"I think people sitting at home know that the Government doesn't have a bottomless pit of money," he said.
"Obviously we look at all these things, I think there are dos and don’ts for the Government. What the Government mustn’t do is try and borrow its way out of debt. You can’t borrow your way out of the situation we’re in, it would be very dangerous for Britain.”
He suggested that the Coalition would focus on making sure householders and businesses have access to cheap loans.
"What we can do is use the fact that we have credibility, we have some of the lowest interest rates we’ve had in Britain for hundreds of years, use that credibility to make sure those interest rates are also available to the homeowner, to the small businessman wanting a loan,” he said.
Danny Alexander, the Chief Secretary to the Treasury, has already signaled that the Government is unlikely to be able to afford to scrap the increase.
“Given the huge issues we have with public finances, we also need to make sure that we’ve got the money coming through the tax system, and the increase in fuel duty is part of that,” he said earlier this week.
Motorists groups have urged the Government not to take advantage of the recent falling petrol prices to argue that the 3p tax rise should go ahead.
Brian Madderson, chairman of the Petrol Retailers Association, said it would be “opportunistic” of the Treasury to hope that people would not notice the extra tax.
“David Cameron knows it is right to scrap this increase while the country struggles with a second recession,” he said. “The decision to do so would not be a U-turn, but common sense prevailing as the economic outlook deteriorates.
“Road fuel is no longer a luxury but an essential part of everyday life. The planned duty increase will penalise lower income earners, pensioners and the unemployed and will push inflation up."
The average price of petrol has fallen by 9.83p a litre since its peaks in April to around 132.65p this week.
The price of oil on the international markets has fallen by around a quarter since March, helping to bring down inflation.
However, Paul Watters, head of public affairs at the AA, warned that the planned duty rise will only "increase the inflation rate and put more pressure on hard-pressed families and business in the UK once again”
EU Finance Ministers to Meet as Decisions on Spain, Greece Loom - 4-traders (press release)
--Euro-zone finance ministers set to consider changes to the senior creditor status of euro zone's new bailout fund
--New Greek government may get 1 billion euros in withheld funds as "goodwill" gesture, officials say
--Spain, Cyprus could formally request assistance from euro zone
--Finance ministers face difficult choices on Greek program changes
(Adds details on developments on Spain's expected formal request for financial assistance, plans for Greek economic reform, possibility of a financial-transaction tax.)
By Vanessa Mock
BRUSSELS--Spain could become the fourth euro-zone country to make a formal request for financial help from other members of the currency bloc during a two-day meeting of European finance ministers that begins Thursday.
The likely request, coming in the wake of the formation of a new Greek government and amid expectations that Cyprus will also ask for a bailout, is aimed at bolstering the capital of Spain's banks, many of which are struggling from losses caused by a collapsing real-estate market.
Ministers will also discuss ways to put Greece on the narrow path of economic reform while also dangling the promise of relaxing some of terms of its bailout in future, officials said.
European Union finance ministers could also decide whether to press ahead with a financial-transaction tax among a smaller group of nine member states.
The meeting in Luxembourg comes amid heightened expectations that the EU's bailout funds could soon be activated to take the heat off Spain, Italy and other debt-laden countries by intervening directly in bond markets, a move floated by Italian Premier Mario Monti to bring down borrowing costs.
"We are just thinking about what instruments might actually be useful to relieve the tension on the market and it seems to me only natural," a spokesman for the European Commission in Brussels said Wednesday.
Although ministers aren't expected to address this proposal explicitly, they could change the senior creditor status that would apply to the EU's new bailout fund, a move that would seek to reverse the negative market reaction to the euro zone's promise to rescue Spanish banks to the tune of up to 100 billion euros ($126 billion).
Under current rules, any aid provided to Spain by the European Stability Mechanism would enjoy preferred creditor status, an issue that could fuel fears by private investors that their rights would be subordinated to those of official lenders. People familiar with the matter Wednesday said ministers could signal that they intend to put private bond holders on an equal footing with official lenders.
"It's one of the important points of the discussion," an EU official said.
Madrid's formal request for aid is set to come shortly after two separate evaluations of its banking sector are published on Thursday, although it was unclear if this would come on the same day. The reports will give an estimate of total capital needs of the banks and would determine the size of assistance, which could come from the ESM or from the region's temporary bailout fund, the European Financial Stability Facility, officials said.
The ESM is due to come into force in July.
Ministers may also discuss calls by Spain and others for the bailout fund to be able to be deployed to inject capital directly into banks, bypassing governments and breaking the link between banks and sovereign borrowers, though a decision on this is unlikely.
Cyprus, whose banking sector has been battered over its exposure to Greek sovereign debt, is also poised in coming days to make a request for targeted aid, albeit on a far smaller scale than Spain's.
Officials on the Mediterranean island, which has the 15th-largest economy in the 17-nation euro zone, have signaled they could split their request for around EUR8 billion in aid between the euro zone and Russia, a country that has already extended loans to the government.
Euro-zone finance ministers are set to meet a day after Greece's conservative New Democracy party leader Antonis Samaras was sworn in as prime minister.
Officials have sought to damp speculation that the tight strings attached to Greece's bailout program could be loosened as a gesture of goodwill toward the new government, formed after two rounds of nail-biting elections. Ministers will demand a cast-iron commitment from the new authorities that they will stick to conditions of the bailout and come up with EUR11.6 billion or more in new austerity measures demanded by the country's creditors.
"There can be no discussion on revisiting the terms of the Greece's bailout before we get the signal from them that they are going to honor their commitments. People are tired of shelling out money for Greece," said one EU diplomat familiar with the discussion.
Any extension of the targets would also ramp up the cost of the Greek bailout, something which Germany, the euro zone's main paymaster, and others have signaled would be highly unpalatable politically.
However, ministers may well consider disbursing EUR1 billion in bailout funds that had been withheld in May, two people familiar with the situation said. The aid would be targeted almost exclusively to pay Greece's EUR900 million contribution to the ESM.
"It's a symbolic gesture, that we would again be giving funds to a Greek government," an EU official said. The funds had been withheld after the Greek elections on May 6 failed to produce a government.
On Friday, finance ministers from all of the EU's 27 member states will gather for talks that will focus on a controversial levy on banks. Britain and Sweden are fiercely opposed to the financial-transaction tax but France and Germany may formally request plans for a smaller group of nine countries to move forward on the measure.
If endorsed, the move would by a major policy shift by German Chancellor Angela Merkel, who had previously supported such a tax in principle but only if endorsed by all of the EU's members. Key differences remain over how proceeds of a financial-transaction tax should be spent, with France pushing to use the money for the EU budget, a proposal Germany currently opposes.
Write to Vanessa Mock at vanessa.mock@dowjones.com.
--Matina Stevis and Laurence Norman contributed to this article.
New money boost close after knife-edge BoE vote - Reuters UK
LONDON |
LONDON (Reuters) - The Bank of England signalled on Wednesday that it was close to releasing a wave of new money into the shrinking British economy because of the worsening euro zone debt crisis.
Such a move would effectively involve printing money to buy government bonds, in turn lowering British borrowing costs.
Coming on the back of last week's announcement of new BoE and government measures to spur lending to businesses, it underlines the depth of concern that exists about the state of Britain's economy as its main trading partners weaken.
The first of last week's new lending measures also took effect on Wednesday, when the Bank gave banks 5 billion pounds of low-interest six-month loans. The banks were urged by the Bank to take the money, sources told Reuters.
Minutes of the BoE's last policy meeting showed officials split 5-4 against launching a new round of monetary stimulus by buying government bonds, a form of quantitative easing, significantly with Governor Mervyn King in favour.
A Reuters poll taken after the minutes came out showed that economists now see a 80 percent chance of another round of QE next month.
The last time the MPC was so divided was in June 2007 - when officials split 5-4 over whether to raise interest rates on the eve of the financial crisis - and the previous time King was in a minority was August 2009, when he also wanted more QE than the consensus.
The minutes show far stronger support for more stimulus than many economists had expected, and follow the announcement last week of new Bank and government and help Britain's economy, which returned to recession late last year.
They also gel with the mood of other authorities around the world in the face of weakening global growth and massive uncertainty about the euro zone, which combines to rival the United States as the largest economy in the world.
The U.S. Federal Reserve is under pressure to authorise more stimulus later on Wednesday at the end of a two-day policy meeting, while the People's Bank of China cut interest rates two weeks ago in a surprise move.
The BoE's Monetary Policy Committee said the global economy was slowing and that risks to Britain and the rest of the world from financial distress and political tension in the euro zone had intensified.
“"Most members judged that some further economic stimulus was either warranted immediately or would probably become warranted in order to meet the inflation target," minutes of the June 6-7 meeting said.
British sovereign bonds outperformed German government debt after the news, as markets bet the bank would soon restart its programme of quantitative easing.
QE is designed to help the economy by making borrowing cheaper and has already led to 325 billion pounds of British government bond purchases.
"The vote in June was much closer than many had been expecting," said Citi economist Michael Saunders. "It's clear the MPC are heading for further QE soon in large scale and I think it's highly important that the governor has switched his vote on that."
The Bank called a halt to new gilt purchases in May, largely because inflation was proving slower than forecast in falling back to its 2 percent target.
But this month the Bank said inflation was now likely to be lower than forecast, in part because of falls in oil prices and less generous wage deals as well as risks from the euro zone. Since the MPC meeting, inflation dropped unexpectedly to 2.8 percent from 3 percent.
QE NOT CERTAIN NEXT MONTH
Last month external Bank member David Miles was the only official to call for an expansion of QE, but this month he was joined by King and external member Adam Posen in urging an extra 50 billion pounds of purchases.
Paul Fisher, the BoE's executive director for markets, supported a 25 billion pound increase.
The Bank policymaker Ben Broadbent - one of the five to oppose more QE this month - told Reuters in an interview that the case for more QE had increased, but that he would want to look at the impact of new Bank and government schemes to boost credit before agreeing to more gilt purchases.
Despite the closeness of the vote, some economists said it would be wrong to see more QE next month as a done deal.
"The immediate reaction on the minutes when you see a 5-4 is QE is imminent, and they are flagging it coming. But I don't think it is entirely as black and white as that," said Scotiabank economist Alan Clarke.
In the minutes, some MPC members had said they wanted to see the outcomes of Greek and French elections before deciding on more QE. Both took place last weekend, and Greece appears to have formed a government that broadly supports the country's existing bailout.
The government's options to stimulate the economy are limited due to its commitment to eliminate most of Britain's big budget deficit over the next five years - putting much of the onus on the Bank.
Demand for the 5 billion pounds lent on Wednesday appeared muted as the Bank had to lend some of the funds at the minimum 25 basis point premium over its 0.5 percent Bank Rate that it was willing to accept.
Anthony O'Brien, strategist at Morgan Stanley, said the result suggested that "the need for liquidity is not as bad as possibly people thought it might be", and that the terms on which the Bank accepted lower-grade collateral were relatively unattractive.
The Bank asked big banks to participate in the operation, in order to remove any stigma attached to taking what could be seen as emergency cash, several people familiar with the matter said.
(Additional reporting by Alessandra Prentice, Olesya Dmitracova, Steve Slater and Sven Egenter. Editing by Jeremy Gaunt.)
Spain's finance minister insists no bailout needed - CBC
Spain's finance minister insisted again Wednesday that the country's government does not need a full-blown bailout, even as the country's sky-high borrowing costs remained at dangerous levels.
On Tuesday, the interest rate on the government's 12-month treasury bills rose to 5.07 per cent from 2.98 per cent at the last such auction on May 14. The rate on the 18-month bills soared to 5.10 per cent from 3.3 per cent.
By Wednesday, the interest rate, or yield, on the Spanish benchmark 10-year bond fell 22 basis points to 6.78 per cent, below the seven-per-cent level it has been hovering above since Monday. But such high rates are still considered by market-watchers to be unsustainable over the long term rate and eventually forced Greece, Ireland and Portugal to ask for international financial help.
Finance Minister Cristobal Montoro told Parliament, however, that Spain's government won't need the same kind of assistance "because it does not need to be rescued."
After years of insisting its banks were among the healthiest in Europe, Spain did recently acknowledge its financial sector will need a rescue package to protect it from a property boom that went bust in 2008. But investors are now more concerned that the country itself may have to be bailed out and this could seriously test the strength of the entire European Union's finances.
Fears about high public debt
Worries about Spain's ability to repay its debt grew last week when the country agreed to accept a eurozone loan of up to $129 billion to shore up its ailing banks, which are sitting on massive amounts of soured real estate investments.
The big fear is that, as the money will count as a loan and raise Spain's overall debt load, the country's financing costs will suffocate the government as it tries to wade its way through a recession and a 24.4 percent jobless rate.
Because the government is ultimately responsible for repaying the banks' bailout money, the deal has increased fears about the size of public debt. If the government cannot get the bailout money back from the banks, it will be saddled with the losses.
Those losses could prove too much to handle for the government, which is already struggling with a second recession in three years and the highest jobless rate among the 17 countries that use the euro.
Independent audits on the state of Spain's banks are due Thursday and these will help Spain determine how much it needs from the $129-billion lifeline the 17-country eurozone has agreed to set up.Cuba brushes off Miami money laundering allegations - Reuters UK
HAVANA |
HAVANA (Reuters) - Cuba brushed off allegations that it has been used as a money-laundering centre for a U.S. healthcare fraud scheme in Florida, saying on Wednesday it closely regulates domestic and foreign banking operations on the island.
"It is not Cuba, but rather the United States that is the central country for money laundering in the world," Johana Tablada, deputy director for North American policy at Cuba's Foreign Ministry, said in a statement to Reuters.
U.S. prosecutors in Miami have charged a South Florida man with funnelling into Cuba more than $30 million (19 million pounds) obtained illicitly from Medicare, the U.S. federal health insurance program for the elderly.
They said there was no evidence that the Cuban government was involved, although some Miami news reports cited outside experts who said it had to be aware such large amounts of money were flowing in.
Prosecutors said the money was moved to Cuba through foreign shell companies and banks in Canada and Trinidad, including Republic Bank of Trinidad's Havana branch.
So far, Republic Bank officials have not responded to requests for comment.
Tablada said foreign banks in Cuba "are obligated to operate in strict adherence to international and Cuban regulations and must answer for the trustworthiness of their transactions and the correct use of their accounts to pass lawful operations."
Cuban banks have "a mechanism of vigilance and supervision," directed by the country's central bank, to detect fraud, Tablada said.
Cuba also cooperates with banks elsewhere to detect fraud, but, due to the longstanding U.S. trade embargo against Cuba, not with American banks, she added.
Because of U.S. policy toward Cuba "this type of collaboration does not exist with North American institutions," she said.
Because of the embargo, "transactions that Cuba makes with foreign banks are done in different currencies from the United States dollar, which causes substantial losses to our finances," she said.
(Reporting by Jeff Franks; Editing by David Adams, Tom Brown and Vicki Allen)
A valuable lesson in pocket money - The Independent
No wonder experts say parents should introduce their children to basic financial matters at an earlier age than ever. "Teaching children the value of money from an early age provides a good foundation for their future spending habits, and sends positive messages about managing finances and living within one's means," explains Simon Walsh, spokesman for Family Lives. "Their observations of how you spend, save, budget and donate to charities can shape early views about money management."
Get them involved in making their own financial decisions too. "My eight-year-old son Henry knows that if he wants something, he must select a few items he no longer wants, photograph them, write a description and put them on eBay," says Rebecca Gunn, 39, who lives in Bedfordshire.
Like many parents, Gunn also uses pocket money to help her son to understand its value. "It stops him walking into a shop wanting everything he sees. It makes him think about what he wants and he enjoys weighing up the pros and cons of things as the week goes on."
Research from Equifax reveals a growing emphasis on encouraging children to "earn" their pocket money through basic chores such as washing up and tidying up. The average amount children receive, according to another survey by Halifax, is £4.57 for 8-11 year-olds and £7.02 for 12-15 year olds. "Each of my two children, aged five and seven, has a special job around the house once a week," says Sarah Brown, a 40-year-old mother from Kent. "It means they realise they need to contribute something to earn money."
A vital component of the pocket money concept, she believes, is that kids discover their own spending power. "This is where, as a parent, you have to get the balance right between parental advice and allowing your child to make their own decisions – and therefore mistakes. It's definitely given my children an understanding, which did not exist a year ago, of how important it is to know how much things cost," says Brown. "Even simple things like checking the price tag on the box to see if it's affordable, is not something you see many kids do. Perhaps most satisfying of all is that my eldest, has opened a bank account and is already beginning to grasp the concept of interest."
When your children hit their teens, consider swapping pocket money for a monthly allowance, but the same principles apply, advises Pritee Chohan, Money for Life Programme volunteer and a branch manager for Halifax. "Sit them down to explain the differences between the savings accounts on offer and help them to budget for that holiday with friends or for driving lessons. By the time they leave home, they should have all the money savvy they need to make a great start in life."
Mother and daughter, 73 and 40, 'used online dating scam to bilk $1M from women who thought they were sending money to soldiers in Afghanistan' - Daily Mail
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A mother and daughter in Brighton, Colorado, teamed up with Nigerian fraudsters to bilk 374 women out of $1 million by posing as soldiers in Afghanistan on online dating sites, authorities say.
Tracy Vasseur, 40, and her mother, Karen Vasseur, 73, are accused of laundering the cash for the Nigerians running the scam. They allegedly kept 10 percent of the profits and passed the rest on to their African partners.
The Colorado Attorney General says Nigerian men posted fake dating profiles claiming to be soldiers and developed online relationships with women from around the world.
Scam: Tracy Vasseur, 40, and her 73-year-old mother Karen are accused of work with Nigerian scam artists to launder $1 million in ill-gotten gains
They used fake documents and photos to convince their victims of their stories, the Denver Post reports.
After developing trust with the unsuspecting women, the Nigerians asked for money -- either to buy a satellite phone so they could communicate more frequently, or to help finance visits to their new 'girlfriends.'
Many of the women gave thousands of dollars. Some sent tens of thousands, including a British woman who claimed she wired a total of $60,000 to her new 'boyfriend.'
All of the cash was actually sent to bank accounts in Brighton owned by the Vasseurs, according to prosecutors.
In 2011, Brighton police warned the women that they were in the midst of a criminal scam.
They continued anyway, the Post reports.
The two women had more than 20 accounts at local banks that they used to move the cash around and hide their ill-gotten earnings, authorities say.
Prosecutors didn't say how the women developed their relationship with the Nigerian fraudsters.
None of the Nigerians were identified. Internet shysters in the country have proven notoriously difficult for American authorities to track down and prosecute.
Julian Assange's leading supporters face losing £240,000 in bail money - The Guardian
Some of Julian Assange's most prominent supporters stand to lose up to £240,000 in bail money, provided to secure the WikiLeaks founder's freedom when he first faced extradition proceedings.
A leading criminal lawyer said that following Assange's decision to seek asylum in the Ecuadorean embassy in London and breach the terms of his bail, they would have to persuade the courts why they should not forfeit their money and prove they had done all they could to prevent him breaking the court order.
A group of celebrities and activists, including the socialite Jemima Khan, film director Ken Loach and publisher Felix Dennis, posted cash security of £200,000 to Westminster magistrates court with a further £40,000 as promised sureties when Assange was freed in December 2010.
"The people who have posted the money would have to go to court and plead their case as to why they shouldn't lose their money," said Oliver Lewis, partner at solicitors Powell Spencer and Partners. "There would have to be a pretty good reason why the money shouldn't be forfeited. Usually the court says 'thank you very much, you have lost your money'. You have to show that you have been vigilant and put every effort in to stop it happening."
Vaughan Smith, the founder of the Frontline Club for journalists, hosted Assange at his Norfolk home for over a year and stands to lose £20,000.
"It is not clear to me whether I have a liability but either way I am concerned," he said. "I do believe Julian genuinely feels he will be sent to America – and of course I think the money is important because it relates to the welfare of my wife and children, but they don't feel they are at risk of being sent to America.
"I remain a supporter and it is important we recognise he is a western dissident. There are a lot of people who believe the work he did at WikiLeaks was in the public interest."
Khan confirmed on Twitter that she had also posted bail money for Assange. "I had expected him to face the allegations," she said. "I am as surprised as anyone by this."
Tracy Worcester, the model and actress turned environmental campaigner, confirmed that she had put up a surety for Assange but said she had not yet been able to speak to his legal team about the latest developments and declined to comment further.
The human rights activist Bianca Jagger denied reports that she had contributed to the bail money, tweeting: "I would like to set the record straight. I didn't post bail for Julian Assange."
A spokeswoman for the courts service said it was normal for breaches of bail to be considered at the court that set the bail conditions in the first place, in this case Westminster magistrates court.
"What happens to the money will be decided by a judge if and when he is brought back before the court," she said. "It depends on what the police say about what they think a person has done and what should follow on from that."
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