Senior Conservatives have denied the chances of introducing tax cuts should they come into power in the upcoming elections. The Tories seem to be in the lead in a poll conducted recently, polling in at 43% with the Labour party down two points at 27%.
Leader of Tories, David Cameron, explained the situation by putting into perspective that Britain is currently under what seems like the highest tax burden in history and that it also had the worst budget deficit faced by any developed country.
He emphasized that unlike America that just introduced tax cuts to jumpstart their economy, Britain would reel under the burden that tax cuts would bring on as Britain’s budget deficit as a share of national income was a lot larger than America’s.
The Shadow Foreign Secretary, William Hague, reiterated these sentiments and stated that they did not want to go the populist way by announcing tax cuts even though the country could not afford them. They however are aiming to be a government that will focus on the long term progress of the country’s economy and work towards gradually reducing the tax burden.
In the meanwhile, Philip Hammond, Chief Secretary to the Treasury said that their main goal in the first term would be building up reserves through efficiency savings. He believes that once the reserve is stocked, they would be able to, hopefully before the next election, announce tax cuts.
BBC has complied by the requests made by the Office Of Fair Trading and the NHS counter fraud unit, by handing over the files that they possessed with regards to the heartburn medication Gaviscon.
The papers, which were found by one of BBC’s news-scouts, indicated that the manufacturers of Gaviscon, Reckitt Benckiser, were planning to thwart rival pharmaceutical companies from making generic versions of this drug. This would eventually lead to a loss of millions of pounds for the NHS.
Reckitt Benckiser however has refused to admit to any such schemes.
The NHS counter fraud unit might launch an enquiry while the OFT was eager to look at the files.
If proven true, Reckitt Benckiser may have to, according to the competition Act of 1998, pay a fine of up to 10% of their turnover for abuse of their dominant market position.
Reckitt Benckiser however also denies that they are in a dominant position in the heartburn medication sector.
Prudential has been at par with profit predictions with a profit of 25%, buoyed by the booming Asian markets.
Asia has contributed to nearly half of the profits made by Prudential and despite indicators from analysts that these markets might suffer from the effect of the US slowdown; Prudential bosses remain upbeat about the state of these markets.
Although Prudential had targeted doubling the business that it had initiated in 2005, by 2009, they now believe they may beat that target by a year and achieve it by 2008. Bringing the dead line forward by year is effectively guiding for 26% new business profit growth in Asia which is 17% ahead of forecasts. Seeing the dismal state of economies worldwide, Prudential obviously views this as a very positive sign.
Prudential’s total profit on a Europeon embedded basis is 2.54 illion pounds, up from 2.13 in 2006(excluding the loss making Internet bank EGG, which has been sold to the Citigroup).
In the US, Prudential has taken an 11% hit and in the toned down UK business they have made an operating profit from its insurance section amounting to ₤859 million,a 25% increase.
Prudential will be paying a dividend of 18p per share, a 5% increase.
Carlyle Capital Corporation (CCC), a hedge fund offered by Carlyle Group, has been forced to liquidate to recover assets, after a fire sale in securities worth ₤2.5 billion resulted in the loss of the remaining ₤8 billion worth of holdings.
When CCC was first floated it was listed on the Amsterdam Exchange at ₤10 a share with a design to provide “attractive, risk-adjusted returns for those shareholders by investing in a diversified portfolio of fixed-income assets.”
After the failure of this fund, roughly ₤295 million of client’s money is expected to be lost. The co-founder of Carlyle Group, Mr. David Rubenstein, however said that they were making their best efforts to address the client loss situation.
The fund is another victim of the credit crunch that is ailing the global economy. CCC has been unable to pay back its debts which led to liquidation of assets by banks that had lent money to CCC and the shares in Amsterdam were suspended.
CCC has stated that it has been unable to refinance its business and is now a defaulter of debts worth ₤8.1 billion.
The Carlyle Group had initially received bad press when they had invested ₤140 million in the government-owned defence contractor QinetiQ. They were then accused of making profits at the cost of taxpayers, when they raked in profits greater than ₤250 million when they privatized the firm in2006, barely three years after the starting investment.
After the fall of CCC, several other investment funds are also afraid of a similar fate.
With a whopping 25% rise in fraudulent use of UK credit and debit cards last year, losses amounted to a staggering £535 million, as estimated by the banking industry.
Although fraudulent usage a couple of years ago was attributed to stolen cards used overseas, the trend now is the wrongful use of credit cards to purchase things over the phone, or via the mail and internet.
Overseas figures indicate a 77% increase in credit card fraud last year amounting to ₤208 million, which was 39% of total losses.
In an effort to stem these losses, a number of countries, including UK, have adopted the card-and-pin system, resulting in a reduction of fraudulent use in the “card-not-there-scenario” in UK, but criminals still use stolen card numbers oversees in countries that do not require a pin.
Banks throughout Europe have decided to have the card and pin system in place by 2010, hoping to reduce fraud with regards to credit cards including those that are stolen in the mail and fraudulent transaction in shopping areas.
Standard Life has exceeded expectations and stumped analysts by posting a 43% operating profit rise in 2007 making their operating profit (on an embedded value basis) £881 million. This is a lot higher than the predicted range of 579 to 752 million pounds.
This profit comes after beating several odds including mainly a 249 million pound charge due to early encashment by UK customers. Besides this there were foiled plans to takeover a rival and a resignation by one of Standard Life’s top executives in January. In addition to all these setbacks, the firm had to contend with a 100 million pound loss from changes to mortality assumptions as customers are living longer.
All these obstacles were negated by a a jump in new businesses of 68% to 345 million pounds which was encouraged by a 0.7% percentage point increase to its sales margin. Their 249 million pound charge due to early leaving by customers was off set by positive developments in Canada that reduced the group lapse charge to 219 million.
Despite an increasing trend towards early encashment by customers buoyed by demutualization and listing o the stock market and by UK pension rule changes enforced since 2006, Standard Life claims that pension activity is now stable although market value has hit the bonds hard in the second half of 2007.
Early this year, Standard Life announced, that they expected to make an extra provision for the early leaving customers, after they were faced with a 266 million pound lapse charge in 2006.
The insurance company has announced a dividend of 11.5p per share, a 6.5% increase.
Friends, the 176 years old UK based insurance company, has reported a loss of £46 million, in the year ending 31st December 2007.
The company had made a profit of £400 million in the previous year. The loss last year is largely because of a one time £440 million accounting charge.
Friends is at the cusp of numerous changes, with a decision to cut its task force by nearly 600 and a possible take over by US based equity firm JC Flowers. Although Friends claims that they have not had any official offer from JC Flowers, they state that they are prepared to discuss one when it is made.
Friends was all for a merger with its insurance rival Resolution last year, but that deal fell through. Also, their finance director Jim Smart has announced his decision to leave the company this summer.
JC Flowers, the U.S. Equity group is prepared to make a bid worth ₤3.5 billion towards Friends Provident, ailing life assuror, after Flowers has gathered a stake of almost 2 % in the life insurance company.
JC Flowers is believed to have offered nearly 175 p per share which is a lot higher than the closing Friends made at 152.5 p last week. JC Flowers may wait for Friends to show their annual tally on Tuesday before making any final decision.
JC Flower is run by former Goldman Sachs financier Christopher Flowers, and is aid to be standing by to receive the information about the review that Flowers is scheduled to make at the end of this month where Friends will deliberate about the sale or merger of Friends’ 53% stake in F&C Asset Management, which is a separately listed fund manager. Friends will also discuss, probably next week about its decision to sell Lombard, its European Wealth Management Business, worth almost ₤700 million. Lombard has already attracted potential customers in Zurich Financial Services and AXA.
Life Insurance companies have been hit hard by the subprime crisis and Flowers’ move to sell indicates that there are lots of companies out there that are out to make the most of the opportunity to buy out these companies at their current low values.
Amid an acknowledged economic slow down, the Confederation of British Industry (CBI) attributed the high levels of business tax as one of the causes for the suffering UK Economy.
CBI lamented the loss of one of the most conducive corporate environments that the UK had just a couple of years ago. CBI claims that the cutting of taxes would attract increased global ventures to UK, which would eventually negate the losses that the government would incur by cutting the taxes. He however considered that tax cuts may not happen in this situation as public borrowing was quite high.
When this situation is compared globally, it is evident that governments through out Europe have indulged in some huge tax cuts, with Germany halving their taxes to 29.8% , and Netherlands slashing theirs by 9% to take them down to 25.5%.
This announcement comes just before the budget is scheduled to be presented by the chancellor Alistair Darling, on Wednesday. The CBI wants a simplification of the tax system and a tax cut from the present day 28% to 18% by 2016.
Although the Conservatives and the CBI are both lobbying for tax cuts, the Shadow Chancellor George Osborne has suggested that given the grim situation of the UK budget deficit (being the worst in Europe, a massive tax cut would not be feasible currently. He has stated that simplifications would be put into place instead that would reduce the relief and allowances in corporation tax which would ultimately enable them to reduce the main rate.
On going negotiations indicate that Thomson Corporation of Canada may take over news giants Reuters, in a deal estimated to be in the range of 8 billion pounds and deemed to be a merger.
Although no price for this acquisition has been made final, the Reuters shares are already up 25%. This merger will result in a powerhouse that will be a definite threat to rivals Bloomberg.
It is expected that the Thomson Family, headed by David, who already own 70% of the company, may be the new owner. However the size of his holdings have raised doubts as the Reuters Founders Principle sates that Reuters at no time shall be passed on to a single interest group or faction.
Thomson has previously owned the Times and has a market value of $ 28 billion. Reuters share was at 23%, still lagging behind Bloomberg’s’ which was at 33%.