the huge disparity in fees between Scottish and RUK students will become intolerable and will inevitably result in fees for all students.

"Whatever tokenistic measures are introduced, a financial market in education will always result in discrimination against those unable to afford fees, whatever the level.

"Education is a right, and must be free, as it was for generations.

"The Conservatoire's Student Union has abandoned its responsibilities by backing the decision by management."

Robert Gordon University (RGU) in Aberdeen and the Scottish Agricultural College (SAC) also made announcements on fees for RUK students today.

RGU adopted a "tiered approach", with three bands of undergraduate fees.

Business, management and social science courses will cost £5,000 a year, fees for art and design, architecture and built environment, computing, engineering, health and science courses will be set at £6,750 a year, while the master of pharmacy course will be the most expensive at £8,500 a year.

The Scottish Agricultural College (SAC) said fees for RUK students would be £27,000 for a four-year degree, with fees set at £6,750 a year.

The announcements came after St Andrews and Edinburgh universities set fees at the maximum level of £9,000 per year for students from the rest of the UK, meaning that a four-year honours degree at the universities will cost £36,000.

Aberdeen and Heriot-Watt universities also announced £9,000 yearly fees, although both have capped the cost of a degree at £27,000.

Glasgow School of Art also capped fees at £27,000 for a four-year course.

Currently, no full-time undergraduates domiciled in Scotland pay tuition fees at Scottish universities.

The conservatoire said the fee its board of governors has agreed is exactly the same as that charged by comparable conservatoires in England which offer four-year undergraduate degree courses in music and three-year undergraduate degree courses in drama and dance.

The conservatoire, whose alumni include James McAvoy, Robert Carlyle, Billy Boyd and Tom Conti, already operates an extensive scholarship programme.

It said that from 2012/13 it will introduce additional scholarships, which will be means-tested, for new undergraduate students from the rest of the UK to partly offset the introduction of increased tuition fees for that group of students.

Scholarships of £3,000 a year will be available for students from a household whose income is less than £25,000 per annum.

The RCS was not immediately available for comment.

Liberal Democrat Leaders Say Fair Taxation Is Key To Cutting Deficit

Danny Alexander outlines plans to kickstart economy by ensuring money hoarded by Labour is spent on infrastructure.












Liberal Democrats should fight the next election by aspiring to lift those earning less than £12,500 out of paying income tax, says Danny Alexander.

The Liberal Democrats should fight the next general election by aspiring to lift anyone earning less than £12,500 out of paying income tax, Danny Alexander said.

The chief secretary to the Treasury, a close ally of Nick Clegg, also set out the "next steps in our plan for growth", including a pot of £500m drawn from "unallocated funds" across Whitehall. Later, in an interview with the BBC's Andrew Neil, Alexander said these funds had been taken from savings found across government and did not amount to a stimulus.

Although this money comes from within the "spending plans", he said, the cash will now be disbursed with more urgency to kickstart infrastructure projects currently struggling for credit, with the hope of galvanising private spending.

It is the third indication from the Lib Dems in the past week that they intend to concentrate efforts on accelerating capital projects, which marks a subtle shift in emphasis towards greater public spending, without busting the headline deficit reduction plan.

Clegg made a speech on the subject last week, announcing that Alexander was now in charge of 40 projects across Whitehall, ensuring they are implemented rather than delayed.

They are pressing because they believe that if government funds already allocated can be spent rather than hoarded – which they believe was the case under the last Labour government – modest upfront sums "gear" up to become substantial amounts of fresh capital.

The business secretary, Vince Cable, also evoked the policies of Franklin D Roosevelt in the 1930s when he called for a "New Deal-style stimulus" for capital investment in an interview on Saturday with the Guardian. In his Q&A with Neil on Sunday evening at the party conference, Alexander refused to back Cable's language, but said he preferred to express it as the government "straining every sinew" to get the economy growing more.

As well as further schemes to drive capital investment, and the aspiration of the party going further in its bid to take the low paid out of tax, Alexander also set out measures to increase tax revenues.

He repeated a pledge made in last year's conference speech that there would be a clampdown on tax evasion, with 2,250 HMRC staff working on evasion and avoidance. He said the government was already raising £2bn in this way this year, which he pledged would rise to £7bn annually by the end of the parliament.

In one month's time, an "affluent team" will begin looking at the 350,000 wealthiest taxpayers who each earn more than £2.5m a year, in addition to the 5,000 who are already monitored: "These are the people who pay or should pay the 50p rate of tax," he said in his speech on the first morning of conference.

"My message to the small minority who don't pay what they owe is simple – I agree with the chancellor. We will find you and your money and you will pay your fair share," he said.

He was sanguine about the 50p rate of tax – which Tory colleagues expect will be dismantled if a review winding up in January shows it yields little revenue. Once Alexander had said he believed it was "cloud cuckoo land" the rate would be discarded despite Tory colleagues regarding him to agree he was not ideologically committed to it should it emerge to be unlucrative.

Tories say the debate behind the scenes is turning not on whether the 50p tax rate stays or goes but rather on what amount the replacement levy raises – the sum the previous Labour government intended it to raise when they introduced the tax; or the amount the 50p rate has actually brought in. The question then becomes what tax on the wealthy be brought in its stead.

Alexander said: "Fair taxation of the wealthiest is key to our deficit reduction plan. Of course, if a better way can be found to raise the money from this group, I will be willing to consider it."

Later in his interview with Neil, Alexander talked about ensuring the "tax burden" on the wealthy remained high.

Earlier in the day, Clegg also made it clear the party's negotiations on the 50p rate would not see them martial an ideological commitment to it, but rather they would accept its replacement by some other form of levy on the well-off.

He told the BBC's Andrew Marr programme: "It stays unless we can first make more progress on lowering the tax burden on people on low and middle incomes, and secondly making sure as the chancellor himself has said we can find other ways the wealthiest can pay their fair share."

In Birmingham, Alexander's speech was remarkable for placing an emphasis on how to push ahead with another aspect of the Lib Dem income tax policy, at the other end of the scale.

He told the conference hall: "In the next parliament, I want us to go further; our aspiration should be that someone working full time on the minimum wage should pay no income tax at all. An income tax threshold of £12,500 – think what that would do to work incentives, think what it would mean for basic fairness. Let's put that on the front page of our next manifesto."

The coalition agreement pledges that both parties in government will raise the income tax threshold to £10,000 by the end of the parliament and it is one of the policies the party is proudest of.

The policy has received support on the centre-right of the political spectrum with Tories sympathetic to its aims of cutting tax for the less well paid, but it has been criticised for being poorly targeted; in its original form this was a tax cut enjoyed by all, regardless of income.

The policy also has its Tory critics within the cabinet who fear a policy that removes people from paying tax would sever the relationship between government and the people.

Now the Lib Dems have committed themselves to raising the tax threshold still further, putting on the record an early indication of how they might seek to differentiate themselves from the Conservatives towards the end of the parliament.

Alexander's speech was occasionally heckled by one audience member with a shout of "rubbish" when Alexander criticised the Labour policies of Gordon Brown – a reminder that some delegates in the hall do not agree with the party leadership's decision to back plans to eliminate the structural deficit by the end of the parliament.

The coalition is currently trying hard to devise policies that will stimulate the British economy without busting either of the two targets they hope to hit at the end of the parliament – eliminating the structural deficit by 2014-2015 and bringing down the debt-to-GDP ratio.

While insistent they will not resile from the so-called "plan A" both on and off the record, the new imperative is to find ways of using existing capital spending commitment to encourage the private sector to part with their capital and increase the amount of capital in the economy.

On Friday, the business secretary Vince Cable, published a pamphlet for the CentreForum thinktank in which he suggested that alongside a new round of quantitative easing, he also believed new infrastructure projects were necessary including new roads built as toll roads.

This would have the advantage of encouraging the private sector to embark on a capital investment with a certain revenue stream not coming from the public purse.

Insisting his proposals amounted to a radical Keynesian package – using language and ideology not associated with the Conservative chancellor, George Osborne – Cable said that in the face of a stagnating economy ministers had to "pull all the levers available to government. We are not powerless."

Cable said: "It was four years after the Great Crash that Roosevelt came in and several years before they could do anything. Dams started being built 10 years after the Great Crash. What I have set out is a Keynesian approach to a demand crisis, but operating in a new world in which governments are highly constrained by these very febrile international financial markets. We constantly have to pay attention to them."

Now Alexander will disburse a "Growing Places fund", which he hopes enable the creation of local infrastructure across England.

"£500m to deliver key infrastructure and unlock development and create jobs. Providing a one-off upfront capital investment to kickstart developments that are stalled due to cash flow problems or lack of confidence.

"Putting local areas in the driving seat, enabling local government to invest in the key strategic infrastructure projects that they have identified as priorities and getting people into work."

Alexander said: "As Liberal Democrats, our judgments about what needs to be done should be driven by the liberal economy we want to build – sustainable, balanced, competitive, fair. To get there we must break down the vested interests – the enemies of growth that stand in the way of future prosperity."

"Too many businesses are being held back by congested roads, slow railways, inadequate broadband. Now more than ever, we need to get on with this work."

Hugh Grant: style watch

OK, so Italian politics has its problems, but at least they know how to dress. Hugh Grant, on the other hand, here lends weight to the old style adage that British men can't do casual.

When it comes to rocking a three-piece suit with a pocket square, the Savile Row gent still leads the world, but a certain type of British man still flounders as soon as let off the strictest dress code leash.

The trouble with this outfit is that the messages are mixed: was he trying to look smart but didn't have time to pull himself together and tuck his shirt in, or was he aiming for casual and put a suit jacket on as an afterthought? I suspect he was aiming for the kind of rakish dishevelment that Bill Nighy has made his own. But to pull that off takes effort.

Only the most perfectly fitted jacket looks good rumpled. Lucky for Hugh he's only addressing the Lib Dem conference. He'd never make it at London fashion week.

UK Lags Behind In Child-Parent Wellbeing, Says Unicef

Children and parents in two contrasting European countries, Sweden and Spain, have significantly higher levels of wellbeing than those in a third, the United Kingdom, according to a survey and research by Unicef, the United Nations Children’s Fund.


















The survey examined attitudes towards materialism and inequality and found that parents and children had markedly different attitudes towards material possessions.

It was carried out among some 250 children, ranging in age from eight to 13, from all social backgrounds in the three countries. The findings were further discussed in three steering groups, one each in England, Spain and Sweden, of 14-year-olds. Twenty four families in the three countries were also observed and filmed.

“The message from them all was simple, clear and unanimous,” according to the Unicef report, “their wellbeing centres on time with a happy, stable family, having good friends and plenty of things to do, especially outdoors.”

Given the links, in terms of history, cultural and social policy thinking, between Ireland and the UK, the survey is likely to be of interest in Ireland, in particular to social workers, childcare specialists and policy analysts.

“Family life in the three countries was strikingly different,” says the report. It identified pressure on parental time in the UK, linked to long hours and both parents working outside the home, as having an impact on children, with parents trying to “make up” by buying things for their children.

“In the UK homes, we found parents struggling to give children the time they clearly want to spend with them whilst in Spain and Sweden family time appeared to be woven into the fabric of everyday life. We also noticed that the roles played by mothers, fathers and children within the family and the rules which governed family life were much more clearly defined in Spain and Sweden than in the UK.

“Moreover by the time many British children had reached secondary school, their participation in active and creative pursuits – pursuits that children said made them happy – had in fact dwindled, whilst this occurred less in other countries . . .

“Behind the statistics, we found British families struggling, pushed to find the time their children want, something exacerbated by the uncertainty about the rules and roles operating within the family household. And we found less participation in outdoor and creative activities amongst older and more deprived children.”

On materialism, the survey found that British children and parents both had problems.

For the majority of eight- to 13-year-olds in all three countries, “new toys, fashion items and gadgets were not central to their wellbeing”.

“Rather than wanting to acquire things for their own sake, material objects and consumer goods tended to fulfil a range of purposes in children’s lives: utilitarian, symbolic and social,” says the report.

“However, whilst most children agreed that family time is more important than consumer goods, we observed within UK homes a compulsion on the part of some parents to continually buy new things both for themselves and their children . . .

“We also noticed that UK parents were often buying their children status brands believing that they were protecting them from the kind of bullying they experienced in their own childhood.

“This compulsive acquisition and protective, symbolic brand purchase was largely absent in Spain and Sweden where parents were clearly under much less pressure to consume and displayed greater resilience.”

On inequality, in the UK this tended to be defined in terms of money and material possessions.

“Whilst the links between brands and inequality created tensions and anxieties for children in all three countries to some extent, these feelings were only shared by UK parents. Swedish and Spanish parents seemed not to belong to a “consumer generation” in the same way.

“Deprivation for Swedish parents was understood as living in an area where personal safety was threatened, whilst for Spanish mothers not being able to spend time with your children was seen to confer disadvantage relative to others.

“In the UK, inequality was also seen in access to outdoor, sporting and creative activities, with poorer children spending more sedentary time in front of screens whilst the more affluent had access to a wide range of sports and other pursuits.”

Children’s Well-being in the UK, Sweden and Spain: the Role of Inequality and Materialism (Unicef; June 2011) is a qualitative study and may be read online in full at unicef.org.uk/Latest/News/

Autumn Of Strikes Edges Closer

Unions have moved closer to an autumn of strikes as the Government was warned it faces a huge campaign of civil disobedience over spending cuts and "attacks" on workers' rights.













Millions of public sector workers could be taking industrial action in protest at planned changes to their pensions, possibly on November 29, when the Government announces its autumn financial statement.

An announcement could made within days of widespread ballots for action, heralding the biggest outbreak of industrial unrest for decades.

Plans to co-ordinate industrial action will be discussed at the TUC on Wednesday, but sources said a large number of unions were now moving towards balloting for strikes.

At the conference on Monday, delegates agreed to consider a legal challenge against the coalition, alleging breaches of international labour law, and to campaign against "anti-union" legislation.

Officials lined up to attack the Government over its spending cuts and moves to strengthen laws against strikes and other forms of union action.

Paul Kenny, leader of the GMB union, said that if the Government brings in more laws, it would be in response to strikes against public sector pensions, which he warned looked set to be joined by millions of workers.

He said: "Bad laws have to be broken. Civil disobedience in protest at erosion of civil liberties and freedoms have a place in our history. Millions of people inside and outside of trade unions can and will fight. If going to prison is the price to pay for standing up to bad laws, then so be it.

"We will give politicians the biggest campaign of civil disobedience their tiny minds have ever seen."

Len McCluskey, general secretary of Unite, said unions should not "meekly accept" anti-union laws, adding: "If tax avoidance is lawful and unpunished, let's plan for anti-union law avoidance in the same spirit."

David Cameron: Parents Of Truants Face Benefit Cuts

Parents of children who regularly truant face having their benefits cut, David Cameron has warned, as he opened the first wave of the Government’s free schools.











In a keynote speech on Friday, the Prime Minister said the government's social policy review, set up in the wake of the recent riots, was considering the proposal.

Addressing the Norwich Free School, Norfolk, he outlined Coalition plans to ensure teaching was based on “excellence”.

Controversial reforms were needed to “bring back the values of a good education” because failure to do so would be “fatal to prosperity”.

Mr Cameron said more discipline and rigour were needed.

In his speech, Mr Cameron signalled a return to “elitism” in schools in an attempt to mend Britain’s “broken society” and secure the economic future.

He said discipline needed to be restored in schools, with teachers and heads being given the tools to do this but “restoring discipline is also about what parents do”.

“We need parents to have a real stake in the discipline of their children, to face real consequences if their children continually misbehave,” he said.

"That's why I have asked our social policy review to look into whether we should cut the benefits of those parents whose children constantly play truant.

"Yes, this would be a tough measure – but we urgently need to restore order and respect in the classroom and I don't want ideas like this to be off the table."

In his speech, Mr Cameron also championed the opening of the first free schools, state-funded institutions run by parents, charities and faith groups, independent of local council control. Some 24 have opened this month.

The Prime Minister attacked the “prizes for all” culture in which competitiveness was frowned upon and winners are shunned.

The comments marked the latest in a series of attempts to focus on education in response to the riots that shocked London and other English cities last month.

They follow the announcement by Michael Gove, the Education Secretary, of back-to-basics discipline in state schools.

He plans to give teachers more freedom to search pupils suspected of carrying banned items and to let them use reasonable force in removing the most disruptive children from the classroom.

Mr Cameron sought to move the debate on to standards, saying that a rigorous focus on the basics is needed to give young people “the character to live a good life, to be good citizens”.

The Prime Minister added: “For the future of our economy, and our society, we need a first-class education for every child. Of course, everyone’s agreed on that.

“The trouble is that for years we’ve been bogged down in a great debate about how we get there. Standards or structures? Learning by rote or by play? Elitism or all winning prizes?”

"Every year that passes without proper reform, is another year that tens of thousands of teenagers leave school without the qualifications they really need."

He added: "The most important value we're bringing back to the classroom is a commitment to rigour. Rigorous subjects, tested in a rigorous way.

"However well students perform in their exams, we cannot deny the reality of the past few years. The numbers of people taking core academic subjects - they went down.

"The voices from business concerned about the usefulness of some of our exams - they grew louder.

"We are determined to stop this slide - and already we're making an impact."

Mr Cameron made clear that he was in favour of elitism and not prizes for all.

He added: “These debates are over – because it’s clear what works. Discipline works. Rigour works. Freedom for schools works. Having high expectations works.

“Now we’ve got to get on with it – and we don’t have any time to lose.”

Free schools have provoked fury among teaching unions who claim they smack of elitism and represent an attempt to dismantle the state education system.

But Mr Cameron insisted free schools will “have the power to change lives”.

He also sought to link improvements in education to mending “our broken society.”

“We’ve got to be ambitious if we want to compete in the world,” he said.

“When China is going through an educational renaissance, when India is churning out science graduates, any complacency now would be fatal.

“And we’ve got to be ambitious, too, if we want to mend our broken society. Because education doesn’t just give people the tools to make a good living – it gives them the character to live a good life, to be good citizens.”

He added: "A free school is born of a real passion for education – a belief in its power to change lives.

"It's a passion and a belief this coalition shares. We want to want to create an education system based on real excellence, with a complete intolerance of failure."

The comments come days after Nick Clegg said that parents must take more responsibility. The Deputy Prime Minister insisted that teachers should be left to educate, and not be expected to act as “surrogate mothers and fathers”.

Homelessness Up As Cuts Take Effect

Homelessness is on the rise in the wake of the recession and government cuts to housing benefit, official figures show.












In the three months to June there was a 17 per cent rise to 11,820 in the number of households accepted by local authorities as in priority need of rehousing, compared to the same quarter last year.

The figures show that on almost all measures homelessness is now rising, reversing a trend that has seen more or less continuous declines since 2003, according to Crisis, the homelessness charity.

A report commissioned by Crisis and carried out by academics at York and Heriot-Watt universities to coincide with the figures warned the “worst is yet to come” after the combined effect of the economic downturn and significant cuts to housing benefit takes hold.

“Government reforms, in combination with the pressures of the economic downturn seem certain to increase all forms of homelessness, from rough sleepers on our streets to homeless people hidden out of sight,” said Professor Suzanne Fitzpatrick of Heriot-Watt’s institute for housing.

The latest figures are the first since cuts to the local housing allowance for new claimants – an allowance that determines housing benefit levels – were introduced in April. There has been a big percentage rise, although small numerical increase, from 1,460 to 2,130 in the number of households accepted as homeless because a private rented tenancy has come to an end.

The report for Crisis notes that during the last big housing recession in the early 1990s, homelessness fell as lower house prices eased access for first time buyers, releasing homes for rent.

That is unlikely to happen this time, the report says, as available lettings in the social rented sector are down and first time buyers still face difficulty in getting mortgages.

On top of big housing benefit cuts, the government is moving towards more “flexible” tenancies in social housing while pushing up rents for new homes to 80 per cent of market levels. Both moves will weaken the safety net function of the social rented sector, the report says.

Leslie Morphy, chief executive of Crisis, called on the government to reverse the housing benefit cuts and withdraw its plans to no longer pay benefit on actual housing costs, instead providing an allowance. “We need the government to change course now or risk returning us to the days of countless lives facing the debilitating effect of homelessness,” she said.

Grant Shapps, housing minister, urged those threatened with homelessness to seek help as early as possible, arguing that a wide range of support remained available to people struggling to stay in their homes.

Interest In Apprenticeships Soars As Universities Say Fees Will Put Too Many Students Off

Universities joined the growing consensus against the rise in tuition fees today as figures revealed thousands are seeking alternative routes through apprenticeships.


















Falling fees: Students at some universities could see their tuition fee drop as part of a government incentive to lower the cost.

Higher education establishments across the country are vowing to drop their fees to below £7,500 after the Government announced incentives for those that charge lower amounts.

The move comes after ministers announced that English institutions who charged £7,500 or lower would be able to bid for a share in 20,000 funded places.

The decision has seen 12 universities, all of whom were planning to charge up to £9,000, express an interest in lowering their fees.

The majority considering the move are believed to be former polytechnics, including the University of Derby and University of Hertfordshire.

Despite the move, figures released yesterday suggested that the rise in fees will result in a drop of 7.5 per cent in the university enrollment rate for males and nearly 5 per cent for female students.

Ministers, who had expected just a handful of elite institutions to charge £9,000, are desperate to drive fees down to reduce the burden of the student loan on the public purse.

The move will also help reduce the mountain of crippling debt for some graduates.

However, it drew widespread criticism yesterday and accusations that the Coalition’s policy is in complete disarray.


















Attack: Liam Burns, president of the National Union of Students, said the revelation is yet another example of the Coalition's shambolic policies.

It comes just one week before the admissions process for autumn 2012 is due to start. This means thousands will be expected to choose universities without knowing the cost.

Liam Burns, president of the National Union of Students, said the revelation is yet another example of the Coalition’s shambolic policies.

‘With students preparing to submit university applications in just a matter of weeks, the shambles of the Government’s fees arrangements has left places being auctioned off to the lowest bidder and universities looking to cut corners,’ he said.

‘As a direct result of ministers’ bungled funding policies, prospective students have been left in the dark as to what universities will charge and now face an agonising wait for clarity over their future options.

‘We need urgent action from ministers to put right shambolic policies that risk doing permanent damage to students’ prospects.’

The disarray among the university fees comes as figures revealed that interest in apprenticeship vacancies has soared rapidly since the turn of the year.















On the up: Searches for 'apprentice vacancies' are up by 400%, while the term 'apprenticeship' has seen an increase of 625.















Rises: The National Apprenticeship Service website (blue) has seen a 50 per cent rise in visits year on year, while notgoingtouni.co.uk, has seen hits soar by 150 per cent.

Statistics released by internet analysts Hitwise showed that since January 2011, searches for 'apprenticeship vacancies' have soared by 425 per cent, while the term 'apprenticeship' is up 62 per cent.

And the National Apprenticeship Service website has seen a 50 per cent rise in visits year on year.

Another website, notgoingtouni.co.uk, has seen hits soar by 150 per cent since this time last year.

The figures also revealed that the most popular type of apprenticeships searched for were that of plumber, engineer or electrician.

And the most popular companies searched for included British Gas, NHS and British Telecom.

Support Grows For Keeping 50p Tax Rate

Politicians from Labour and the Liberal Democrats joined forces with trade unions to argue for a retention of the 50p top rate of income tax after 20 leading economists called for it to be scrapped “as soon as possible” in a letter to the FT.










Alistair Darling, the chancellor who introduced the rate in 2009, and Tim Farron, the Lib Dem president, said on Wednesday that lowering the top rate of tax would be unfair while the economy was still in difficulty.

Mr Darling said: “This has got to stay in place until we get out of the crisis. It would be grossly unfair to remove it. In the long run you have got to keep your tax rates internationally competitive which means something like the two rates we used to have. To remove it today would be grossly unfair. If they do not pay their taxes then it is poorer people who are going to pay.”

He was supported by Mr Farron, who said scrapping the 50p rate would be “phenomenally immoral and send an appalling message to the overwhelming majority of hard-working people in this country”.

Ed Balls, Labour shadow chancellor, also weighed in: “If we really are all in this together then the right priority to boost the stalled economy now should be temporarily reversing the VAT rise, which is costing families with children around £450 a year. This temporary tax cut would help to kick-start the recovery and give a much needed boost to millions of people regardless of their income.

“If the chancellor really wants to know how effective the top rate of tax is he should immediately ask the Office for Budget Responsibility, not just HMRC, to produce a report genuinely independent of government.”

Their warnings came after the Trades Union Congress also took issue with the suggestion of an immediate tax cut for top earners.

Brendan Barber, general secretary of the Trades Union Congress called the economists’ opinion “monstrously unfair”, adding: “At a time when cuts are biting hard and ordinary people are suffering the biggest squeeze on their living standards in years, the last thing we need is a handout to the wealthiest in our society.”

But DeAnne Julius, the former member of the Bank of England’s monetary policy committee and one of the signatories of the letter, defended her position to the BBC, saying many hedge funds had already moved to Switzerland and that, if marginal rates were raised on a small number of highly mobile people, “You end up not collecting the tax that you’d hoped to.”

“Only by returning to an internationally competitive tax regime will Britain enjoy long-term sustainable economic growth,” the economists say in their letter.

The signatories include many figures not usually associated with conservative causes, such as Bob Rowthorn of Cambridge University, and two former members of the Bank of England’s policy committee, Ms Julius and Sushil Wadhwani.

George Osborne, chancellor of the exchequer, is already facing pressure from the Tory right and CBI employers’ organisation to scrap the “temporary” top tax rate.

The Treasury believed that the 50p rate, introduced by the former Labour government in April 2010 on annual taxable incomes above £150,000, would eventually raise £2.7bn a year. Combined with restrictions on income tax relief for pension contributions and the abolition of the income tax personal allowance for people with annual incomes above £100,000, last year’s tax increases on the rich were designed to raise £7bn per annum.

The economists dispute these estimates, arguing the 50p rate “punishes” wealth and entrepreneurship. “It is often portrayed as a justified tax on the rich, but the economic damage it causes means that it is against the interests even of ordinary workers who don’t pay it,” they write.

Last month Mr Osborne said “there’s not much point in having taxes that are economically inefficient”. He added that the rate was uncompetitive internationally and targeted wealthy people who were already paying taxes on their capital gains.

Government officials, however, have suggested that the top rate is unlikely to be scrapped until 2013 at the earliest, when a pay freeze affecting millions of public sector workers is due to be lifted.

Nick Clegg, Liberal Democrat leader, will insist the 50p top rate can only be scrapped if other measures, such as a property or “mansion” tax, are introduced to ensure the wealthy pay their “fair share” towards cutting the deficit. The Lib Dems will also insist that the 50p rate’s abolition is accompanied by accelerated moves to raise the annual tax threshold to £10,000.

Other leading economists are more sceptical. Paul Johnson, director of the Institute for Fiscal Studies and not a signatory of the letter, said it was much too early to give up on the 50p rate: “The Treasury has been taking a punt on whether [the 50p rate] will raise money. It is taking a risk, but it is not a stupid punt.”

Childcare Costs Mean A Choice Of Debt Or Unemployment For Many Parents

Rather than facilitating work, the huge cost of childcare in the UK is a daunting obstacle – and government cuts worsen the bind.












David Cameron visits a nursery in London. His government's reduction of tax credits has made childcare even more costly for working parents.

I could understand why my bank manager was looking at me like that. It did sound a bit stupid. "You're about to start a job, and that means you need to extend your overdraft?" he said, dubiously. After years of scratching around as a student, I was finally about to draw a wage – but first, I needed to get myself just a bit deeper in debt.

I have two children, so before I could set foot in my office, I needed somewhere to put them, and childcare has to be paid for in advance. That's no minor outlay here in the UK, where we have the highest childcare costs relative to household income of anywhere in the world. A survey by the Daycare Trust and Save the Children explains how much of a barrier and a burden this can be, particularly to families on low incomes. Of the parents questioned, a quarter said that the cost of childcare had caused them to get into debt, but it's the poorest families (those with a household income of less than £12,000 a year) who experience the most crippling effects.

While the better off may have to compromise on swimming lessons or music tuition to cope with higher-than-inflation rises in nursery fees, the more impoverished are often forced to cut back on essentials such as food or heating to make up the difference. And sometimes, ends simply can't be met: a quarter of those in severe poverty said that they had given up work because of childcare costs. A third of them had passed on a job offer for the same reason, and a quarter reported that the expense of childcare had prevented them from taking up education or training.

Rather than facilitating work, childcare becomes a daunting obstacle, keeping parents out of the workplace – and the poorer a family is, the more likely it is to remain in poverty for the lack of money to cover nursery fees. Single-parent families without savings or access to credit are effectively shut out of work.

The government likes to talk about getting people off welfare and into the workplace. "Over the last decade, thousands of people were simply abandoned to a lifetime on benefits, and a staggering 1.84 million children are living in homes where no one works," said employment minister Chris Grayling last week. Rightwing analyses talk about the "lack of work ethic … helping to fuel levels of unemployment".

But it's practical, financial limitations more than nebulous psychological causes that are often keeping parents from becoming employees, and the government's actions so far seem likely to worsen the childcare bind. Working tax credit was sliced in this year's budget, so that it now covers only 70% rather than 80% of childcare costs – a huge difference in the finances of those who need help the most. As the cuts agenda combines with a sneering rhetoric of disdain for the unemployed, this just seems like one more way of keeping the poorest poor, from cradle to grave.

Shirley Williams Plunges NHS Reforms Into Fresh Turmoil

Liberal Democrat peer in new battle over health and social care bill, while secret emails fuel privatisation fears for hospitals.












Baroness Williams has raised fresh doubts over the health and social care bill following the publication of secret emails.

The future of the government's health reforms has been plunged into fresh doubt as the Liberal Democrat peer Shirley Williams raises new concerns, and secret emails reveal plans to hand over the running of up to 20 hospitals to overseas companies. The revelations come as MPs prepare to return to Westminster on Tuesday for what promises to be a crucial stage of the flagship health and social care bill.

Baroness Williams, one of the original leaders of a Lib Dem rebellion against health secretary Andrew Lansley's plans – who appeared to have been pacified after changes were made over the summer – said she had new doubts, having re-examined the proposals. "Despite the great efforts made by Nick Clegg and Paul Burstow [the Lib Dem health minister], I still have huge concerns about the bill. The battle is far from over," she said.

Writing in Sunday's Observer, Williams raises a series of issues that she says must be addressed. Chief among them is a legal doubt as to whether the secretary of state will any longer be bound to deliver "a comprehensive health service for the people of England, free at the point of need".

Some critics of Lansley believe the Tories are bent on a mission to privatise the NHS, gradually handing it to the private sector. They fear that moves to end the legal obligation on the secretary of state to deliver comprehensive services may be a deliberate part of the process.

Concerns that ministers want more private involvement will be strengthened by details of email exchanges involving senior health officials about handing the management of 10 to 20 NHS hospitals to international private companies. The emails, which were made public following a freedom of information request and were obtained by non-profit-making investigations company Spinwatch, show that officials have been planning since late last year to bring in international companies. This is despite repeated insistences by both David Cameron and Nick Clegg that there will be no privatisation of the NHS. On 16 May, Cameron said: "Let me make clear: there will be no privatisation." Clegg said: "Yes to reform of the NHS, but no to the privatisation of the NHS."

One of the emails released by the department shows that officials at the private sector firm McKinsey, which advises ministers, were in active discussion about bringing in overseas firms to take over up to 20 hospitals in return for contracts running into hundreds of millions of pounds. An email to Ian Dalton, head of provider development at the Department of Health, who is heavily involved in the reform programme, in November last year talks about "interest in new solution for 10-20 hospitals but starting from a mindset of one at a time with various political constraints".

The emails show that McKinsey is acting as a broker between the department and "international players" that are bidding to run the NHS. The documents even lay out some of the conditions required by "international hospital provider groups" for running NHS hospitals. "International players can do an initiative if 500 million revenue [is] on the table." They also need to have "a free hand on staff management". The NHS would be allowed to "keep real estate and pensions".

The Department of Health attempted to play down the significance of the emails, saying they were referring to what might be done if any one hospital trust asked for the private sector to become involved in running a failing hospital. A spokesman said: "It is not unusual for the Department of Health to hold meetings with external organisations. Any decisions to involve organisations, such as the independent sector or foundation trusts, in running the management of NHS hospitals would be led by the NHS locally and in all cases NHS staff and assets would remain wholly owned by the NHS."

But a spokesman for the public service union Unison said: "Regardless of what Cameron and Clegg say in public, it is clear that behind the scenes the government is planning to privatise the NHS. Private companies will only run hospitals if they see a profit in it. This, together with lifting the cap off the number of private patients NHS hospitals can treat, will completely change the culture of the NHS. It will be profits before patients.

"We demand that the government come clean on their plans. If this is true, patient choice is a complete sham. The move to any qualified provider is clearly about creating a market for private companies. Any MP who votes for the health and social care bill is voting for the end of the NHS."

Williams also raises worries about the extent to which the role of the private sector is being expanded. "I am not against a private element in the NHS, which may bring innovatory ideas and good practice, provided it is within the framework of a public service …" she writes. "But why have they tried to get away from the NHS as a public service, among the most efficient, least expensive and fairest anywhere in the world? Why have they been bewitched by a flawed US system that is unable to provide a universal service and is very expensive indeed?"

She adds: "The remarkable vision of the 1945 Attlee government, of a public service free at the point of need for all the people of England, should not be allowed to die."

John Healey, Labour's shadow health secretary, said: "As David Cameron's government railroads the health bill through parliament, MPs are being denied their constitutional role to properly scrutinise his plans for the NHS. The prime minister has already done a political fix with Nick Clegg on the health bill, and now he's trying to force it through with a procedural fix."

David Cameron On 'Danger' Of Eurozone Bailouts

David Cameron has said it is in Britain's national interest to be removed from "the danger of bailing out eurozone countries".


















He was challenged by Conservative Bill Cash over the need for a referendum on eurozone fiscal union and economic governance.

Mr Cameron said: "I think to say you have to have a referendum in Britain about something other countries are doing, and going ahead with anyway, I think would be rather an odd approach."

The prime minister faced a lengthy session of questioning from the Liaison Committee, made up of all select committee chairmen.

David Cameron Returns To Italian Bar Where He Failed To Tip... And Makes Amends With Waitress

Prime minister David Cameron today returned to an Italian bar where he had failed to leave a tip and made amends with the waitress who worked there by leaving one this time.

Mr Cameron, 45, made headlines across the world when it emerged he had paid for a 3.10 Euro bill with a 50 Euro banknote and failed to leave any small change, as is customary in Italian bars.

Last week waitress Francesca Ariani, 27, failed to recognise the Number 10 resident when he walked in with his wife Samantha, 40, and ordered two cappuccinos asking for them to be brought to an outside table.














Tipped: David Cameron puts his arm round waitress Francesca Ariani, who he initially failed to tip during his Italian holiday.

But Francesca had told him she was too busy making coffees to bring them out and to serve himself.

On Sunday Mr Cameron returned with his daughter Nancy to clear up the misunderstanding at the Dolcenero bar in Monetvarchi near Arezzo.

This time he ordered a beer for himself and a soft drink for Nancy - paying the 5.10 Euro tip with a 10 Euro note and telling her to keep the change as she served him at a table.

Francesca even offered the Prime Minister a cocktail she created the 'Cameron Tuscan Dream' - with the ingredients being local Vin Santo (sweet wine), coffee and cream.

Mr Cameron, who is in the final week of a fortnight break at a nearby villa, where he is on holiday with friends, was even happy to pose for a picture with Francesca.













Self service: Waitress Francesca Ariani, 27, who failed to recognise David Cameron when he called in for coffee.


















Foot loose: David Cameron and his wife Samantha at the cafe in Montevarchi where it was noticed he was not wearing socks.

She said: 'I was so surprised when he came back to the bar after what had happened last week. I said I was sorry for not recognising him and not serving him and he said it was not a problem.

'He said he was sorry for any fuss that had been created and he was very nice, very friendly. He ordered a beer and a Sprite for his daughter Nancy and I took them out to the same table as where he was sat last time.

'I had no idea he was coming into the bar and it was a real surprise. I even offered him a cocktail my boyfriend and I invented and dedicated to him called the Cameron Tuscan Dream.

'He tried it and he said it was very nice. The bill came to 5.10 Euro and he left me a tip this time. He paid with a ten Euro note and said to keep the change.'

The 16-bedroom villa where the Camerons are staying is on the Petrolo wine estate and besides the main house there are four other smaller houses - one of which has been taken by Mr Cameron's security team.

It is close to the hamlet of Bucine in the Tuscany region known as Chianti which is popular with British holidaymakers, many of who have homes in ther area - Sting and his wife Trudie Styler are close by.

Chef Jamie Oliver is also a close friend of Petrolo's owner Luca Sanjust and visits every year with a team of his students to watch the olives being pressed and turned into oil.

The villa is no stranger to celebrities with actor Jason Flemying tying the knot there with his wife Elly Fairman in 2008. Oliver cooked their lavish wedding breakfast and model Claudia Schiffer was among the guests.













Arno Valley: The wine-growing estate where Prime Minister is spending his holiday.

The 300-year-old property has its own private garden, swimming pool and tennis court and is surrounded by high walls and tall cypress trees ensuring total security.

It is surrounded by lush working vineyards and olive groves, as well as oak woods which contain wild boar, and there are also fishing lakes on the estate.

Other members of the Cameron Downing Street entourage, as well as security personnel, have checked into a four star hotel in Montevarchi having driven across Europe in a van.

Priorities Questioned Over Defence Cuts

Nearly 2,000 armed services personnel are learning that their jobs are to disappear today.

At least half of the 920 Army jobs and 930 RAF roles are expected to face compulsory redundancies in the first round of defence cuts.












RAF pilots prepare for a mission over Libya.

The Gurkhas face the heaviest cuts, with 140 soldiers facing redundancy. No service personnel currently receiving the operational allowance will be forced to leave, however.

"Just as many RAF personnel will be thinking about returning home having performed heroics in Libya, ministers are drawing up their P45s," shadow defence secretary Jim Murphy said.

"People will be shocked and will wonder whether the government have got their priorities straight."

The defence cuts follow an eight per cent overall reduction in the MoD's budget in the comprehensive spending review.

Broader financial problems have forced defence secretary Liam Fox to seek a more fundamental rationalising of his department, leading to plans for over 22,000 jobs to go in total by 2015.

"The tough measures will bring the budget largely into balance for the first time in a generation," Mr Fox said.

"Extra money allocated for the equipment budget from 2015 will allow capability to grow in the second half of the decade."

The slow-burning nature of the cuts makes them politically sensitive, however. Around 1,600 redundancies in the Royal Navy are expected to be announced next month.

"This underlines the scale of the government's cuts in manpower. The frontline cannot be protected from cuts this deep," Mr Murphy added.

"Savings must be made, but in a world of uncertainty to many this will seem a worrying loss of important capability."

David Cameron's Holiday Boost

Pity the poor Cameron family. The received wisdom suggests that August should be a quiet month in British politics. Not so for David Cameron this year. Twice in the space of a few weeks, the prime minister was summoned away from wife and children to take charge back in Downing Street.













First, the worst rioting in decades brought him home from Tuscany; then the assault on Tripoli meant quitting the beaches of England's southwest. That's tough on a leader badly in need of a break after a pasting from the press over his suspiciously close ties to the Murdoch media empire revealed by the phone-hacking scandal.

But the broken holiday has useful consolations. Cameron's approval ratings now stand at around 40 percent; much the same as before the summer's traumas. Better still, the Conservatives are slowly regaining some of the ground lost to Labour in recent months. The latest YouGov polls suggest that the party is trailing by just five points at 37 percent.

Some explanations are easy enough. The riots allowed Cameron to show off the kind of calm and competence that the public expects of a leader at a moment of crisis. And the approach of total victory in Libya has converted many of the skeptics, with support for Britain's involvement in the campaign–now 43 percent–rising with every advance.

No less important, the summer's troubles have provided useful political distraction from other pressing national woes. The latest growth figures show a British economy that's more or less flat-lining. Unemployment and inflation are both rising while manufacturing output–seen as crucial to recovery–fell sharply last month.

That's bad for the Conservatives, with the polls indicating that they are still seen as the party of the rich out of sympathy with the poor or the squeezed middle classes. Voters accept the need for austerity measures if Britain is to escape the fate of other European nations, but the mood is grim. “You need another story if you want to keep them happy,” says Neil O'Brien of the Conservative think tank Policy Exchange.

The riots provide just such a story. Cameron, long accused of lacking a distinctive cause, now has a clear purpose and goal: repairing what he has called “Broken Britain.”

And he can't be accused of any sudden conversion. For Cameron, the issue of how to tackle the problems of Britain's poor and alienated youth is familiar ground. His concern for “Broken Britain” was a recurring theme in his attempts to give the Conservative Party a more caring image in the run-up to last year's elections.

Politically, it's an issue that demands all Cameron's PR deftness. On the one hand, he knows that the public takes a tougher line than both main parties when it comes to questions of law and order. He knows too that plenty of right-wing Tory MPs–their numbers strengthened at the election–are still suspicious of their leader's attempts to edge the party onto the center ground of politics.

On the other, he can't disown the talk of compassionate conservatism that he's deployed in the past, and Labour yearns for a slip-up that will allow him to be portrayed as an old-style Conservative more interested in punishment than seeking to understand the causes behind the riots.

Language is crucial. Whatever their reaction to the riots, the public doesn't like the harsh rhetoric of retribution. “Much of it is tonal,” says Neil O'Brien. “If you get it wrong, it sounds like you're off the golf course.”

So far, Cameron has managed to sidestep the pitfalls, moderating his language to match the voters' cooling temper. The initial talk of the looters' “sheer criminality” and his apparent endorsement of harsh sentences have given way to a more nuanced stance. In a BBC interview Friday, he was advocating “tough love” as well as tough justice.

Not that Cameron can risk complacency. Next month he must address his party's annual conference in Manchester, always a testing experience for a Conservative leader, and he'll need policies to match his words. One recent survey showed a clear majority believed that neither party was capable of mending “Broken Britain.”

And if Cameron's ratings have yet to slump, nor have they markedly improved since he took power. Voters may be awaiting results before they come to a firm conclusion on his premiership, says Rick Nye of pollsters Populus. “You have seen the hacking, the riots, and Libya, but they are not really game-changers when it comes to their fundamental assessment.”

Even if the streets of London and Tripoli stay calm, for Cameron the coming months will be no holiday.

City Chiefs 'Won't Ask For Any More Trams Funding'

City chiefs today pledged to take Edinburgh's trams to St Andrew Square without having to find more money - as calls grow for an immediate public inquiry into the troubled project.







Council chief executive Sue Bruce insisted that the £776 million estimate of the cost includes a "sufficiently large" risk allowance - and said she does not expect to come back to councillors and ask them to approve more funding.

But she stopped short of giving a guarantee that they would definitely not require more money.

Labour councillors called for the Scottish Government to start a public inquiry into the whole project immediately.

The move came after councillors agreed to reverse last week's shock decision to only take the tram to Haymarket and instead take it as far as St Andrew Square.

Mrs Bruce told the Evening News: "We know there is nervousness and uncertainty because, although we have done all of the things you would expect us to do, when you dig up roads you can find things you don't expect, so we have left an enormous risk pot to cover that."

The estimate includes a 0.8 per cent, or £1.1m, "risk contingency" for off-street work between the airport and Haymarket, as well as a 71.8 per cent, or £30m, risk allowance for the on-street work from Haymarket to York Place.

When asked if members of the public should be confident that more money will not be needed for the project, she said: "They should have faith that £776m is our estimate of the project to St Andrew Square.

"We do not expect to have to come back to ask for more money. We think it is the best estimate we can come to for completing the work."

After the decision was approved, councillors urged the Scottish Government to get on with a public inquiry.

A spokesman for First Minister Alex Salmond said last week that it would happen "once there is greater clarity about the direction of the project".

Cllr Andrew Burns, leader of the Labour group, said: "I do not see why a public inquiry cannot start right away and I would urge the Scottish Government to get on with that."

A Scottish Government spokesman said: "We recognise the complexities and difficult circumstances that the council has faced as it seeks to make the right decisions for the people of Edinburgh.

"It is appropriate that ministers now give full consideration to all of the factors before making any further decisions."

The Liberal Democrats won support from their SNP coalition partners to get the project nodded through, despite the Tories calling for the contract to be cancelled.

City leader Jenny Dawe hit out at Labour and Conservative councillors, who came together last week to force through the shock decision to stop the tram line at Haymarket.

She said: "To play political football with the citizens of this city shows irresponsibility of a level never before seen in this Chamber.

RAF Flies £140m Unfrozen Cash Assets To Libya

The RAF has flown £140m of Libyan banknotes (280m Libyan dinars) to Libya after an assets freeze aimed at Col Muammar Gaddafi was lifted.









People rushed to get cash from their accounts after the Libyan banks reopened on Tuesday.

The cash, printed in the UK, is the first tranche of £950m that will be handed to Libya's Central Bank.

A Whitehall official said the money should be available for cash machines and banks in Libya very quickly.

Meanwhile, the BBC has learned that David Cameron set up a unit to block fuel supplies to Col Gaddafi's forces.

The secret "Libya oil cell" also ensured that petrol and diesel continued to get through to the rebels in the east, BBC deputy political editor James Landale said.

The Whitehall-based unit was made up of a handful of civil servants, ministers and military figures.

"If you didn't have the fuel, you couldn't win the war"

Whitehall source

It played a crucial role in starving the regime's war effort of fuel while making sure that the rebels could continue taking the fight to Gaddafi, Whitehall officials told our correspondent.


Our correspondent said the unit was the idea of International Development Minister Alan Duncan. He was unavailable for comment on Wednesday evening.

The former oil trader convinced the Mr Cameron in April that part of the solution to the conflict lay in oil, our correspondent said.

One Whitehall source said: "If you didn't have the fuel, you couldn't win the war. So our aim was to starve the west of fuel and make sure the rebels could keep going.

"Gaddafi had lots of crude but he couldn't refine it. So he had to rely on imported fuel. And we turned off that tap."

The unit was established in the Foreign Office and was initially headed by a senior admiral, and later by a senior government official.

The operation gathered intelligence about oil and fuel movements, and information was passed to the government and Nato.
'Britain's commitment'

The release of the Libyan currency came following a decision by the United Nations sanctions committee in New York.

The official said the cash delivery, worth $1.55bn, should make it possible to pay many public sector workers, including nurses, doctors, teachers and police officers, over the Eid holiday.

Many of those dependent on government salaries have not been paid for a number of months.

The money will also be used to provide aid for refugees displaced by the conflict and to pay for medicine and food supplies.

The funds were frozen in February when the uprising in Libya started.

The move comes on the eve of a major international conference on the future of Libya to be held in Paris on Thursday, chaired jointly by French President Nicolas Sarkozy and the UK prime minister.

UK Foreign Secretary William Hague said he was "delighted" the delivery to the Central Bank in Benghazi had been completed.

"Returning money to the Libyan people is part of our commitment to help the National Transitional Council rebuild Libya and help create a country where the legitimate needs and aspirations of the Libyan people can be met," said Mr Hague.

He added further deliveries of the remaining funds would be made shortly.
Ship held

Germany has also asked for agreement to release about 1bn euros (£900m) in seized assets, while France wants to unfreeze about 5bn euros (£4.4bn) to help pay for humanitarian aid and keep essential services going in Libya.

Last week, the UN agreed to a US request to unblock $1.5bn (£1bn) in frozen Libyan assets.

In March, a ship carrying Libyan currency worth £100m was impounded.

The Home Office said the ship was intercepted by UK authorities after heading back to British waters following an aborted attempt to dock at Libya's capital, Tripoli.

The money, which was printed in north-east England, was held at Harwich, Essex.