George Osborne opens doors to rich Chinese with new visa system

British chancellor moves to improve relations with Beijing after rift over David Cameron's meeting with Dalai Lama

George Osborne has heralded the "next big step" in Britain's relationship with Beijing, unveiling a new visa system to make it easier for Chinese business leaders and rich tourists to visit the UK.

In a sign of Downing Street's determination to reset relations with Beijing, which unofficially downgraded Britain's status after David Cameron met the Dalai Lama last year, the chancellor told an audience in the Chinese capital that no country in the west is more keen to attract Chinese investment than Britain.

Osborne, who began a five-day trade mission to China at the weekend, told students at Beijing University: "I don't want us to try to resist your economic progress, I want Britain to share in it.

"And I want, this week, us all to take the next big step in the relationship between Britain and China. Because more jobs and investment in China mean more jobs and investment in Britain. And that equals better lives for all."

As a first step the chancellor announced Britain will make it easier for Chinese business leaders to visit the UK by introducing a 24-hour "super priority" visa service.

In the biggest step, a separate pilot scheme will allow selected Chinese travel agents to apply for UK visas simply by submitting the application form used for the EU Schengen visa.

The scheme is aimed specifically at the high-end tourism market, after figures showed that wealthy Chinese tourists are not bothering to apply for a UK visa after applying for a Schengen visa, which allows them to visit 22 out of the 28 EU member states plus Iceland, Liechtenstein, Norway and Switzerland.

Ministers were understood to be alarmed when one study found that Chinese tourists were buying vastly higher numbers of expensive designer handbags in Paris than in London. The chancellor said: "These changes will streamline and simplify the visa application process for Chinese visitors, while ensuring the system is strong and secure. This is good news for British business and tourism."

The Foreign Office has no difficulty with the relaxed visa system, which will be administered through its embassy in Beijing and consulates in Shanghai and other high-growth cities.

But concerns have been voiced to the chancellor and the prime minister from within the Foreign Office that Britain needs to tread with care in the light of China's human rights record and its aggressive cyber-attacks.

Cameron is understood to have heard the Foreign Office's concerns with sympathy. But he is determined to open a new chapter in Britain's relations with China after declaring that the "Bric" countries – Brazil, Russia, India and China – would be a priority. He has led two trade missions to India but has visited China only once as prime minister, three years ago.

Ed Davey, the energy and climate change secretary, who has recently returned from Beijing, spoke of a "massive Chinese investment" worth tens of billions of pounds in nuclear power and other sources of energy in Britain.

Davey told the Andrew Marr Show on BBC1 that there would also be major energy investments from Japan and South Korea. The China General Nuclear Power Group has been in talks with EDF Energy about taking a stake of up to 49% in the deal to build a nuclear power plant at Hinkley Point.

Osborne's trip – in which he is being accompanied in part by the London mayor, Boris Johnson, and four other government ministers – is designed to pave the way for a long-awaited trade mission to China by the prime minister.

Cameron was forced to abandon a visit to China earlier this year when Beijing punished him for meeting the Dalai Lama, the spiritual leader of Tibet, at St Paul's Cathedral in May 2012 with Nick Clegg.

The prime minister abandoned tentative plans for a trip to China in April after Beijing indicated that he was unlikely to be granted meetings with senior figures. The UK government said no plans had been finalised and the new Chinese leadership, which only took over in March, needed time to bed down.

The Osborne and Cameron trips, which have been pencilled in for the autumn for some months, have been the subject of intense negotiations in Whitehall. The chancellor is said by some ministerial sources to be adopting a gung-ho approach and is keen to explore every opportunity to boost trade links with China. "With George it all comes to pounds, shillings and pence at the end of the day," said one ministerial source.

Britain's nervousness about the Dalai Lama was highlighted when Johnson declined on five occasions on Sky News to say whether he would like to meet Tibet's spiritual leader. On the fifth occasion an exasperated mayor told Dermot Murnaghan: "This is the fifth time, I'm coming up for air again, Dermot, I'm just repeating that it's not my job as mayor to insert myself into controversial areas of international dispute. My job is to promote the interests of the city."

In his speech Osborne said: "There are some in the west who see China growing and they are nervous. They think of the world as a cake – and the bigger the slice that China takes, the smaller the slice that they will get. I totally and utterly reject that pessimistic view. If we make the whole cake bigger, then all our peoples will benefit. That should be the basis of our relationship with China."

In addition to Beijing Osborne will visit Shenzen, Guangzhou and Hong Kong.

Article Source : http://www.guardian.co.uk

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George Osborne's credibility gap

The chancellor claims he'll balance the books and avoid tax rises. But his record so far is of failure

The party conference season doesn't always change the political weather. This year it has. Ed Miliband's decision to stand up to the power companies in the face of market failure struck a loud chord with the public. And no, it's not anti-business to challenge such failures.

His jibe that the rising economic tide would lift only yachts, struck a raw nerve with the Tories. So they rushed out measures to help home buyers, despite real fears of a housing bubble. They announced a married couples' allowance worth less than £4 a week. They promised to freeze fuel duty. The funding of these promises, costing more than £2bn, is to be met from some unidentified source. Strange that when Labour makes promises, the Tories claim it will mean more borrowing, yet it's fine for them to make unfunded promises.

The Tories have also changed their tune on the economy. In September George Osborne claimed to have slain the dragon of downturn. Many economists have their doubts. It was also bad politics. A dead dragon poses no political threat. So this week the beast has been resurrected: it's not over, after all.

The chancellor promises another six or seven years of austerity. After that, he claims he will balance the books. This raises questions about both the credibility and the desirability of his promise. On credibility, consider the facts: in 2010 the economy was growing and we still had ourtriple-A rating – yet at the time Osborne claimed we were like Greece. More than that, he said he would balance the books by 2015.

Today, having moved considerably from his original plans, he is borrowing 68% more than he promised. He will borrow £96bn in election year alone. The deficit, far from being eradicated, is still at £120bn. Osborne's debt reduction target has been kicked into the far distance, and the effect of many of the cuts pencilled in for the next few years has yet to be felt.

So the chancellor's record is not good.

Is it really credible to deliver the scale of the cuts needed to balance the books and avoid tax rises, as Osborne now says it is? Not without economic growth it isn't – something that the prime minister seemed to concede in his speech yesterday. Is it credible to deliver a 20% real cut in the police budget, both in this parliament and the next?

There are two issues here. First, what sort of services will the public get if they are hacked back on this scale? The Tories need to tell us. Second, the Conservatives' rhetoric often implies that the public sector is bad and the private sector the only good. Yet, for example, this country's future depends on the quality of our education, not just for the few but for the many. And what price do we put on good quality health care, let alone the increasing costs of caring for a growing elderly population?

This is a debate we must have. It is essential to bring down our borrowing and debt. It's worth remembering that in 1997 Britain's debt was the second highest in the G7. A decade on, it was the second lowest. But these reductions must be delivered both credibly and in a way that does not damage the UK's economic and social fabric. The best way of doing that is to get sustainable growth. To promise a balanced budget, come what may, carries the risk of damaging cuts and unacceptable tax rises.

Although economic growth seems to be returning, it is still lagging way below what was expected by now. What we produce as a country, our GDP, is not likely to return to its pre-crisis levels until 2018. This government is not on strong ground, either in blaming the crisis on the spending it supported in opposition, or on the credibility of its performance since the election.

The Labour party will stay in the middle ground, promoting enterprise and growth and never afraid to challenge market failures. Nor should we be scared to make the case that the public and a thriving private sector need each other. We need them both.

Article Source : http://www.guardian.co.uk

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Lloyds boss in line for bigger bonus as government makes £60m on share sale

António Horta-Osório could be in line for more than £2.2m as chancellor claims part selloff is sign of improving economy

António Horta-Osório the boss of Lloyds Banking Group, is in line for a bigger than expected bonus after the government sold off the first tranche of its stake in the bailed-out bank for a £60m profit.

The Lloyds chief executive stands to collect more than £2.2m if the shares stay above 73.6p – the price paid by taxpayers for their stake during the 2008 bank bailouts – for 30 consecutive days or if the government sells off a third of its stake above 61p, the price the shares were trading at during the bailouts.

His bonus, when it was awarded in March, was originally worth £1.5m but it has steadily increased in value as the 3m shares he was awarded have risen from 49p to 74.65p – the level they closed at on Tuesday night after the government sold off 15% of its holding. He will receive the shares in 2018 if the requirements are met.

The share sale, which leaves the taxpayer with a 32.7% stake, down from 38.7%, prompted George Osborne to claim the economy had turned a corner and to insist he would get back the entire £65bn of taxpayers' money ploughed into the banks to keep them afloat in 2008- 2009.

The share sale came five years to the day after Lloyds TSB rescued HBOS to create the enlarged group. UK Financial Investments, the government body that looks after the stakes in the bailed-out banks, said the 6% stake – some 4.2bn shares, worth £3.15bn – was placed with major investors at 75p a share. Some £45bn of the £65bn bailout cash was used to prop up Royal Bank of Scotland but a sale of the taxpayer's 81% stake is being delayed by a review of whether to hive off a bad bank.

Osborne tweeted: "Confirm have sold 6% of Lloyds shares at 75p. Profit for taxpayer & important step in plan to get their money back and repair economy."

He later spent part of the day with Horta-Osório at one of Lloyds' operations in Birmingham. "If you look at what has happened over the last 12 hours with Lloyds, you have investors from around the world investing in a British bank. That is a sign the British economy is turning a corner," he said.

"Five years ago the previous government forced British taxpayers to put a huge sum of money into bailing out the banks. That was a big ask of the British public. I have been determined ever since I became chancellor to get that money back for taxpayers."

The chancellor said the money would be used to reduce the national debt by £586m, based on the 61p value of the Lloyds stake in the nation's accounts.

Ian Gordon, banks analyst at Investec, said the government may now be able to sell off its entire stake before the May 2015 general election.

He said: "Many aspects of government/Bank of England policy – [such as] the 'Funding for Lending' scheme, which caused the collapse of retail savers' interest rates, and overt support for the housing market through the 'Help to Buy' scheme – have been distinctly positive for Lloyds".

The biggest block of buyers for shares was saidHalf the shares are understood to have been sold to UK investors, with 30% going to the US and 20% to other international buyers.

The government has promised not to sell off any more Lloyds shares for 90 days and there is little expectation of a quick sale of RBS while the review into whether to a create a bad bank is under way.

But analysts at Jefferies reckoned it might yet be possible. "UKFI's sale of 6% of Lloyds in a simple manner is unequivocally positive for that bank and also for RBS, in our view."

Article Source : http://www.guardian.co.uk

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Soaring house prices spread across UK as surveyors warn of another bubble

Poll shows fastest rise since late 2006 peak, with Rics saying Osborne schemes risk pushing prices to unaffordable levels

House prices are rising at their fastest pace for almost seven years, according to the latest survey to point to a property market on the rise.

Rising prices and growing demand have also driven a jump in the number of people putting their homes on the market, according to the Royal Institution of Chartered Surveyors (Rics).

Its survey echoed a report from Britain's largest mortgage lender, Halifax, last week that house prices were 5.4% higher than in the summer of 2012. Estate agents polled by Rics indicated the fastest rise in prices since their peak in late 2006 as government schemes such as Funding for Lending continued to improve access to mortgages.

Rics warned, however, of the risk of prices soaring to unaffordable levels, echoing commentators who have warned that George Osborne's property market schemes could spark another house price bubble.

The group said that although the market conditions were prompting more people to put their home on the market, demand still outstripped supply.

"During August, the number of would-be buyers increased yet again as increasingly accessible finance allowed more people to enter the market," the Rics report said.

Peter Bolton King, the Rics global residential director, added: "It's not surprising that more and more people are looking to sell their homes. Buyers are out there and prices are on the up so if you're looking to move it's a good time to do so. What we don't wish to see, however, is prices rise to such an extent that they become unaffordable.

"For the market to work properly, it's vital that property is both accessible and affordable, and we'll be monitoring the situation very carefully as the housing sector continues to recover."

Following government moves to improve access to mortgages, there have been reports of first-time buyers flocking into the housing market.

LSL Property Services, which owns estate agencies including Your Move, suggested last week that there were more than 26,000 first-time buyer transactions in July – an increase of 45% on the same month in 2012.

The Rics report said the Funding for Lending scheme and Help to Buy "appear to be part of the reason for the pick-up in activity".

The report's headline prices balance stood at 40, based on the proportion of respondents reporting a rise in prices minus those reporting a fall. That was the highest since November 2006 and compared with 36 a month earlier.

Rics said each region across the country saw supply increase in August as the recovery continued to spread from south-east England to other areas. The South West and the North East, in particular, saw the number of new homes coming onto the market rise significantly.

Rics added: "It seems that recent price rises are going to continue unabated."

The estate agents surveyed expect prices across Britain, on average, to increase by 2.2% over the coming year and by 4.4% in each of the next five years. At the start of this year, those respective figures were 0.6% and 3.4%.

The survey of 348 agents will intensify fears of unsustainable rises that will leave another generation saddled with huge debts.

Experts' concerns about another bubble centre on the Help to Buy scheme, which was introduced in April and provides equity loans for first-time buyers of up to 20% towards the cost of new-build properties worth up to £600,000.

The International Monetary Fund and others have criticised the scheme, which will be expanded in January to make the loans available to all buyers and all types of property up to the £600,000 limit.

Some of the estate agents surveyed by Rics predicted a boom as a result of the government schemes; others were more cautious about their impact.

"The second stage of the government's Help to Buy scheme in January 2014 could create a bubble," said Michael Brooker, an agent in Crowborough, East Sussex.

Others were less confident the price rises would last.

Julian Dyer in the Welsh town of Abergavenny, said: "The market has definitely perked up over the last 6 months, however the market seems very fragile, and I am not convinced that the upturn is sustainable. The government initiative to help builders does not seem to have worked in this area."

Article Source : http://www.guardian.co.uk

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George Osborne's homes scheme could sideline first-time buyers, say lenders

Help to Buy scheme may 'give with one hand and take with the other' by pushing costs up by 11% by the end of 2016

George Osborne's policy of kickstarting the housing market with subsidised mortgages could inflate prices to pre-crash peaks and sideline the first-time buyers it is designed to help, according to a group representing some of the UK's biggest banks and building societies

In the latest warning about the impact of the Help to Buy programme, lenders said property prices could rise by 11% by the end of 2016, with artificially inflated valuations the biggest threat to its success. Without a housebuilding programme to address the extra demand, property prices could spiral to new highs, said the Intermediary Mortgage Lenders Association.

"If house prices continue to rise for the duration of the scheme, then in essence we will be giving with one hand and taking away with the other," said Peter Williams, executive director of the IMLA and director of the University of Cambridge Centre for Housing and Planning Research.

House prices in London are above their 2007 peak, according to the Nationwide building society, but taken across the entire country they remain 9% lower, as IMLA warned that under the scheme the average UK home would cost £180,256 by the end of 2016. That would take average prices close to 2007 peak of £181,975.The Help to Buy scheme, announced by the chancellor in March, aims to grant mortgages to homebuyers with a deposit of as little of 5% of a property's price.

The first part of the programme, which allows buyers to subsidise purchases of newbuild homes with an interest-free loan from the government, launched in April. It has been credited with reversing a fall in housebuilding and boosting consumer confidence. However, the second part, which will be introduced at the start of 2014 and will offer a taxpayer-backed guarantee to lenders who offer mortgages worth up to 95% of the property's value, has attracted criticism from economists, politicians and other commentators, who have warned it could fuel a house price bubble. Albert Edwards, who heads the global strategy team at Société Générale, described it as a "moronic policy".

IMLA, whose members include subsidiaries of Santander, Barclays and Nationwide that offer mortgages through brokers, said 60% of its members believed the scheme could be undermined by a house price bubble.

While all respondents agreed first-time buyers had the most to gain from the second part of the scheme, they are likely to be the hardest hit by a rise in prices to 2007 levels. This would push the cost of a 5% deposit from £8,321 at the end of this year to £9,013 by the end of 2016.

A recovery in the housing market has accompanied a turnaround in the economy since the beginning of the year. GDP has risen by 1% in the first six months, with most sectors of the economy showing they expanded compared to last year.

However, the TUC is warning that a rise in UK population, by 2.3 million to 63.7 million over the last five years, means the benefits of GDP growth have been spread over a greater number of people. According to a TUC analysis, GDP per head is still 0.7% lower than when the coalition took office and 7.5% lower than the UK's peak level in late 2007.

The TUC's general secretary, Frances O'Grady, warned that the recent burst of borrowing by consumers to fund everything from house purchases to the weekly shop was based on extra debt and not on a rise in incomes.

She said: "Too many people are having to run down their savings or turn to credit cards to spend in the shops, rather than see their incomes grow. And behind improving employment figures are millions of workers whose incomes are falling and who can't get enough hours to make ends meet.

"We all want to see the UK economy back on track but any talk of recovery is meaningless unless we get the right kind of growth."

The current level of GDP per head at £23,728, is mere 0.7% higher than at the lowest point of the recession in September 2009, the TUC said.

Article Source : http://www.guardian.co.uk

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