Business has put itself on a collision course with government, with the Confederation of British Industry (CBI) today urging an immediate slowdown in the growth of public expenditure to address a £10bn "black hole" in the public finances that "cannot be ducked for ever", reports the Financial Times
In its recommendations to Gordon Brown for his pre-Budget report, the employers' organisation insists "there should be no further increase whatsoever in the business tax or cost burden", says the paper .
The CBI's demands on expenditure have already been rejected by the Treasury, while its fears on business taxation are widely thought to be well-founded. In stepping up its rhetoric, the CBI seems prepared to let its relationship with government sour, the FT claims.
"The going is getting tougher," it quotes John Cridland, CBI deputy director general as saying. "The relationship will depend on the nature of the decisions government takes and how credible they are to the business community."
He added a warning about the consequences if the chancellor rejects the CBI pleas. "We believe now is the time for the right judgment calls from the chancellor. For us, this is big. If we don't get them, the government would get the response from the CBI that you would expect."
The CBI called on Brown to slow public spending growth to 10 per cent over the next two years from his planned 12 per cent. This would save £10bn a year after 2007-08 - equal to the CBI's estimate of the underlying problem in public finances.
The CBI suggested cuts in the public sector wage bill, action on absenteeism, lower non- pensioner benefits and slower expenditure growth in health as ways to curb expenditure growth without hitting capital investment projects, which it supports.
If, as is likely, Brown rejects the CBI's demands, it will be left with a difficult choice. Either it will have to accept a much more frosty relationship with the government or it will be seen to have been bluffing.
FORTY MILLIONAIRES will be created today, on paper at least, when the fund management group New Star floats on the stock market, valuing the company at £700m, reports The Guardian.
As a result of the flotation on Aim, London's junior market, New Star's founder, John Duffield, will add an extra £120m to his wealth. But he will retain his 17% stake in the business he founded five years ago, having made an estimated £200m after his acrimonious departure from the German bank Com.
The papers says New Star's offer price is thought to have been fixed at 225p, suggesting a market capitalisation of just over £700m.
All of New Star's 270 or so staff are believed to be shareholders and between them own 60% of the company. They are expected to sell off just 5% of their combined holding and will be required to hang on to the remainder of their stock until 2009 under the terms of the share sale.
The flotation is taking place because the institutions that put their money into New Star five years ago now want a way out. Mr Duffield eventually hopes to list the company on the London Stock Exchange's main market once he has all the financial data required for such a move.
Among the New Star employees expected to become paper millionaires today are the receptionist Zoe Shaw as well as the former financial journalist John Jay.
PENSIONERS are unlocking record amounts of money tied up in their homes to boost their retirement incomes, reports The Scotsman.
Retired homeowners freed £293.6m through equity release schemes during the three months to the end of September, the highest figure ever, according to industry body Safe Home Income Plans, whose members represent 90 per cent of the market. The figure is 12.5 per cent higher than the £260.9 million that was unlocked during the second quarter of the year.
Home reversion schemes, under which people sell a proportion of their property to a company, accounted for £17.3 million of the total, up from £10.6 million in the previous quarter.
Lifetime mortgages, under which people borrow money against the value of their home but do not repay the capital until they die or the property is sold, accounted for the rest.
MEANWHILE HOUSE prices in London’s smartest neighbourhoods will jump by 5% next year, according to Savills, the upmarket estate agent, wrote The Times.
Jim Ward, director of residential research for Savills, said that already there were signs of price growth in prime Central London, which includes areas such as Mayfair, Chelsea, Kensington and Notting Hill. Savills said that price rises in the capital would be fuelled by bumper City bonuses and a strong outlook for London’s financial markets.
Ward said that prime Central London districts would lead the recovery in the housing market, with prices across the rest of the capital and the South East of England expected to rise about 3%.
The positive outlook for London and the South East contrasts with the rest of England and Wales, where prices are expected to drop by up to 5%. The worst falls are expected in Yorkshire and Humberside and the North East. Prices in Scotland are expected to carry on growing, but by only a modest 2%.
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