EXTENDED

BUDGET
SECTION
STARTS P19
Issue 1,349 Thursday 24 March 2011
BUSINESS WITH PERSONALITY FREE
www.cityam.com

GEORGE GIVETH
AND GEORGE TAKETH AWAY
■ Surprise 2p cut
in corporation tax
■ Fuel duty cut by
1p to help motorists
■ Tax allowances
raised by £600
BUDGET 2011
BY DAVID CROW
GEORGE Osborne yesterday unveiled
a handful of eye-catching tax cuts
designed to help the motorist and
boost economic growth.
Businesses welcomed the chancel-
lor’s decision to reduce corporation
tax by 2p next month while a 1p per
litre cut in fuel duty will help soften
the blow of soaring petrol prices.
But Osborne was accused of rob-
bing Peter to pay Paul, after he raid-
ed North Sea oil profits, hiked the
bank levy and slapped a tax on car-
bon that will add £17-a-year to ener-
gy bills by 2015.
The chancellor said his second
Budget would boost growth, but he
delivered it against an increasingly
uncertain economic backdrop.
The Office for Budget
Responsibility (OBR) cut its growth
forecast for this year from 2.1 per
cent to 1.7 per cent, citing higher
inflation, and hiked government
borrowing forecasts; the national
debt will be £44.5bn higher than
expected by 2015-16. Employment
will fall by 100,000 in 2011-12, the
OBR said.
George Osborne said his second Budget would reform the British economy
Osborne insisted he would not
switch course and stuck to his plan
to cut total public expenditure by 3.7
per cent in real-terms over four
years. “Britain has a plan and we are
sticking to it,” he said.
The chancellor’s 2p cut in corpora-
tion tax was twice the amount
expected and will lower the headline
rate to 26p from April, earning plau-
dits from business leaders.
And British-based multinationals
cheered plans to reform the taxation
of foreign profits, ensuring that the
lion’s share of overseas earnings are
not taxed in the UK.
UBM, which quit the UK for
Ireland in 2008, said it was actively
considering returning to Britain
while advertising giant WPP hinted
Picture: Micha Theiner
it would also consider a comeback.
But Osborne hiked the bank levy
without warning for the second
time in as many months to ensure
the industry does not benefit from
lower corporation tax.
And a 1p per litre cut in fuel duty
will have wrong-footed his oppo-
nents in the Labour party, who have
put soaring petrol prices at the heart
■ Bank levy hiked
without warning
■ £3bn carbon levy
to hit consumers
■ North Sea profit
raid to raise £16bn
of their economic argument.
However, the £600 hike in the per-
sonal allowance will be at least par-
tially offset by Osborne’s decision to
increase direct tax thresholds and
bands in line with the consumer
prices index rather than the histori-
cally higher retail prices index. The
move will net the exchequer £1bn a
year by 2015-16.
Meanwhile, the government’s
decision to introduce a carbon floor
price will add £6 to the average con-
sumer’s energy bill in 2013 and £17
in £2015, Treasury aides said.
Industry will bear two-thirds of the
£3bn cost.
And North Sea oil companies were
infuriated by an entirely unexpected
windfall tax on their profits, which
will raise a staggering £16bn by 2015.
The industry said the move would
force it to scale back North Sea oil
exploration, making the UK more
reliant on imports from the Middle
East.
Elsewhere, the chancellor intro-
duced a series of small supply-side
reforms designed to boost growth,
including a less stringent planning
regime and cuts to red tape for busi-
nesses with fewer than 10 employees.
MORE: P2, P3, P4, P5, P19-P27

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31/01/11 - 27/02/11 is 107,265
 2 News | Budget Special
At a glance: All the crucial points
from Osborne’s Budget for Growth
THE ECONOMY/
PUBLIC FINANCES
l The Office for Budget Responsibility
(OBR) has revised its growth forecast for
the economy, blaming higher-than-
expected inflation as a result of recent
global commodity price shocks and the
weather-affected final quarter of 2010.
l GDP growth has been revised down to
1.7 per cent in 2011. Growth is expected
to peak at 2.9 per cent in 2013 and to
remain at 2.9 per cent in 2014 and then
to fall to 2.8 per cent in 2015.
l The OBR says the projection for trend
growth is unchanged from their
November 2010 figure, at 2.35 per cent
to the end of 2013, slowing to 2.10 per
cent from 2014. It adds that despite this
being billed a pro-growth Budget, “Policy
measures announced in the Budget could
increase the economy’s productive poten-
tial, in time, but we do not believe there
is strong enough evidence to raise our
trend growth assumption now”. The out-
put gap is estimated to have been -3 per
cent in the third quarter of 2010.
l Higher-than-expected CPI inflation of
between 4 and 5 per cent is expected in
2011. It is expected to fall back to
around its 2 per cent target level in the
medium term. The Bank of England’s
inflation target remains at 2 per cent.
l Public sector employment fell by
132,000 in 2010, but private sector
employment rose by 428,000.
l Public sector net borrowing will be
£145.9bn this year, £122bn in 2011-12,
£101bn in 2012-13, £70bn in 2013-14,
£46bn in 2014-15 and £29bn by 2015-
16.
l Cyclically-adjusted public sector net
borrowing will be reduced by 8.4 per-
centage points, from 8.9 per cent of GDP
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Editor Allister Heath
Deputy Editor David Hellier
News Editor David Crow
Night Editor Katie Hope
Business Features Editor Marc Sidwell
Lifestyle Editor Zoe Strimpel
Sports Editor Frank Dalleres
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Pictures Alice Hepple
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Chancellor of the Exchequer George Osborne leaves 11 Downing Street for Parliament. Pictures: PA, Micha Theiner
in 2009-10 to 0.5 per cent of GDP in
2015-16.
l As a share of GDP, borrowing will be
10.1 per cent in 2010-11. It will fall to 7.5
per cent in 2011-12, 5.5 per cent in 2012-
13, 3.5 per cent in 2013-14, 2.1 per cent
in 2014-15 and 1.1 per cent in 2015-16.
l The cyclically-adjusted deficit on the
current budget will be 4.6 per cent this
year, 3.2 per cent in 2011-12, 2.0 per
cent in 2012-13 and 0.6 per cent in
2013-14. It will then return to a surplus
of 0.4 per cent in 2014-15 and 0.8 per
cent in 2015-16.
l Public sector net debt as a share of
GDP is to be 60.3 per cent in 2010-11,
rising to 66.1 per cent in 2011-12, 69.7
per cent in 2012-13 and peaking at 70.9
per cent in 2013-14. It will then start
falling to 70.5 per cent in 2014-15 and
69.1 per cent in 2015-16.
l The OBR’s judgement is that the poli-
cies set out in the Budget are consistent
with a greater than 50 per cent chance
of achieving both the government’s fiscal
mandate and its target for debt in 2015-
16, and that both targets will be
achieved a year early, in 2014-15.
PUBLIC SPENDING
l Public sector current expenditure will
be £632.8bn this year, rising to reach
£713.4bn by 2015-16. Capital annually
managed expenditure will be £11.5bn in
2010-11, falling to £7.7bn by 2015-16.
l Total Managed Expenditure (TME) will
rise from £694.4bn to £763.8bn over the
forecast period in cash terms. It will fall
by 3.7% in real terms.
l Spending is projected to fall from 47.5
per cent of GDP in 2009-10 to around
40 per cent by 2015-16 and tax receipts
are projected to rise from 36.5 to 38.5
per cent.
l Public sector net investment is fore-
cast to fall from £41.1bn this year to
£24.5bn by 2015-16 compared with
£49.5bn in 2009-10.
l The government has welcomed the
Hutton Review of public sector pay as a
basis for setting senior pay in the public
sector, and departments will bring for-
ward implementation plans by July 2011.
l Planned gilt sales by the Debt
Management Office (DMO) in 2011-12
are £169bn.
BANKS
l To “offset the benefits to banks” from
a cut in corporation tax, the rate of the
bank levy will increase again to 0.078 per
cent from 1 January 2012.
l The government will consult on a pro-
posal to extend pay disclosure arrange-
ments to all large banks from 2012.
BUSINESS
l The supplementary charge on profits
from UK oil and gas production increased
from 20 per cent to 32 per cent at mid-
night, in a windfall tax on the increased
profits due to higher oil prices. With
restriction on decommissioning relief, it
will raise some £2,000m of tax annually.
l An additional 1 per cent cut in corpo-
ration tax was announced. From April
2011, the main rate of corporation tax
will now be reduced from 28 per cent to
26 per cent as well as by one per cent
each following year until it reaches 23
per cent in 2014.
l In May 2011, further consultation on
the introduction of a patent box will be
published, This will be followed by draft
legislation in autumn 2011. The patent
box will give a reduced corporation tax
rate of 10 per cent on profits from
patents.
l An opt-in exemption from corporation
tax on the profits of foreign branches of
UK companies will be added to the
A man watches Chancellor George Osborne deliver his Budget
Statement on television screens in an electrical store, Edinburgh
Finance Bill 2011 when it is published on
31 March.
l In the Finance Bill 2012, new
Controlled Foreign Company (CFC) rules
will be introduced. A consultation docu-
ment will be published in May and draft
legislation in autumn 2011. The rules will
include a finance company partial
exemption, broadly resulting in an effec-
tive UK tax rate of one quarter of the
main rate on profits derived from over-
seas group financing arrangements.
There will be interim changes to CFC
rules in the Finance Bill 2011.
l A consultation this year on merging
National Insurance Contributions and
income tax was announced.
l A moratorium will exempt micro-busi-
nesses and start-ups from new domestic
regulation from 1 April 2011 for three
years.
l Further deregulation was promised:
the implementation of the Young health
and safety review, the dropping of some
existing regulatory proposals and a pub-
lic review to reduce the stock of burden-
some regulation.
l The location of ten urban enterprise
zones sites were announced across
England, and there will be a further
enterprise zone in London. The Mayor of
London has chosen an area around the
Royal Docks in East London. There will be
a competition for the sites of ten further
zones. Businesses that move into an
enterprise zone in the course of this par-
liament will be eligible for a 100 per cent
business rate discount worth up to
£275,000 over five years.
l The Enterprise Investment Scheme
(EIS) and Venture Capital Trusts (VCT)
will be reformed, if EU state aid approval
is granted. The rate of EIS income tax
relief will then rise from 20 per cent to
30 per cent from April 2011. From April
2012, the annual EIS investment limit for
individuals would double to £1m and for
VCT and EIS the qualifying company lim-
its would increase to 250 employees and
to £15m assets and the annual invest-
CITYA.M. 24 MARCH 2011
ment limit for qualifying companies
would go to £10m. The schemes will also
be refocused.
l From 6 April, the lifetime limit on capi-
tal gains that qualify for Entrepreneurs’
Relief (CGT at 10 per cent) will be dou-
bled to £10m.
l If state aid approval is granted, the
small and medium-sized enterprise
(SME) research and development tax
credit will increase to 200 per cent from
April 2011 and 225 per cent from April
2012.
l The small business rate relief holiday
will run for another year from 1 October.
PERSONAL TAXES
l The 50 per cent higher rate of tax was
affirmed as temporary, but no date was
set for its phasing out. All income tax
rates for 2011-12 will remain at their
2010-11 levels. National insurance rates
will increase by one per cent.
l In addition to increasing by £1,000
this year, the personal allowance for
those under 65 will increase by £630 to
£8,105 in 2012-13, and the basic rate
limit will then be reduced by £630, leav-
ing the higher rate threshold unchanged.
By the end of the parliament, the thresh-
old for income tax will increase to
£10,000.
l Draft regulations for tax-free Junior
ISAs will be published in the week of 28
March alongside the Finance Bill 2011.
l The default indexation assumption for
all direct taxes including ISAs will be the
CPI inflation measure from April 2012.
l The government plans to reform the
rules on non-domiciled individuals from
April 2012. Those who have been UK res-
ident for twelve years or more will face
an increase in their annual charge from
£30,000 to £50,000. There will be no
other substantive changes in this parlia-
ment.
CITYA.M. 24 MARCH 2011 News | Budget Special 3

GREEN MEASURES TECHNOLOGY

l The initial capitalisation of the Green
Investment Bank (GIB) will be £3bn. It
l The government will provide £100m
of new capital funding in 2011-12 for sci-
OUR
will begin operation in 2012-13.

l From 1 April 2013, a price floor for

ence and innovation campuses.
BUDGET
carbon will be set in the power sector,
starting at around £16 per tonne and
TRANSPORT
l Fuel duty was cut from 6pm yester-
SPECIAL
PAGE 4, 5,
targeting £30 by 2020. This will increase
the average annual bill by £17 by 2015. day. A fair fuel stabiliser was announced:
when oil prices are high, fuel duty will

19, 21, 22,

follow inflation. The 2011-12 inflation-
HOUSING only increase in fuel duty will be deferred
to 1 January 2012 and the 2012-13
l The government and builders will fund

23, 24, 25,

increase to 1 August 2012.
an equity investment to help some
10,000 purchases of new-build property. l Air Passenger Duty has been frozen

l For bulk purchases of residential prop-
erty, stamp duty will be able to be calcu-
lated by the mean value of the properties
rather than the aggregate value.
26, 27
for 2011-12. The government will consult
on how to reform the duty, including
plans to extend the tax to flights on busi-
ness jets.
Marc Sidwell

Top right: Protesters

try to block off
Downing Street.
Bottom right:
Chancellor of the
Exchequer George
Osborne (centre) has
a rehearsal with his
treasury team, in
No11, from L, Mark
Hoban (Financial
Secretary to the
Treasury), David
Gauke (Exchequer
Secretary to the
Treasury, hidden),
Danny Alexander
(Chief Secretary to
the Treasury),
Justine Greening
(Economic Secretary
to the Treasury) and
Lord Sassoon
(Commercial
Secretary to the
Treasury)

l Measures on tax avoidance have been
introduced to raise around £4bn over
this parliament, including new measures
on the stamp duty land tax rules.
l The government will introduce legisla-
tion to create an exemption from income
tax for subsistence allowances paid to
experts seconded to EU bodies located in
the UK. These bodies are the European
Banking Authority, the European
Medicines Agency and the European
Police College.
l On top of the above-inflation increases
already planned on tobacco and alcohol
duties, hand-rolling tobacco duty is
increased by 10 per cent.
l Also, from 1 October 2011 an extra
duty on high-strength beers and a
reduced duty on low-alcohol beers will
be introduced to attempt to nudge the
nation’s drinkers. From 28 March, the tax
on a pint will go up by 4p, on a bottle of
wine by 15p and there will be 54p more
tax to pay on a bottle of spirits.
PENSIONS
l The government has accepted the
Hutton review of public sector pension
provision. Following consultation, propos-
als will be set out in the autumn.
l The government has decided the
appropriate discount rate for calculating
unfunded public service pension contri-
bution rates should be based on the long
term expectation of GDP growth. A dis-
count rate of 3 per cent above CPI will
now be used, to be reviewed in five years.
l The state pension system will be
reformed for future pensioners to pro-
vide simple, contributory flat-rate sup-
port above the level of the means-tested
Guarantee Credit. This will, however,
take years to implement. Contributions
to the current system will be honoured.
CHARITIES
l The gift aid benefit limit will rise from
£500 to £2,500 from April 2011, subject
to the existing 5 per cent limit. Guidance
will be published in the Finance Bill 2011.
l From 6 April 2012, estates leaving 10
per cent or more to charity will face a
reduced rate of inheritance tax at 36 per
cent. From April 2013, charities will be
able to claim gift aid on up to £5,000 of
small donations without the need for gift
aid declarations.
JOBS
l 40,000 new apprenticeships will be
created, targeted specifically at young
NEETs (those not in education, employ-
ment or training). Funding will also be
granted to stimulate small businesses to
offer 10,000 higher level apprenticeship
places.
l An additional 80,000 work experience
placements will be funded for young peo-
ple over the next two years.
PLANNING
l The planning application system will
be simplified, removing national targets
on previously-developed land but keeping
greenbelt regulation intact.
4 News | Budget Special
DON’T
MISS
A useful but schizophrenic package
OUR
times, occasionally awful, way too
political and often quite surprising. It
wasn’t quite the Budget for growth
BUDGET
that George Osborne should have
delivered: populism all too often got
the better of economic soundness,
SPECIAL
while the Lib Dems, membership of
the EU and analytical confusion
meant that its radicalism was blunted.
EDITOR’S LETTER
ON
Far from being a simplifying Budget, it
ALLISTER HEATH further complicated the tax code with
its Gordon Brown-style proliferation of
PAGE 19
complex, fiddly micro-measures.
SOME of the early reaction yesterday First, the good stuff. Entrepreneurs
was that this was a slightly boring, for- will now be taxed at 10 per cent on
gettable Budget. Nonsense. It was far- their first £10m in capital gains, up
ranging: radical in parts, brilliant at from £5m previously, a huge increase
in the incentive to set up a new busi-
ness in the UK. The accelerated cut to
corporation tax from 28 per cent to 26
per cent in April, with further cuts of
1p a year until it falls to 23 per cent by
2014-15 is to be applauded. There are
plenty of other related improvements
on tax, some of which could lead to
some companies moving back to the
UK. Other good changes include a
shake-up in planning rules – though
we will have to wait and see whether
this genuinely makes developments
easier. Other pro-enterprise rules were
more gimmicky. The Chancellor com-
mitted himself to simplifying tax
rules, but only chopped 100 pages
from our 11,520 page tax rulebook
and has added many more. He stated a
desire to relieve business from the bur-
den of regulation. But even on his own
numbers, the burden is only being
decreased by 0.4 per cent, the Institute
of Economic Affairs has calculated.
Osborne’s pro-enterprise policy is
schizophrenic. Entrepreneurs are
hugely incentivised – but other top
executives, even if they are creating
just as much wealth by successfully
growing firms on behalf of owners,
are being hit with a rise in direct tax to
42 per cent and 52 per cent above
£150,000 a year from April, thanks to
the special new rate of national insur-
ance. It was good that Osborne con-
firmed that the top rate of tax was just
temporary – but why did he ask HMRC
to assess whether it was raising any
revenue? The taxman will never back
a tax cut. Another contradiction was
that while most firms were given cor-
poration tax cuts, national insurance –
a tax on jobs – is still going up. It’s a
case of robbing Peter to pay Paul
– and often Peter
and Paul are actu-
ally the same per-
son.
Business needs
stability and pre-
dictability. Yet on top
of his sensible meas-
ures, the Chancellor
also unveiled a series of
smash and grab raids
on sectors of the econo-
my the public dislikes:
banks, oil and gas firms
and electricity companies.
The huge hike in the extra
profit tax from 20 per cent
to 32 per cent on the oil
companies came as a shock
to the markets: why bother investing if
you get hit by much higher taxes
when your gamble eventually pays
off? Companies had been using some
of their North Sea oil profits to explore
further afield. When Brown raided the
North Sea last time, exploration
stopped and it was a disaster for
Britain’s energy supplies. Banks are
being hit with yet another increase in
the bank tax to prevent them from
benefiting from the cut in corporation
tax – it is now the second time their
levy has been raised, most recently
just a few weeks ago. The lower corpo-
ration tax and the controlled foreign
company changes may lead to some
firms relocating to London – but this
latest hit on banks may yet tip one or
two over the edge. While the Budget is
un-green in that it helps motorists –
an excellent move – it is greener than
ever when it comes to electricity con-
sumers, who will have to pay more fol-
lowing the imposition of a carbon tax.
The Office for Budget
Responsibility’s decision to cut the
growth forecast to 1.7 per cent this
year was sensible. The reason: higher
inflation, which is eroding take-home
pay and hence consumer spending.
The Bank of England’s failure to keep
control of inflation is having a real,
direct cost: this is something that the
doves, who are paranoid about the
CITYA.M. 24 MARCH 2011
impact on growth of higher interest
rates, ought to mull over.
Growth is predicted at 2.5 per cent
in 2012 and 2.9 per cent for each of the
two subsequent years. Such figures are
not wholly fanciful, of course, and
they still imply the UK economy will
be 0.75 per cent smaller than previous-
ly thought in four years’ time. But the
reason the OBR sees such a bounce-
back is because it thinks there is a lot
of spare capacity in the UK economy, a
doubtful assumption. A better reason
would be that the relatively big cuts in
public spending as a share of GDP,
combined with his supply-side meas-
ures, may have started to boost private
sector growth permanently by then.
Let us hope that this does happen –
but the real worry is that Britain’s pub-
lic finances rely massively on year
after year of accelerating growth. If
this doesn’t materialise, perhaps
because of external events, Osborne’s
entire project could collapse.
Where the OBR may be too pes-
simistic is on jobs. Between 2010 and
2015 it expects total employment to
increase by only 900,000, a figure
which seems on the low side. This
comprises an increase in private sector
employment of around 1.3m, partly
offset by a reduction in general gov-
ernment employment of around
400,000 between 2010-11 and 2015-16,
a five year period. The reason for my
scepticism is that the economy sup-
posedly grew by just 1.3 per cent in the
2010 calendar year – and yet during
that time the private sector created
428,000 jobs, leading to a net rise in
jobs of 296,000 after 132,000 public
job cuts. Stronger growth
ought to mean increased
job creation. Yet the OBR is
actually predicting that
employment will fall by
100,000 overall in 2011-
12, suggesting that
the private sector
will add zero jobs.
If true, this would
be a disaster for
the coalition
and a triumph
for Ed Balls –
but it just
doesn’t
make sense
given the still
decent growth fore-
casts. So if the OBR is right about
overall levels of growth then it is prob-
ably underestimating jobs significant-
ly – but all bets are off if it is
over-estimating the recovery in later
years.
Expenditure will be quite a lot larg-
er than previously predicted. The
biggest driver is the cost of debt inter-
est: in 2011-12, this will be £4.7bn high-
er, because some gilts have coupons
linked to inflation. Total public spend-
ing will rise from £694.4bn this year to
£710.4bn in 2011-12, £720.7bn in 2012-
13, £730.1bn in 2013-14, £743.6bn in
2014-15 and £763.8bn by 2015-16.
Spending in five years’ time will be
around £6bn per year higher than pre-
viously expected and the national debt
will be £44.5bn higher. But despite the
higher cash expenditure, higher infla-
tion also means that total public
spending will still fall by 3.7 per cent
in real terms over the next four years,
roughly the same cut as before.
Osborne was right to stay the course
on spending. It is just a shame that his
pro-growth message couldn’t have
been clearer and less tainted by pop-
ulist diversions and the urge to fiddle.
On balance, however, Britain will be a
better place to do business after this
Budget – the question is whether the
improvement will be large enough to
make a real difference.
allister.heath@cityam.com
Follow me on Twitter: @allisterheath
CITYA.M. 24 MARCH 2011 News | Budget Special 5

A political Budget in Gordon Brown’s mould ration tax and the 1p cut in fuel duty
too late to consider their effects on
its economic forecasts.
Always the master tactician,
Osborne included the cut in fuel
duty to close down the Labour party’s
most potent line of attack. The corpo-
ration tax cut was held up while he
POLITICAL COMMENT found a remedy to deflect the dubi-
ous but populist claim that he is
DAVID CROW handing tax cuts to the banks.
Since becoming shadow chancel-
most obvious example of soaring
inflation.
But Osborne’s decision to cut fuel
duty by 1p, which took effect at 6pm
last night, offered some immediate
respite to hard-pressed families. He
also cancelled the Labour govern-
ment’s fuel duty escalator by raiding
the profits of North Sea oil compa-
nies.
The upshot is that a litre of petrol
now costs 6p less than it would have
will be wiped out by the introduction
of a price floor for carbon, a complex
but all too real tax hike that will add
£17 a year to the average consumer’s
energy bill by 2015-16, according to
Treasury estimates.
Elsewhere, there were lots of
“micro” measures – headline grab-
bing gimmicks that have been
poorly thought through. A cut to red
tape for businesses with less than 10
employees? A sure fire way to stop
levy without notice – for the second
time in as many months. Another
line of attack was swiftly closed
down.
This kind of politicking is reminis-
cent of Gordon Brown, especially
while he was chancellor. Who can
forget the 2p cut in the main rate of
income tax, designed to put the
Tories on the back foot but paid for
by scrapping the 10p rate for the low-
est paid.

G
EORGE Osborne added the two
most eye catching measures to
his Budget at the very last
minute. We know this because
the Office for Budget Responsibility
said it learned of the 2p cut in corpo-
lor, Ed Balls has used rising petrol
prices to great effect. He forced a vote
on cutting VAT on petrol and has
used every press appearance to com-
plain about the price of fuel, all too
aware that prices at the pump are the
done. Allies of Osborne were yester-
day pointing out that this will save
owners of a Ford Focus over £3 every
time they fill up the car (coinciden-
tally or not, the Balls family happens
to own a Focus). Much of the benefit
firms hiring that eleventh worker.
Osborne also knew that the Labour
party would try to portray any reduc-
tion in the headline rate of corpora-
tion tax as a tax cut for banks.
That’s why he jacked up the bank
Brown, a Scottish Labour chancel-
lor, wrong-footed the Tories by raid-
ing the poor. Osborne, a blue-blooded
Conservative, wrong-footed Labour
by raiding the banks. How times have
changed.

George Osborne
unties his hands
tically measured pace, as if afraid that
a step off the scripted path might set
off a landmine.
His careful pace was testament to
months spent grooming a tightrope
act of which even Gordon might have
been proud: tactical feints, mysterious
sleights of tax bands, enterprise zones
POLITICAL SKETCH sent forth like winged monkeys.
JULIET SAMUEL Halfway through, notes began to be
passed with increasing urgency on
the opposition benches, all of them

“T
he chancellor’s hands are
tied,” we kept hearing last
week. But like the digits of a
precocious contortionist,
George’s fingers fluttered free.
They bounced iambically over not-
quite-iambic phrases – “to fix the
budget to fit the forecast” – pointed
emphatically upwards as his nasal
tones scraped the rafters and
stretched themselves soothingly over
sunny phrases and inconvenient facts.
Sliding gingerly into the delicate
matter of downgraded growth fore-
casts, George invoked the ghost of
Gordon, and the House groaned. “It
has been known for chancellors in
recent years to rattle these [growth
forecasts] off at great speed in the
hope that no one will keep up,” he
said. “I will not do that.”
No, George chose an uncharacteris-
funnelled through Ed Balls before
they reached young Ed’s excitable
gaze. A pile of typed Labour notes
even found their way around the
press gallery, deploring “borrowing
up by £44.5” (sic).
Balls heckled and blinked every
time a mildly technical piece of jar-
gon came his way, a bull catching
sight of a red flag. Then Ed stood, pos-
itively wired, ready to catapult him-
self over the despatch box into
George’s lap, as he unleashed the con-
tents of a particularly useful crib-
sheet from the back benches: “He’s
not Nigel Lawson! He’s Norman
Lamont with an iPod.”
Meanwhile, the Treasury’s chief
spinner had ammunition ready for
hacks as they trooped out: “There’s an
important footnote on page 74!”
Well, quite.

PoliticsHome.com

The Budget: What did you think?

AFTER yesterday’s Budget, we ran a
snap poll of 250 readers with
PoliticsHome to gauge your thoughts
on some of the key changes.
First we asked about the decrease in
corporation tax. More than 87 per
cent supported the change, with 9.7
per cent against and 2.75 of no opin-
ion. The average score out of ten was
8.31.
On the increase to the bank levy,
58.66 per cent were against, 39.76
per cent for, and 1.58 per cent unde-
cided.
A total of 82.35 per cent supported
increasing the tax allowance to
£8,075 in 2012-13, with 13.73 per
cent against, 3.92 per cent of no opin-
ion. The score out of ten was 7.96.
Fuel duty cuts got a positive reaction,
with 73.44 per cent for, 21.88 per
cent against and 4.69 per cent of no
opinion, with an average rating of 7.43
for the reform.
Finally, 52.75 per cent were in favour
of the windfall tax on North Sea oil
companies, with 43.36 against, and
3.91 not expressing an opinion.

In association with Apply to join today at

PoliticsHome.com www.cityam.com/panel
 6 News CITYA.M. 24 MARCH 2011

Tchenguiz inquiry CARNAGE IN JERUSALEM

A BOMB planted in a

hits double setback

bag exploded near a
bus stop in a Jewish
district of Jerusalem
yesterday, killing a
woman and injuring
at least 30 people, in
an attack police
sion to quit will raise eyebrows since blamed on
▲

REGULATION
THE man in charge of the fraud inves-
tigation into the financial affairs of
the Tchenguiz brothers and their con-
nection to the collapsed Kaupthing
Bank has resigned on a day which
also saw dozens of documents being
returned to the brothers’ lawyers.
The Serious Fraud Office’s (SFO)
Mick Randall is said to be taking up a
job in the private sector. But his deci-
it comes just two weeks after a mas- Palestinian militants.
sively high profile raid at the
Tchenguiz Brothers’ Mayfair offices.
The brothers, who have strongly
protested their innocence, yesterday Picture: Getty
received dozens of documents via
their lawyers Stephenson Harwood, it
is understood, which had been
“seized in error” according to an SFO
letter. The documents were returned
without warning.

Portugal PM
forced to quit
He presented his resignation two

▲
EUROZONE CRISIS
BY ALISON LOCK
PORTUGUESE Prime Minister Jose
Socrates resigned yesterday after his
latest austerity budget was thrown out
by parliament.
The defeat leaves Portugal teetering
on the bring of an EU bailout, without
a government and without a credible
plan to address its debt problems.
Socrates had threatened to resign if
the cuts – the fourth package of
reforms designed to help the country
avoid a rescue – were rejected.
But all five opposition parties voted
against the measures and the primary
opposition Social Democrat party
called for an election.
“This political crisis has very grave
consequences for the confidence
Portugal needs from institutions and
the financial markets,” Socrates said.
hours after the vote to President
Anibal Cavaco da Silva, who said he
would meet all political parties on
Friday but the government would con-
tinue to hold authority until then.
Socrates said he would remain in
power in a caretaker capacity but the
country faces weeks of political uncer-
tainty until an election can be held in
two months’ time.
The yield on Portuguese govern-
ment bonds shot to euro lifetime
highs of 8.18 per cent preceeding the
vote, a level the market views as unsus-
tainable and that makes a bailout
almost inevitable.
The collapse of the government
leaves Portugal without permanent
leadership for a crucial two-day sum-
mit starting today in Brussels, where
the EU will hammer out a solution to
the bloc’s debt problems.

WHAT THE OTHER PAPERS SAY THIS MORNING

BP GULF SPILL PROBE UNCOVERS GOLDMAN SACHS' LLOYD BLANKFEIN

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VALVE BLOCKAGE
BP’s Macondo well continued to spill
oil into the Gulf of Mexico after the
Deep water Horizon rig explosion
last year because a piece of pipe was
wedged in the valves that were sup-
posed to shut it off, an investigation
into the accident has found. The
blow-out preventer, the stack of
valves on the sea bed intended to pre-
vent escapes of oil and gas, failed to
APR representative close properly because a section of
drill pipe had buckled inside the
well, obstructing the “rams”
deployed to seal it, according to Det
Norske Veritas, a consultancy hired
by the US interior department. The
failure of the blow-out preventer was
a missing piece of the picture.
TELLS COURT THAT FORMER BOARD
MEMBER BROKE FIRM’S RULES
Lloyd Blankfein, the chairman and
chief executive of Goldman Sachs,
told a New York court that a former
board member broke the bank’s rules
by revealing discussions of its strategy
review to Raj Rajaratnam, a billion-
aire hedge fund manager on trial for
insider trading. Blankfein was called
by government prosecutors as a wit-
ness in the third week of the trial of
Mr Rajaratnam, who is accused of
making $45m (£27m) trading shares
based on inside information. Some of
that information, prosecutors allege,
came from Rajat Gupta, who was a
director on Goldman’s board between
2006 and 2010.

CONOCOPHILLIPS TO SELL UP TO
$10BN IN ASSETS
ConocoPhillips, the third-biggest oil
and gas company in the US, said it
Fuel consumption figures for the CR-Z range in mpg (l/100km): Urban 46.3 (6.1), would shed an additional $5bn-
Extra Urban 64.2 (4.4), Combined 56.5 (5.0). CO2 emissions: 117 g/km. $10bn in assets during the next two
years on top of $7bn sold last year.
Terms and Conditions: Offers valid on new retail cars registered from 1 February to 30 March 2011. Applies to CR-Z range. Offers applicable The company’s shrink-to-grow strate-
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(HP): Indemnities may be required in certain circumstances. Finance is only available to persons aged 18 or over subject to status. All figures who pushed the company’s share
are correct at time of publication but may be subject to change. Credit provided by Honda Finance Europe PLC, 470 London Road, Slough,
Berkshire SL3 8QY. Servicing: 3 years complimentary servicing or 37,500 miles, whichever comes first, and includes a maximum of 3 services. price up by more than 40 per cent
Complimentary servicing covers the manufacturer’s scheduled servicing only. during the past year. Yesterday, when
the additional sales were announced,
Conoco shares rose 65 cents to $77.87
the NYSE in late morning trading.
PAY BONUSES WITH COCOS SAYS
BANK OFFICIAL
A Bank of England official has said
there is a strong case for bonuses to
be paid in the form of contingent
convertible capital — securities that
convert into loss-absorbing equity
when a bank is in trouble. Executive
director Andy Haldane suggested if
half of City bonuses and dividends
since 2000 had been paid in “cocos”
the bank bailout might have been
averted.
 8 Economics CITYA.M. 24 MARCH 2011

Mortgage approvals from UK Bank’s doves

high street banks remain low stick by low
▲

HOUSING

BY ERIC WILKENS
MORTGAGE approvals for house pur-
chases remained near their lowest
level for two years, the British Bankers’
about 11 per cent on the year.
However, the annual growth of the
main high street banks’ net mortgage
lending was 2.5 per cent in February --
substantially ahead of the 0.7 per cent
for the whole mortgage market in
rates despite
rise unemployment, negative real
income growth, the increasing fiscal
squeeze, very low consumer confi-
dence, and ongoing difficulties in get-
ting a mortgage (particularly for first
time buyers).”

Association (BBA) reported yesterday.
The 29,923 mortgage approvals in
February were just a slight upgrade
from the 29,159 in January and the 23
month low of 29,029 in December.
Mortgage approvals were down
January, the BBA claimed.
Economist Howard Archer of IHS
Global Insight, said: “We believe hous-
ing market activity and house prices
will remain under pressure for some
time to come from high and likely to
nervous split
Archer added that because of the
weak housing market, he speculates
housing prices will fall by around five
per cent in 2011 and end up losing
about 10 per cent from the peak levels
seen in the first half of 2010.

▲
UK ECONOMY “The agents report that labour cost
BY JULIAN HARRIS growth is back to about the 1998-2007
norm,” he said. “With the weak
STERLING dropped by over half a per pound and strong import prices, this
cent against the dollar yesterday would set the stage for a lasting infla-
morning, after the Bank of England tion overshoot -- we still expect the
revealed that two thirds of its mone- committee to hike soon.”
tary policy committee members still Andrew Sentance voted again for a
oppose a rise in rates. 0.5 per cent tightening of rates, and
However, there were further signs stood out among the committee
that the committee may be moving notes for his ultra-hawkish com-
towards a gradual normalisation of ments. Bank chief economist Spencer
interest rates. Dale, along with Martin Weale, both
Six members of the nine-man com- again voted for a milder 0.25 per cent
mittee voted against any rise in rates, rise in Bank rate.
yet the minutes, released yesterday, However, the Bank’s chief dove,
admitted to “differences of view American Adam
between these members” on upside Posen (pic-
risks to inflation. tured), con-
Some of the six felt that “the case tinued to
for an increase in Bank rate had argue for
strengthened in recent months.” e v e n
The Bank rate has sat at the his- more
toric low of 0.5 per cent for over quanti-
two years. tative
There is a “significant risk” of easing.
consumer price inflation shooting
above five per cent in the “near
term”, the minutes revealed.
“We agree,” commented Alan
Clarke of BNP Paribas, “we see the
peak at 5.2 per cent.”
“What is clear is the Bank will have
to revise up its inflation projection at
the May inflation report,” Clarke
added.
Inflation in the first three
months of this year could
already exceed the level
that the Bank predicted
in its February inflation
report.
The effect of January’s
VAT rise on prices was
“as yet unclear,” the
committee believed.
Yesterday the Bank
also revealed results
from its latest agents’
survey, which con-
tains more evidence
on inflationary pres-
sures, according
to Citigroup’s
chief economist
Michael Saunders.

NEWS | IN BRIEF Eurozone high street morale slips

Growth for Eurozone’s industry
Industrial new orders in the Eurozone
were up by 0.1 per cent in January,
month by month. Excluding volatile
items, new orders were up 1.6 per cent.
Compared with January 2010, industri-
al new orders grew by 20.9 per cent in
euro area. Across the wider European
Union area, new orders were up 0.2 per
cent in January, compared to
December – an annual rise of 18.6 per
cent, and 1.9 per cent month on month
when excluding volatile items. Among
member states, Denmark, Latvia, and
Bulgaria registered the highest increas-
es. Estonia, France and Finland regis-
tered the largest falls in new orders.
Consumer confidence in the Eurozone
suffered a knock in February. The
European Commission’s “flash” index
slipped back to -10.6, having recovered
to -10 in February.
US home sales fall to record low
Wall Street stocks fell in yesterday’s
morning trading, partly due to disap-
pointing new home sales data. US new
home sales plummeted in February to a
record low and prices were the lowest
since December 2003, suggesting the
housing market slide was deepening.
Sales in February dropped 16.9 per cent
to a seasonally adjusted 250,000 unit
annual rate, the lowest since records
began in 1963, the Commerce
Department revealed.
 The Capitalist
10
A BRAND
NEW BAG ON
GEORGE’S
BIG DAY
YESTERDAY’S budget saw George
Osborne depart from a 150-year-old tradi-
tion, when he debuted a brand new red
dispatch box for his journey from
Downing Street to the Treasury.
The battered briefcase touted by
almost every chancellor since 1860 was
made for William Gladstone, and only
James Callaghan and Gordon Brown
have diversified since, the latter famous-
ly carrying his speech in a bag made by
local craftsmen from his constituency.
With Gladstone’s bag officially retired
by the National Archives, speculation
ahead of the budget was rife as to what
Osborne would deem a worthy replace-
ment. Would he plump for a trendy man
bag or designer briefcase from
SamCam’s Smythson line?
But Osborne chose to stick with tradi-
tion, flaunting an almost identical (if
considerably fresher looking) bag in the
customary red.
The bag was commissioned by the
National Archive as an homage to
Gladstone’s original, and “hand-made
using traditional techniques and materi-
als by a team of experts including car-
penters, bookbinders, and engravers”,
The monogram on the new budget box has been updated for Elizabeth II
according to the Archive’s press office.
Eagle-eyed observers will spot one cru-
cial difference though – the monogram
has been updated from VR to ERII to
reflect the change in monarchy.
BETTING ON TAXES
ASIDE from the iconic red bag, Gladstone
left another legacy following his time in
Parliament – the record for the longest
budget speech ever, running to four
hours and 45 minutes in April 1853.
Luckily for today’s MPs, Osborne’s
effort yesterday didn’t come close – he
spoke for just 56.5 minutes before hand-
ing the floor to Ed Miliband.
The length of his speech was just one
EDITED BY CITYA.M. 24 MARCH 2011
ELIZABETH FOURNIER
Got A Story? Email
thecapitalist@cityam.com
Follow The Capitalist
on Twitter: @citycapitalist
The bag was
commissioned
by the National
Archive as an
homage to
Gladstone’s
original
firm paying out to a large number of
happy gamblers.
THE BIG SLEEP
BOOKIES were also forking out on a
slightly more embarrassing budget bet
Pictures: PA yesterday, after Ladbrokes offered
odds of 16/1 on justice secretary
of several light-hearted budget Ken Clarke falling asleep dur-
punts run by spread betting firm ing the budget speech (above).
Sporting Index yesterday, which Though Clarke’s office
also offered odds on the number was quick to issue a
of times Osborne would utter the denial of the claim,
word tax during his speech. Ladbrokes said that
Unlucky Sporting Index took the fact that Ed
quite a hit on its moderate Miliband drew atten-
spread of 76-80 times, as tion to Clarke’s nap in
Osborne dropped the T word his budget response was enough
an impressive 95 times in less for them.
than an hour. However, punters that bet on
It was also stung by his need Osborne wearing a purple tie
for vocal lubrication – despite can expect a much lower pay-
an estimate that he would take ment – his indigo silk was a
just three sips of water during conservative choice with odds
the speech, Osborne’s eight of just 2/1.
mouthfuls (right) will see the Harriet Dennys is away.
 CitiFX
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 12 News
Inditex, which owns Zara, has seen sales surge
Inditex profit
soars thanks
to Asia boom
▲
RETAIL
BY JOHN DUNNE
SPAIN’S Inditex, the world’s largest
fashion retailer and owner of the
high street Zara chain, yesterday
reported a surge in profit and plans
to continue its march into Asia.
The company posted a 33 per cent
increase in overall net profit for the
year ending 31 January to €1.73bn
(£1.5bn).
Sales worldwide soared by 13 per
cent to €12.53bn, Inditex said in a
statement, with the fastest growing
revenue source in Asia.
The clothing giant announced
that it was looking to open between
460 and 500 stores this year to add to
its 3,044 stores in 77 countries.
Plans include at least 120 new
stores in China, where it already owns
143 outlets, around half of which
opened during 2010.
Asia saw one of the most rapid
rates of expansion last year with the
HSBC’s Gulliver faces opposition
over planned £13.3m package
▲
BANKING
HSBC ’s proposal to pay its chief execu-
tive up to £13.3m this year is likely to
meet shareholder opposition, investor
representatives said yesterday.
The bank’s compensation commit-
tee has proposed paying Stuart
Gulliver a base salary of £1.25m, a
bonus of up to three times that and a
long-term performance-based payout
six times his base salary.
Sarah Wilson, chief executive of
proxy voting agency Manifest said
there was “a high level of concern”
among shareholders and “a great
deal of push back” was expected.
The proposed sum is still subject to
Picture: PA
group’s retail presence there growing
to 645 stores, accounting for 15 per
cent of sales.
The group, whose other brands
include youth label Bershka and
upmarket Massimo Dutti, will also
move into new markets such as
Australia and South Africa this year
as well as launching online Zara
stores in both Japan and the United
States.
“Our priority remains to focus our
growth in Europe and Asia. 2011 will
be a year of strong acceleration in
China,” said Inditex chief executive
Pablo Isa, who took over the post in
July from Amancio Ortega, the
group’s founder and Spain’s richest
man.
“Asia should continue gaining
around three percentage points per
year in terms of its contribution to
sales.”
Shares in the company rose by five
per cent in Madrid after the annual
figures were released.
several rounds of shareholder consul-
tation and a revised figure will be put
to HSBC’s annual general meeting in
May.
But the payout dwarfs RBS chief
executive Stephen Hester’s £7.7m pay-
out and Barclays head Bob Diamond’s
£6.25m this year.
HSBC’s return to pre-financial crisis
levels of remuneration at a time
when the economy is struggling
could place banks on a collision
course with the public and govern-
ment. But its negotiations may be a
sign that large banks are gearing up
to reward their top staff far more,
which may cause more boardroom
battles this year, Wilson warned.
CITYA.M. 24 MARCH 2011
Slowdown in
sales growth
at Sainsbury’s
▲
RETAIL
BY JOHN DUNNE
SAINSBURY’S said yesterday that its
sales growth was slowing with fears
over the economy draining consumer
confidence.
Chief executive Justin King said
that the company was performing
well considering the challenges fac-
ing retailers.
Like-for-like sales for the fourth-
quarter were up by one per cent,
below market expectations, and
against growth of 3.6 per cent in the
previous quarter.
Like-for-like sales in the full-year to
19 March, excluding fuel, were up 2.3
per cent.
King said that there had been an
almost overnight change in the way
people shopped, with customers typi-
cally buying one item less on their
weekly visit to a supermarket.
He said that although that figure
seemed insignificant it represented a
massive change.
“These changes usually take years
but this has happened overnight.”
In an overview of the economy he
warned: “I do not see that customer
sentiment will change in the near
future.” King said that fuel rises had
taken a heavy toll on customers who
were trying to rein in their spending.
Meanwhile sales of non-food items
are still growing at three times the
rate of food, the UK’s third-largest
supermarket chain said.
The sales slowdown follows a
strong Christmas.
ANALYSIS l Sainsbury
400
p sumer expenditure is creeping its way up the income scale.
335.30
380
360
340
320
10 Jan 28 Jan 17 Feb
Consumer News 13
Rumours of third
tablet before UK
launch of iPad2
▲
TECHNOLOGY
Justin King said Sainsbury’s has been resilient in the downturn
ANALYST VIEWS: WHAT HAS CAUSED THE
Picture: Micha Theiner
BY STEVE DINNEEN
THE iPad 2 isn’t released in the UK
until tomorrow but rumours are
already circulating about its successor.
Sources yesterday claimed the iPad 3
SLOWDOWN AT SAINSBURY’S? Interviews by John Dunne could be released as soon as September
this year. This could spell disaster for
iPad rivals such as HP’s TouchPad,
NICK BUBB | ARDEN which is slated for release in the sum-
“
mer. Its specifications already fall
short of the iPad 2 and a new genera-
Sainsbury's was very pleased with itself for delivering 3.6 per cent like- tion Apple tablet being released with-
for-like growth in its third-quarter, but once higher VAT and the benefit of store in weeks could kill it off.
”
extensions were stripped out the performance wasn’t so impressive. We maintain Analysts are predicting the iPad 3
a ‘weak Hold’ view. We would switch to Morrisons. will have an ultra-sharp retina display
similar to that on the iPhone 4 and
hardware could include an NFC chip
CLIVE BLACK | SHORE CAPITAL for mobile payments. Other possible
“
additions include a Thunderbolt port,
which would appease those who have
The figures are indicative of how markedly and rapidly the UK con- lobbied for a USB connection, and an
sumer economy has declined in the first quarter of 2011. The read-through to the SD card reader.
”
other food retailers is cautionary. It is not good. To my mind the clamp on con- Also being dragged through the
rumour mill is the iPhone 5, which is
expected to be released in June.
23 Mar Sources in China have hinted it could
DAVE MCCARTHY | EVOLUTION SECURITIES feature a four inch screen – moving
“
closer to the monster 4.3 inch screen
on the Samsung Galaxy S II.
Consumers under pressure, rising inflation and excess capacity are Apple boss Steve Jobs also insisted
resulting in poor like-for-like sales. With the consumer facing falling that he has no plans to kill off the iPod
”
disposable income, sales are being spread more thinly – hence the underlying Classic, which was not revamped
negative like-for-like sales. when a new range of iPods were
9 Mar released in September last year.
 14 News
Espirito Santo
profits fall on
Basel III cost
BANKING
▲
BY MARION DAKERS
PORTUGUESE investment bank
Espirito Santo blamed the Eurozone
debt crisis and the new Basel III rules
for a 22 per cent drop in net income
to €122.2m (£106.3m) for the year yes-
terday.
Espirito Santo, which bought
London stockbroker Execution Noble
last November, said pre-tax profit fell
3.2 per cent to €678.6m.
Fees and capital market income
grew 13.6 and 7.8 per cent respective-
ly, delivering more than €1bn to net
income, but a 10 per cent rise in oper-
ating expenses dented gains.
The bank said an agreement with
the Portuguese government to lower
wages in 2011 would pare losses this
year.
Smiths Group eyes emerging
markets to increase its sales
▲
TECHNOLOGY
BRITISH technology firm Smiths
Group said it would look to grow full-
year sales through a greater focus on
emerging markets, after cost cuts
helped it to a higher first-half profit.
“To support growth opportunities
in emerging markets, we established
a direct sales presence in India for
both Smiths Detection and Smiths
Medical,” chief executive Philip
Bowman said.
“We remain confident of meeting
expectations for the full-year,” he
added.
“Overall recurrent income
remained healthy despite a difficult
operating environment, it said.
The bank added: “Increased inter-
est costs relating to [our] commit-
ment to maintaining a strong capital
position, as required under Basel III,
contributed to a fall in overall
results.”
ANALYSIS l Espirito Santo
3.30
€ 3.12
23 Mar
3.10
2.90
2.70
2.50
2010 10 Jan 24 Jan 7 Feb 21 Feb 7 Mar
Smiths Medical and Smiths
Detection together accounted for
nearly half of total company sales in
the first half.
The company did not give further
details on any possible sale of its med-
ical unit, for which it rejected a
£2.45bn bid approach in January.
Analysts said the medical unit could
fetch a far higher price, but more
importantly the spurned bid took the
conglomerate closer to a possible
break-up.
On a conference call with analysts,
Bowman said it “was business at
Etalon chair Viacheslav Zarenkov (inset) and the firm’s estate in St.Petersburg Picture: PA
Etalon joins the ranks of
the Russian IPO hopefuls
PROPERTY
▲
BY MARION DAKERS
PROPERTY developer Etalon yesterday
became the latest Russian firm to
announce a public float in London,
after the family-owned business said
it planned to sell off some of its stake
later this year.
Etalon, which builds residential
property in Moscow and St
Petersburg, said it planned to issue
around $500m (£307.8m) of new
usual at Smiths Medical”, and it was
the board’s “duty” to consider any
offers.
Earlier yesterday, Smiths reported a
pre-tax profit of £224m for the six
months to 29 January, slightly above
analysts’ estimate of £221m.
Sales at Smiths, whose products
range from airport scanners and
bomb detectors to medical devices
and fuel hoses, rose seven per cent to
£1.37bn, in line with market esti-
mates of £1.36bn.
The company also increased its div-
idend by seven per cent to 11.25p.
shares and use the cash to buy new
land plots.
Etalon plans to start a roadshow on
4 April, one source said yesterday,
though the firm has yet to name a
date for the share sale. Credit Suisse,
Renaissance Capital and VTB Capital
are acting as joint global coordinators
and joint bookrunners on the sale.
Credit Suisse and VTB are also
working with Russian bank Nomos,
which is planning a $700m float in
the next three months.
Divestments needed if the tech group
wants to meet price expectations
WITH operating margins up 17.4 per
cent and a confident outlook for the
year ahead, Smith Group’s long-term
outlook now depends on its ability to
navigate through its restructuring
and implement portfolio changes
that will bring value to shareholders.
It’s been an unpredictable few
years for the technology company,
which launched a restructuring plan
in 2008 to deliver annual savings of
£47m.
The firm’s pension deficit for
example – which prompted a precip-
itous sell-off in March 2009 when its
value jumped more than £450m in
six months – is now looking more
manageable, having fallen from
£305m at end July 2010 to £119m by
CITYA.M. 24 MARCH 2011
NEWS | IN BRIEF
Deutsche Bank
In yesterday's paper, we reported that
Deutsche Bank had been asked to pay
out €541m in compensation to a paper
company as a result of selling it a deriv-
atives deal without first adequately
describing the risks. This was incorrect.
The amount should have been
€541,000. We apologise for the error.
BoA forced to scale back dividend
The Federal Reserve told Bank of
America (BoA) to rein in its plans for a
modest dividend increase, in a sign that
regulators still view the lender as being
financially weaker than its rivals. The
largest US bank by assets did not dis-
close how much of a dividend increase it
was looking for, and did not give a rea-
son for the rejection. The bank said it
intends to submit a revised proposal to
the Fed and still hopes to increase its
dividend in the second half of the year.
Huntsworth profits surge
PR firm Huntsworth saw its profits
surge 14 per cent last year after a string
of new business wins. It reported pre-
tax profits of £26.7m on revenues up
11.1 per cent to £173.6m.
Unilever washes hands of Sanex
Unilever has sold its shower gel and
deodorant business Sanex to US con-
sumer goods group Colgate-Palmolive for
€672m (£584m), the firm said. The sale
is part of Unilever’s deal with the EU to
sell the brand for anti-trust reasons.
January this year.
But the market expects a disposal
– and chief executive Philip Bowman
remained reticent today on when
that could happen.
Shares in Smiths spiked as long
ago as April 2009 on rumours of the
sale of its medical arm, but as recent-
ly as January the group said it had
rejected a £2.4bn offer from Apax
Partners for the business.
Though target prices look good,
investors should be wary – a failure
to demerge would lead to significant
downside.
BOTTOMLINE
Analysis by Elizabeth Fournier
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16 News
CITY MOVES | WHO’S SWITCHING JOBS Edited by Elizabeth Fournier
Mayer Brown Matrix Group
The City law firm has boosted its asset finance David Wilson has joined the asset man-
team with the hire of former Orrick Herrington agement and banking firm as deputy
& Sutcliffe European managing partner Stuart chief executive of investment banking.
McAlpine. Wilson has over 25 years experience in
McAlpine focuses on cross-border asset and the city, most recently as chief executive
project finance transactions in the shipping, off- of Piper Jaffray where he also served as
shore and energy sectors. At Orrick, he spent global chairman of healthcare and on
time in the firm’s Singapore, London and Paris the leadership team of the group.
offices. He was the firm’s European managing Matrix also appointed Rajeev Bahl
partner between 2008 and 2009. and Chris Wickham as co-heads of
research. Bahl previously worked for
To appear in CITYMOVES please email your career
updates and pictures to citymoves@cityam.com SPECIALISTS IN GLOBAL PROFESSIONAL RECRUITMENT
WESTMINSTER
ENRC profits double
BUSINESS SCHOOL on production rises
MINING
▲
BY HARRY BANKS
BUSINESS DEGREES KAZAKH miner ENRC met forecasts
FOR THE REAL WORLD
with full-year underlying profit that
more than doubled, on record pro-
duction and demand recovery, and
said the global economic outlook
was still improving.
“We remain positive on the
group’s prospects for 2011, although
the control of costs growth and the
development of our assets in Africa
Come and experience our Postgraduate and MBA will be important issues for manage-
ment, as will be the continued near-
programmes first-hand with an Information Session term risk of commodity market
in Canary Wharf on Tuesday 29 March, 6-8pm.
NEWS | IN BRIEF
For more information text ‘CANARY’ followed by
your email address to ‘88802’ BP sells US plant for $575m
BP has sold one of its US natural gas
plants to Anadarko for $575.5m
WESTMINSTER.AC.UK/WBS (£354.3m) as part of its $30bn asset
sale to fund reparations for last year’s
Gulf of Mexico spill. The Wattenberg
Processing Plant in Colorado has the
capacity to process 195m cubic feet
per day and 15,000 barrels of natural
gas liquids. Anadarko is the largest
producer in the Wattenberg field and
is also drilling in the emerging
Niobrara Shale.
in association with
Piper Jaffray as principal, senior
research analyst covering software and
IT services. Wickham joined Matrix in
November 2010.
Cushman & Wakefield
The real estate brokers has hired Tony
Edwards, Simon Wild and Chris Parfitt
as partners in its Southern retail
agency team.
Edwards and Wild both join the real
estate firm from Jones Lang LaSalle, in
volatility,” chief executive Felix Vulis
said yesterday.
Pre-tax profit for 2010 rose 106.9
per cent to $2.97bn (£1.83bn), on rev-
enue up 72 per cent to $6.60bn
thanks to record production levels.
ENRC would not comment on
speculation a publicly listed
Glencore could make a bid.
ENRC said material prices and
costs were expected to show signifi-
cant increases in 2011, as it
embarks on a $11.1bn capital expen-
diture programme.
Margin growth of 62 per cent off-
set a 28 per cent rise in 2010 costs.
Colliers halves its losses
Commercial real estate consultant
Colliers International halved its pre-
tax losses last year to £8.4m, on rev-
enues up 14 per cent to £65.9m. The
firm said market conditions in the UK
market are improving, though Colliers’
property management business saw a
seven per cent decline in revenues as
its clients sold their buildings. Colliers
chief executive Tony Horrell said busi-
ness in 2011 has been significantly
higher than last year.
CITYA.M. 24 MARCH 2011
which Edwards was the head of their
Southern retail agency. Parfitt was pre-
viously head of leasing at Centros.
RSA
Mark Christer has been appointed man-
aging director of UK personal lines by
the global insurer. Previously Christer
was managing director of MORE TH>N
and group chief executive of renewable
energy. Christer will be responsible for
RSA’s personal lines business.
+44 (0)20 7557 7245
morganmckinley.com
Shares in the FTSE 100-listed
miner yesterday increased by 3.5 per
cent to 929.50.
ANALYSIS l ENRC
1,150
p 929.50
23 Mar
1,050
950
850
10 Jan 28 Jan 17 Feb 9 Mar
Hammerson snaps up malls
Anglo-French retail property owner
Hammerson has bought six British
retail assets for £208m, equivalent to
a yield of seven per cent, from St
Martins Property Investments. The
biggest asset in the portfolio is the
Centrale shopping centre in Croydon.
Hammerson also bought up the
remaining 75 per cent interest in
Central Retail Park in Falkirk for £69m
from its partner, US pension fund
TIAA-CREF.

 

 
    

  


 
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CITYA.M. 24 MARCH 2011
BEST OF THE BROKERS
ANALYSIS l Deutsche Telekom
11
€ 23 Mar
10.6
10.2
9.8
27 Dec 17 Jan 4 Feb
DEUTSCHE TELEKOM
Goldman Sachs rates the telecoms group “neutral”, up from “sell”, with a
target price of €10.90 (£9.47). The broker thinks the possible sale of T-
Mobile USA will be positive for the firm even if it doesn’t go ahead, given the
$3bn cash and spectrum assets promised in the break clause. The sale
would solve one of DT’s biggest strategic challenges, the broker adds, but
only has a 50 per cent chance of successfully closing.
FTSE inches up despite
Sainsbury’s glum update
THELONDON
REPORT
B
RITAIN’S top shares edged up
higher yesterday, on a budget
day that brought a mixed out-
look for UK corporates.
J Sainsbury fell sharply after a
downbeat trading update, while sec-
tor peers firmed after the budget, as
did housebuilders which got a first-
time property buyers boost, while
North Sea-focused oil firms were hit
by a tax rise.
The FTSE 100 closed up 33.17
points, or 0.6 per cent, at 5,795.88,
having ended down 0.4 per cent on
Tuesday.
Pre-budget, the spotlight fell on
Sainsbury, the most traded stock
across Europe at 421 per cent of its 30-
day average, with the FTSE Eurofirst
300 trading only 84 per cent of its 30-
day average.
The grocer topped the blue-chip
fallers’ list, off 5.4 per cent, after it
missed fourth-quarter sales forecasts,
stoking fears of a downturn in con-
sumer spending.
But money managers saw opportu-
nities among UK consumer stocks,
Wall St rises as investors
dismiss Middle East fears
THENEW YORK
REPORT
U
S stocks advanced yesterday as
materials shares rose, but rising
commodities prices due to tur-
moil in the Middle East and
North Africa could keep rallies mod-
est.
The market’s favoured indicator of
anxiety, the Chicago Board Options
Exchange Volatility Index or VIX,
shows investor worry over unsettled
world situations has been tempered
for the moment. But the lack of vol-
ume and moderate gains suggest opti-
mism is limited in scope.
News 17
To appear in Best of the Brokers email your research to notes@cityam.com
ANALYSIS l Punch Taverns ANALYSIS l Grainger
10.86 78 69.90 103.60
108 23 Mar
p
23 Mar p
74
104
70
100
66
96
24 Feb 16 Mar 10 Jan 28 Jan 17 Feb 9 Mar 10 Jan 28 Jan 17 Feb 9 Mar
PUNCH TAVERNS GRAINGER
Deutsche Bank (DB) rates the pub chain “sell” with a target price of 55p. Collins Stewart rates the residential property group “buy” with a target
The broker thinks Punch’s strategic review yesterday chose the most sen- price of 180p. The broker approves of Grainger’s increasing exposure to
sible option, though the long process of splitting the company means a London following a recent acquisition, now at around 74 per cent of its resi-
straightforward equity value for the business is still unclear. However, DB dential portfolio, and thinks new debt facilities should help shore up confi-
believes that there is some upside for investors who are prepared to be dence in the firm. Based on net asset values, the broker thinks the firm is
patient over the longer term. trading at a discount of 59 per cent.
which have been poor performers in
recent months.
Jeremy Thomas, chief investment
Gain an edge in a
officer UK equities at fund manager
competitive market
RCM, who oversees about £2bn, has
been gradually adding new invest-
ments in selected companies such as
Tesco, “which is now trading on a
lower valuation than at any time in
its history”.
Thomas said that while profit
expectations for more cyclical retail-
ers such as Next may continue to fall,
“if their share prices decline much
Study part-time for a successful
further, this will be a chance for long
term investors to buy good franchises
at terrific prices”.
career within the financial
Shares in Tesco firmed 0.3 per cent,
while Next advanced 1.5 per cent
ahead of its full-year results on
services industry
Thursday, with traders optimistic
about its online sales.
ANALYSIS l FTSE
6,100 p 5,795.88
23 Mar
6,000
5,900
5,800
5,700
5,600
5,500
10 Jan 28 Jan 17 Feb 9 Mar
Professional Certificate in Banking
Foundation Degree in Banking Practice and Management
Professional Diploma in Banking Practice and Management
BSc (Hons) in Banking Practice and Management
Join us to find out more
“Nobody really wants to step in
front, they are waiting to see, and London 6 April 2011
obviously the selling was a little over-
Open evening 6pm-8pm
done on the Japan situation,” said
Peter Jankovskis, co-chief investment
officer at OakBrook Investments in Drop-in between 12pm-5pm for a more informal chat
Lisle, Illinois.
“There is nothing else out there
right now to kind of provide that kick Free to attend
up.”
About 7.01bn shares traded on the Spaces are limited so book your open evening place today,
New York Stock Exchange, the
American Stock Exchange and visit www.ifslearning.ac.uk/CityAM to register
Nasdaq -- below the daily average of and for more information
8.07bn. The Dow Jones industrial
average gained 67.39 points, or 0.56
per cent, to 12,086.02. The Standard &
Poor’s 500 Index rose 3.77 points, or
0.29 per cent, to 1,297.54. The Nasdaq The ifs School of Finance is incorporated by Royal Charter and is the only specialist financial education body with
Composite Index climbed 14.43 the power to award its own taught degrees
points, or 0.54 per cent, to 2,698.30.
 Business Features
18 CITYA.M. 24 MARCH 2011

| Careers

Small players can beat

even the biggest rivals
Three easy ways individuals who are feeling outgunned in the
workplace should fight back against giant-sized competitors

Inn today’s
today
today’’s market you
yo
ou need to understand
the
he key principles of
o structured finance:

The larger they are, the harder they fall Picture: GETTY

and his/her bosses know what you

know. Step up and explain what your
team is doing, how it connects to their
vision and what results you’re getting.
We all get caught up in our respective
to-do lists and communicating can get
lost in the noise. Step up and seize the
microphone.
Secondly, win in the last three feet.

Securitisation.
Securit isation
isation. STEPHEN DENNY
AUTHOR AND CONSULTANT
Smart companies love it when their
giant competitors spend millions on
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Analysis.
A
Analysi
ly iis.
s drives potential consumers to stores
or search engines like the yearly great

T
HE world of work can some- migration. Companies like Adobe
times feel like you’re complete- have applied this guerilla-styled

Valuation.
Valuatioon
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S&P V Valuation R Strategies Principles of Structured Finance
aaluation and Risk when they launch.
is designed to help you better understand, surveil and value structured finance We live in a world where most of us
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assets. Can you afford to miss out? have to get up every morning and
compete against “giants” with more
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have.
Fortunately, winning isn’t always
11 - 13 May
May,, 2011 about having a bigger budget or an
MBA. While researching my book,
Standard & Poor’
Poor’s,
s, 20 Canada Square, Canary Wharf, London, E14 5LH Killing Giants, I interviewed senior
executives from great businesses like
Full course £2,200 ++VAT
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Register: www.standardandpoors.com/london_training
www.standardandpoors.com/london_training ideas, passion and the desire to see it
executed skillfully. I identified 10 ways
these giant-killing businesses succeed-
ed against seemingly overwhelming
opposition. These same lessons apply
For information on Standard & Poor’s
Poor’s Risk Driven Investment Analysis Education to managing your career. If you feel
out-muscled at work, here are three
Programme please e-mail emea-marketing@standardandpoors.com key tools to help you kill the giants.
First, seize the microphone. Often,
smaller businesses succeed by spend-
Please note: the course curriculum ing their time talking to actual cus-
does not cover the ratings criteria, tomers while their bigger competitors
worry about big media outlets and
methodologies, or applications of investors. If there is no dominant
Standard & Poor’s
Poor’s Ratings Services. voice in the market, they step up and
become that voice. Even – or especial-
ly – if they’re not the biggest player.
The world’s number one domain
name registrar, Go Daddy, was an also-
ran until it seized the microphone,
telling consumers that owning your
Poor’ss and its affiliates provide a wide range of services to, or relating to, many organizations, including issuers of securities, investment advisers, broker-dealers,
Standard & Poor’ broker-dealers, own website wasn’t just for big com-
investment banks, other financial institutions and financial intermediaries, and accordingly may receive fees or other economic benefits from those organizations, including panies and “techies,” but for everyone.
address..
organizations whose securities or services they may recommend, rate, include in model portfolios, evaluate or otherwise address
In your career, the same applies
Poor’s,
Copyright © 2011 by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. All rights reserved.
STANDARD
ST
TA registered trademarks of Standard & Poor’s
ANDARD & POOR’S and S&P are registe Poor’s Financial Services LLC. when it comes to success and promo-
tion: your customers just happen to be
internal. Never assume that your boss
approach, competing in the last three
feet and converting their giants’ cus-
tomers, one by one.
For you, focus on finishing well.
Anyone can start brilliantly, but the
ending is where results – and promo-
tions – are made. Nothing ever takes
care of itself and you’ll set yourself
apart if you’re the member of the
team who finishes solid plans bril-
liantly time and time again.
And thirdly, polarise on purpose.
When companies put meaningful
space between themselves and larger
competitors, they force customers to
make a decision. They either choose
you – or they make the active decision
not to choose you. For many, the Mini
is an impossibly small car – but for
those who tap into the brand’s ethos
of fun, performance and responsibili-
ty, it’s the perfect size. It’s not for
everyone, and this sense of exclusivity
is their strength. Applied to your
career, focus on being known for
something. Whatever it is that you’re
very good at doing, ensure that when
the discussion comes up internally
that all eyes point to you. And a word
to the wise: developing and promot-
ing this strength in an area that the
CEO personally cares about is a smart
move. If the CEO is an engineer and
you’re known for creativity, for exam-
ple, find a way to bring your strength
to bear on new product design.
We all face giants in business and in
life, whether competitors looming on
the horizon or obstacles to be over-
come in our own careers. Fortunately
for us, the game isn’t just about scale.
It’s about who has the best ideas, the
most passion and the greatest desire
to win.
Killing Giants by Stephen Denny is pub-
lished on 31 March by Portfolio Penguin,
priced £14.99
 News
Corporate tax
cut – but not
for the banks
BUDGET
▲
BY JULIET SAMUEL
BUSINESSES welcomed George
Osborne’s decision to go further and
faster in lowering corporation tax in
yesterday’s Budget.
But banks didn’t get the cut, with
the Treasury increasing its bank levy
for the second time in as many
months in order to offset the gain
they would have received from the
corporate tax measure.
Osborne announced that he would
cut corporation tax by 2p – a penny
more than expected – to 26p from
April. The headline rate is expected to
fall by 1p a year until it hits 23p in
2014-15.
But the chancellor was quick to sin-
gle out banks: “To ensure that this is
not a net tax cut for banks, I am
adjusting the bank levy rate next year
to offset its effect,” he declared.
Although banks will benefit from
the tax cut this year, they will then
have to pay out £780m more than
expected over the following three
Global firms welcome relief on foreign earnings
▲
BUDGET
THE government has announced
measures intended to lure multina-
tionals back to the UK and has prom-
ised a review on the taxation of profits
made outside the country.
The Chancellor said during his
Budget announcement yesterday: “I
want Britain to be the place interna-
The UK’s No.
| Budget Special
years due to a larger rise in the govern-
ment’s bank balance sheet levy. It will
rise to an 0.078 per cent charge on
their global assets rather than the
planned 0.075 per cent.
The change marks the second sur-
prise jump in the levy since the coun-
try’s five main banks signed up to
project Merlin, in which the govern-
ment vowed to provide a stable tax
environment. The £780m increase is
in addition to £800m extra raised
from the levy increase this year.
KPMG tax partner Tom Aston said:
“While the bank levy increase is
small, this is the second… and some
banks will be alarmed by the direc-
tion of travel.” PwC’s Matthew Barling
said: “The tinkering with the levy has
resulted in four different rates being
in force during... this year and next,
which is representative of the com-
plexity of tax rules the sector now
faces.”
A spokesman for Standard
Chartered said: “We just want to see
consistency and agreement across the
globe on these levies.”
tional businesses go to, not the place
they leave.” He claimed that the meas-
ure will “give us a far more attractive
system than France, America or
Germany”.
The headline change to Controlled
Foreign Company (CFC) tax rules
means that company units set up
abroad in order to finance foreign ven-
tures will see taxes on their earnings
financial spread
betting provider*
The government hopes Martin Sorrell will bring WPP home
decrease to a minimal rate of 5.75 per
cent by 2014, instead of being taxed as
part of a firm’s overall profits.
This is even lower than the previ-
ously announced rate of eight per
cent, a change that PwC’s Claire Evans
called “really exciting”.
The government has also promised
to review the taxation of foreign
branches of UK companies so that
Picture: Micha Theiner
they are taxed like subsidiaries of
multinational groups, which have
more generous tax terms under cur-
rent laws.
A full review of CFC rules is due to
be published in May, with the
Treasury currently consulting on the
measures. The key issue is how the UK
taxes profits that companies make
abroad. While the Budget sharply
19
Osborne calls
big businesses
home to UK plc
BUDGET
▲
MULTINATIONALS that have fled
Britain’s punitive business tax
regime gave a cautious welcome to
yesterday’s Budget, with UBM and
WPP both saying that the country is
going in the right direction of travel.
Communications group WPP
moved its headquarters to Dublin in
2008, but chief executive Sir Martin
Sorrell said yesterday that the
Budget was a positive move.
UBM went further, with chief
financial officer Robert Gray saying:
“We welcome the chancellor’s pro-
posals for reform of UK corporate
tax regulation and in particular the
taxation of [foreign] income.
“In the light of the reform propos-
als, UBM is actively considering
whether to relocate its corporate tax
domicile to the UK.”
The most important issue for
multinationals is the taxation of
their profits made abroad, which
the government has promised to
reform.
Securing the return of either firm
would be a coup for George Osborne,
who wants to give a tangible sign
that his reforms are working.
UBM’s pre-tax profit last year was
£156.4m and it paid £23.5m of tax,
while WPP made £851.3m in pre-tax
profit and paid £190.3m in taxes.
reduced taxes on earnings made for
financing foreign investment, it has
yet to declare its policy on general
earnings made overseas.
The consultation is part of an effort
to tempt back companies like WPP,
Google, Wolsely, UBM and Shire,
which have all moved their European
headquarters into more tax-friendly
domiciles.
CITYA.M. 24 MARCH 2011
Non-doms escape crackdown but UK Banks face probe for their
will reap extra £200m, says Osborne use of Big Four auditors
▲
TAX
BY STEVE DINNEEN
NON-DOMS escaped the budget with-
out the crackdown some were expect-
ing but Osborne says he will raise an
extra £200m from them over the com-
ing years.
A raft of new rules were applied to
non-doms – people residing in the UK,
but not domiciled here to avoid paying
UK tax on their foreign earnings, the
FUEL DUTY CUT PAID FOR BY RAIDING NORTH SEA OIL PROFITS
Carbon floor hits power firms
▲
ENERGY
BY MARION DAKERS
GEORGE Osborne slapped a mini-
mum price on carbon emissions per-
mits in yesterday’s Budget, which is
set to hammer energy producers
which rely on fossil fuels and add up
to £17 a year to home energy bills by
2016.
The carbon price floor will force
power generators to pay at least £16
per tonne of carbon produced from
2013 – around £5 above the expected
2013 price of an EU carbon permit.
The Treasury will pocket the differ-
ence if the EU permit price sinks
below the new UK minimum, earn-
Oil explorers
rage at 32pc
North Sea tax
▲
ENERGY
BY MARION DAKERS
NORTH SEA oil firms were left
aghast by the chancellor’s surprise
tax hike on offshore fuel explo-
rations yesterday, which has been
imposed immediately to fund the
fuel duty cut.
North Sea-focused oil explorers
saw their shares hammered by the
news yesterday that an existing levy
on profits from UK production will
rise from 20 to 32 per cent from
today.
George Osborne said the duty is to
compensate for soaring oil costs, and
that it would be scaled back if oil
prices dip below $75 a barrel.
While the Treasury will now con-
sult with oil companies, industry
bodies reacted furiously to the levy.
“Oil companies make long-term
investment decisions on a stable and
predictable tax regime. This is not
helpful,” Steve Jenkins, chief execu-
tive of Nautical and head of the Oil
and Gas Independents’ Association,
told City A.M. “It goes against the idea
of growth, jobs and exports.”
Analysts at Numis Securities said
most striking of which was an addi-
tional £20,000-a-year charge to those
who have been in the UK for 12 years
or more. This is on top of the existing
£30,000 charge for those residing in
the UK for seven years or more to total
£50,000.
However, Osborne also scrapped the
tax charge for those bringing money
into the UK to invest in a British busi-
ness. He also said there will be no
other major charges for non-doms
ing it up to £1.4bn a year by 2016 after
the price floor rises to £30 a tonne.
EU carbon permits for March
closed at €16.42 (£14.25) per tonne on
the ICE Futures market yesterday,
meaning £1.75 would go to the
Treasury at the current price to make
the difference up to the £16 floor.
Energy stocks including Drax,
Scottish & Southern and Centrica fell
after the speech.
EDF, which plans to expand its
nuclear presence in the UK, wel-
comed the tax rise. “It will support
the economics of renewables and car-
bon capture and storage and can
reduce the need for specific measures
to support those technologies,” said
the unexpected tax jump could cut
Aim-listed Xcite’s net asset value by
as much as 40 per cent to 370p.
Premier Oil, which has nearly two-
thirds of its assets away from the
North Sea, could see net asset values
drop by 2.5 per cent, Numis said.
“This one size fits all approach to
increasing the tax rates will affect
some fields more than others,”
Alan McCrae, head of energy tax
at PwC, told City A.M. “Unfortunately
there might be a number of
projects where companies decide
that the risks of making further
investments aren’t worth it any
more.”
ANALYSIS l Premier Oil
2150
p
1,972.04
23 Mar
2000
1850
10 Jan 28 Jan 17 Feb 9 Mar
over the course of the parliament – a
move aimed at creating stability that
will stop wealth generators from leav-
ing the UK.
The rules will apply to the 120,000
overseas taxpayers who are resident in
Britain. There were fears a crackdown
could damage the competitive advan-
tage enjoyed by many non-doms and
drive them out of the country, along
with their lavish spending and the tax
receipts they provide the Treasury.
chief executive Vincent de Rivaz.
Consumer groups warned that the
price increases for business would be
passed on to consumers, although
some experts were sceptical of the
Treasury’s revenue forecasts.
“The carbon price floor is in line
with current market expectations for
carbon prices, so there is a reasonable
prospect of the floor providing cer-
tainty to investors, without embed-
ding a big extra cost to the power
sector,” said PwC sustainability part-
ner Richard Gledhill.
Greenpeace complained that the
price floor handed a big subsidy to
nuclear power plants, which emit lit-
tle carbon.
North Sea oil explorers will see their levies rise from 20 to 32 per cent
News | Budget Special
▲
ENFORCEMENT
THE GOVERNMENT has asked regu-
lators to investigate whether banks
help to entrench the Big Four audit-
ing firms’ dominance through
restrictive lending agreements with
companies.
The Budget included a call to the
Office of Fair Trading to probe
whether bank covenants lock out
smaller auditors.
Tourist tax rise scrapped
and Learjet raid delayed
▲
AVIATION
THE chancellor scrapped a planned
rise in air passenger duty yesterday,
but admitted that legal difficulties
have shelved a change to aviation tax.
Air passenger duty will be frozen
this year, with a hike linked to the
retail price index planned for April
2012, George Osborne said.
The government said in the emer-
gency June Budget it would look to
switch aviation tax from a per-pas-
senger to a per-plane duty, to ensure
planes flying half-empty would be
Picture: GETTY
21
The Financial Reporting Council
had expressed concern to lawmak-
ers last year that clauses in some
covenants force companies to use
only one of the Big Four accounting
firms – PwC, Deloitte, KPMG and
Ernst & Young.
The Financial Reporting Council
said yesterday that the government
had listened to its concerns and
hoped the OFT would push ahead
with a probe.
charged the same as a full flight.
Osborne also stopped short of
introducing a “Learjet levy”, or tax
on business jets, trailed earlier this
week to close a loophole exempting
corporate jets from the air passenger
duty.
Osborne instead delayed the plan
to 2012, after launching a consulta-
tion on the structure of the tax.
Lord Sugar slammed this proposal
as a PR stunt, claiming “the revenue
on private flights, based on the same
duties paid by holidaymakers, will
not add up to a row of beans”.
Motorists win 1p
fuel duty cut to
ease pain of
rising oil prices
▲
CONSUMER
GEORGE Osborne sweetened his
Budget for consumers with a surprise
1p per litre fuel duty cut, effective
from 6pm yesterday.
The tax cut, announced at the end
of Osborne’s 56-minute Budget
speech yesterday, will be funded by a
12 percentage point tax hike on
North Sea oil exploration.
A fuel “stabiliser” will also attempt
to cushion motorists from some of
the pain of higher oil prices.
Duty on petrol will not rise above
inflation until the price of a barrel of
oil falls below $75, and after that the
hike would be 1p above the retail
price index rate of inflation.
Fuel duty will rise in line with RPI
from 1 January 2012, after Osborne
delayed the inflation-linked rise due
next week.
Labour lampooned Osborne for
keeping the VAT rise on fuel, which
the opposition party had lobbied to
overturn.
Labour pledged in its 2010 budget
to raise fuel prices by 1p plus infla-
tion each year between 2011 and
2014, but oil prices have risen from
around $80 a barrel last March to
more than $115.
The AA said the fuel tax cut
showed that the chancellor had lis-
tened to the concerns of motorists.
 22 News | Budget Special
WHAT DOES THE CHANCELLOR’S BUDGET MEAN FOR YOU?
CATHERINE GANNON, 48
MANAGING DIRECTOR OF
CITY LAW FIRM GANNONS
LAW LLP
Catherine is single with two
children, earns a gross
income of over £100,000 a
year and pays a mortgage
on her family home. She has
a share portfolio and also
has mortgages on various
investment properties. She
does not drink or smoke.
She has not contributed
much to her pension plans.
PwC’s BUDGET TEAM SAYS: There is potential for her to diversify these
Catherine was already resigned to the fact she investments and invest in Enterprise
will be losing her entitlement to child benefit Investment Schemes.
from 2013 and this has not changed following The government announced an extension of
this budget. the tax advantages – the highlight being a 10
She is unlikely to benefit much from the per cent increase of tax relief to 30 per cent.
increased personal allowance as her income She may also wish to start paying into her pri-
falls into a band where this is eroded by £1 for vate pension plans, with the gross annual limits
every £2 she earns over £100,000. from 6 April 2011 increased from £30,000 to
There was some good news for Catherine, £50,000.
with the capital gains tax annual exemption Catherine's healthy lifestyle choice means she
increased to £10,600 should she decide to sell is sheltered from the usual alcohol and tobacco
some of the investments in her share portfolio. duty increases.
PwC’s BUDGET TEAM SAYS:
Jonny may be concerned about
the impact of the increased
banks’ levy, with many of his
customers potentially working
in the city's banks.
Unfortunately there is no
opportunity for Jonny to opt
out of the VAT scheme as the
registration limit has been set
at £73,000 from April 2011.
As he is close to this thresh-
old, he should monitor his prof-
its carefully going forward for
the opportunity to de-register,
which would occur once his
turnover sinks to below
£71,000 and would thus
reduce the cost to his cus-
tomers.
JONNY SAYLE, 25 Jonny will be pleased to hear
FOUNDER OF SPIRELIFE, A FITNESS CONCIERGE FIRM FOR that fuel duty has been lowered
CITY WORKERS by 1p per litre when he next
Jonny set up his firm, which provides personal training, comes to refuel his scooter, yet
physio and massage services to clients in their own may be disappointed with the
homes and offices, in December. He is targeting turnover two per cent above inflation
of £75,000 for this year and hopes to take home a increase in alcohol duty.
salary of £40,000. He does not currently have a pension But if he enjoys a beer, he
plan or a mortgage, but is hoping to buy his house soon. should consider switching to a
He travels by scooter but tries to cycle as much as he low strength alternative to
can. He does not smoke and drinks moderately. benefit from the lower rates
when they are implemented in
October.
LAURA MUCHA, 28
Pictures: Micha Theiner
ASSOCIATE AT NORTON ROSE
Laura lives in central London, she
doesn't own a car as she is on
the bike scheme and goes every-
where on it. She is still paying off
her student loan with only one
year left. She makes £63,500 a
year as a first-year qualified
solicitor in the firm’s disputes
practice and contributes to the
firm’s pension scheme. She is not
married and has no children. A
non-smoker, she drinks on week-
ends or at social functions but
stays away from cider.
PwC’s BUDGET TEAM SAYS: employees’ national insurance.
Happily, Laura will not be affected by the recent Laura may wish to restrict her drinking habits
dramatic petrol increases given that she cycles to lower strength beers given the budget
everywhere on her bike purchased via the tax announcement of a 50 per cent reduction in
advantageous cycle to work scheme. So she will duty. She should be mindful to avoid “super
not benefit from the fuel measure. strength” beers given the 25 per cent increase
She will be hit by the one per cent increase in in duty as announced in the budget.
CITYA.M. 24 MARCH 2011
by Phoebe Torrance
PwC’s BUDGET TEAM SAYS:
Adam will be encouraged by the
announcement of further gov-
ernment investment of £2bn in
the Green Investment Bank. This
will specialise in lending for envi-
ronmental projects and should
be up and running by 2012.
He will also be buoyed by the
two per cent reduction in corpo-
ration tax from April 2011 and
the further one per cent falls in
each of the following three tax
years.
New pension rules dictate
that from 5 April 2011 Adam
will be able to make a gross con-
tribution of up to £50,000 into
his SIPP plus bring forward any
unused relief from the three pre-
ADAM HART, 47 vious tax years based on a
CHAIRMAN OF LONDON BRIDGE CAPITAL £50,000 annual limit.
Adam is married with three children aged 11,13 and 15. The one per cent increase in
He founded a corporate finance advisory firm specialis- national insurance will unfortu-
ing in the environmental economy. He makes well over nately hit Adam’s take home
£150,000 a year in salary and bonus. In addition to his pay.
main residence, he has a flat in London and a home in He should also prepare him-
Canada, though the mortgages are paid off. He has a self for being unable to claim
self-invested personal pension plan (SIPP). He does not child benefit given that he is a
smoke but does drink a moderate amount socially. higher rate tax payer. It is envis-
aged that this will be taken
away in January 2013.
RICHARD DIFFENTHAL, 30
ASSOCIATE AT LOVELLS
Richard is a corporate
solicitor. He has an 18
month old son and rents a
property with his wife.
They are hoping to get on
to the property ladder
soon. They have one car
but Richard travels to and
from work by public trans-
port. He has been flying
more frequently than he
has before. Richard takes
home around £100,000
including bonus a year and
contributes to the firm’s
pension scheme. He does-
n't smoke and drinks in
moderation.
PwC’s BUDGET TEAM SAYS: Any increase in salary from Lovells would of
Despite the recent dramatic fuel increases course be welcome but Richard should be mind-
Richard will be moderately pleased with the ful that as he broaches the £100,000 mark he
slight respite of the 1p decrease per litre and will start to lose his personal allowance.
the introduction of measures by the chancellor For the 2011-12 tax year, once his gross
to stabilise future price fluctuations. salary exceeds £114,950 he will lose his person-
Unfortunately the help for first time buyers, al allowance completely.
as announced by George Osborne, will be of lit- Richard will also be faced with the withdraw-
tle help to Richard. But he will benefit from buy- al of his entitlement to child benefit in January
ing into a subdued market. 2013 given his level of income.
PwC’s BUDGET TEAM
SAYS:
Andrew will be worse off
from 6 April 2011 due to
the one per cent increase
in employees’ National
Insurance.
This will be offset slightly
in April next year when
he will benefit from an
increase in the personal
allowance of £630 but he
will have a year to wait
for that gain.
The extension in pen-
sion relief which will
allow him to make a
gross contribution of up
to £50,000 per tax year
may well be of interest
long term, should
ANDREW GREVETT, 28 Andrew’s income
BUSINESS DEVELOPMENT MANAGER increase dramatically
Andrew is engaged and lives with his partner, has no children over the next couple of
and earns a basic salary of £60,000 a year. He owns a flat in years.
London, which he lets out, and a house in Brentwood, Essex. Andrew may wish to
Both properties are on two-year fixed rate consider switching his
mortgages. He pays £250 a month into a private pension and savings account to a cash
saves for the long term using a standard savings account. ISA to shelter up to
£5,340 worth of capital
per year from taxation.
** PwC comments provided by Claire Evans
CITYA.M. 24 MARCH 2011 News | Budget Special 23

Enterprise Zone a Royal opportunity

TAXING VICES

• In a bid to narrow the price between

Royal Victoria, Royal Albert and King
George V Docks are just to the east of
the glittering towers of Canary
Wharf. But with exceptions such as
the ExCeL international convention
centre, they are remarkably undevel-
oped. It is a beautiful location with
large expanses of water, is connected
VIEW FROM CITY HALL to the DLR and will be connected to
Crossrail. The brownfield land
ANTHONY BROWNE around is an “opportunity”, which
investors are starting to realise.
jobs in East London. The business
rates relief given to companies that
set up there, and the range of other
incentives, will help unlock the
potential of the area, and return it to
its former position as a thriving place.
The transformation could prove as
dramatic as that achieved by the last
enterprise zone in the area, which
twenty years ago ensured that towers
rose out of the industrial wasteland
that was Canary Wharf.
burdens on Londoners.
The cut in corporation tax and
commitment to having the most com-
petitive tax regime in the G20 will be
a particular benefit to a city that
depends so much on inward invest-
ment, and on global firms deciding it
is a good place to do business. It will
reduce the lure of other lower tax
jurisdictions for companies.
The chancellor’s commitment that
the 50p income tax band will only be
economy and premium cigarettes and
support health goals, the government is
loading duties on cheaper brands.
Tobacco duty rates will rise two per cent
above inflation, as was decided in last
year’s Budget, but from 6pm last night
economy cigarette packets went up 50p,
while premium brands went up by 33p.
Meanwhile smokers of hand-
rolled tobacco face a 10
per cent hike in duty.
•The price of alcohol
will rise by two per cent
above inflation from 28

I
F you haven’t been before, visiting
the Royal Docks can be a real eye
opener. In their heyday they were
the world’s busiest docks, A centu-
ry later, they are eerily quiet. The
So the creation of a new Enterprise
Zone around the Royal Docks – the
direct result of lobbying by the Mayor,
and announced in the budget – is a
real opportunity to boost growth and
Overall, the Budget will boost what temporary will answer concerns that March. From November
London specialises in: economic we are becoming less internationally high strength beers will
growth. Other measures will show competitive. have extra
the rest of the world that London is Anthony Browne is an adviser to the Mayor duty on them.
open to business, and help reduce the of London

Reforms cut
£350m of red
tape on firms
▲

REGULATION those companies,” said Ernst & Young

BY ALISON LOCK
A RAFT of micro reforms to planning
laws and business regulation were
introduced in the Budget to boost
growth in UK enterprise yesterday.
Key supply-side reforms included
sweeping changes to planning laws,
to wave through applications for sus-
tainable development and tear up
nationally-imposed targets on the use
of brownfield land.
“We will introduce a new presump-
tion in favour of sustainable develop-
ment, so that the default answer to
development is ‘yes’,” chancellor
George Osborne said.
Osborne pledged to scrap £350m
of regulation on business and
exempt all start-ups and businesses
with fewer than ten employees from
all new UK regulation for three
years.
Industry groups welcomed the
moves. “Reductions in regulations
on businesses and the promise of a
faster planning system will provide
relief to companies trying to take on
staff and invest,” said CBI director-
general John Cridland.
“Small companies will be central to
creating jobs and rebalancing the
economy. These measures and a
moratorium on new regulation and
exemptions should be encouraging to
ITEM Club chief economic adviser
Peter Spencer.
Further pro-business measures
included revising employment
tribunal procedures and extending
to two years the time employees
must work for a company before
they can sue for unfair dismissal.
The government will also
minimise the health and safety bur-
den on business by implementing
reforms recommended by Lord
Young.
The Association of British
Insurers welcomed the move. “Lord
Young rightly identified how badly
interpreted or misunderstood regu-
lation, bureaucracy and disreputable
claims management firms have
contributed to a compensation cul-
ture,” said ABI director of general
insurance and health Nick Starling.
But others warned the planning
regime changes may be hard for
local communities to accept.
“The success of these changes
will ultimately rely on local
people accepting development in
their back yards and the government
could become the architect of
its own demise if its drive to empow-
er local communities pulls the rug
from under its pro-growth agenda,”
said John Brooks, planning director
at property firm DTZ.

Science and vocational training

in focus to boost workforce skills
▲

EDUCATION
VOCATIONAL training and appren-
ticeships received a boost as chancel-
lor George Osborne unlocked more
funding yesterday.
Admitting that the UK has a lower-
skilled workforce than the US,
Germany and France, Osborne said he
would spend £180m to create up to
50,000 new apprenticeship places in
the next four years.
At least 24 new vocation-focused
university technical colleges are to be
built, double the 12 announced to
date, and he announced an extra
£100m to invest in four UK science
campuses this year.
Experts welcomed the news
though KPMG director Craig
Robinson said employers may find
the level of bureaucracy involved in
apprenticeships offputting.
 24 News | Budget Special
Osborne targets £4bn from
tax avoidance clampdown
▲
BUDGET SPECIAL
BY ALISON LOCK
TAX avoiders skipping stamp duty on
property purchases and tax on trusts
funded by employers were targeted
yesterday as the chancellor aims to
recover £4bn in lost tax revenue.
The chancellor is clamping down on
house buyers’ use of sub-sale relief,
alternative financing schemes and
exchange of land rules to avoid paying
stamp duty of up to four per cent.
And new rules on disguised remu-
neration – where companies pay staff
extra benefits such as retirement pro-
vision and deferred bonuses that sit in
trusts for years – will ensure more peo-
ple pay tax on these rewards.
Experts said his decision eased the
burden on companies that have strug-
gled to juggle new rules pushing for
them to defer bonuses with HMRC’s
demands that they pay tax immediate-
ly. “The original rules left employers
between a rock and a hard place,” said
HOUSING SUPPORT
l CHANGES TO STAMP DUTY
LAND TAX ON BULK PURCHASES
- If the buyer chooses then the rate
of stamp duty land tax (SDLT) on
properties can be determined by the
mean value of the homes bought,
rather than the aggregate value that
is currently the case. This will be
subject to a minimum rate of one per
PwC partner Carol Dempsey. “Employees cent.
could end up paying 52 per cent tax and - The rule change is expected to
NIC before a bonus is paid, even if it is encourage professional landlords and
eventually never actually received.” institutional
The move on stamp duty follows investors to
widespread use of non-mortgage build up their
financing schemes such as Sharia- property
compliant lending structures to avoid portfolios.
tax on expensive commercial proper-
ty developments. Osborne said on l STAMP
very high value property, “some of DUTY
the wealthiest are not paying their LAND TAX
fair share.” AVOIDANCE
CLAMPDOWN
- Currently
payable at
five per cent
on properties
over £5m.
-Osborne has from today banned
three schemes commonly used to
avoid paying the tax.
Two of them involved setting up
financial institutions through which a
property was bought such as an
offshore registered company,
incurring a much lower rate of stamp
duty or no duty at all.
While the third relied on taking out
long-term leases of up to 999 years
Switch to CPI
to hit workers
▲
PERSONAL TAX
BY ELIZABETH FOURNIER
AN increase in personal income tax
allowances could save basic rate
earners £326 per year compared to
what they are paying in tax today,
but the benefits will be undermined
by planned changes to how increases
in tax thresholds are calculated.
Chancellor George Osborne yester-
day said the personal tax allowance
would increase by £630 in 2012-13,
on top of a £1,000 increase already
planned for April. This will raise the
allowance to £8,105 from the current
figure of £6,475, which will take
260,000 out of paying tax.
The increased allowance will be
matched by an equivalent narrowing
of the basic rate tax band, leaving
the 40 per cent threshold at £42,475.
In similar changes that come in this
year the chancellor overbalanced the
Treasury’s books, reducing the rate
Osborne puts the 50p top rate
for high earners under review
▲
PERSONAL TAX
GEORGE Osborne yesterday confirmed
that the 50p tax rate on high earners
will stay in place for the time being,
but reassured that it won’t exist for
much longer.
The chancellor said that he would
consult HMRC to look at whether the
high earner income tax was financial-
ly viable, or whether scrapping it
would tempt more business to Britain.
CITYA.M. 24 MARCH 2011
instead of buying a property outright.
l FIRST-TIME BUYER SUPPORT
- A £250m assisted deposit scheme
for new homes.
- Open to those with a household
income of less than £60,000 a year
who can put down a five per cent
deposit on a new home.
- Eligible for a loan worth up to 20
per cent of the value of the
property, jointly funded by the
government
and
housebuilders.
The loan
will be
interest-free
for five
years and will
only be
repayable
when the
house is
sold.
l SUPPORT
FOR
MORTGAGE INTEREST SCHEME
EXTENDED
- Jobless home owners can claim up
to 100 per cent of their interest
payments after 13 weeks of
unemployment and for mortgages
worth up to £200,000.
- Originally due to expire in January
2012, the scheme will now be
extended to January 2013.
Katie Hope
by £1,500 and pushing around
700,000 people into the higher
bracket.
But the actual benefits to the tax-
payer will fall behind basic govern-
ment projections due to a switch in
2012 to the consumer price index
(CPI) for measuring the increase in
tax thresholds. It means the increas-
es won’t keep pace with salary hikes,
leaving workers more likely to be
dragged into a higher bracket.
“The chancellor’s switch to the CPI
index for direct taxes is a sleight of
hand to boost the tax take,” said
Pauline Manning a tax partner at
accountancy and business advisory
firm Wilkins Kennedy.
On national insurance, the chan-
cellor stuck to inherited plans to
raise contributions by one per cent
from April. The change will see the
standard employee rate climb to 12
per cent, with an additional two per
cent on higher earnings.
The 50 per cent tax rate for those
earning over £150,000 has been in
place since April 2010.
“The 50p tax rate would do lasting
damage to our economy if it were to
become permanent. That is why I
regard it as a temporary measure. Now
wouldn’t be the right time to remove
it, when we’re asking others on much
lower incomes to make sacrifices. But
it’s sensible to see how much revenue
it actually raises,” said Osborne.
CITYA.M. 24 MARCH 2011 News | Budget Special 25

THE CBI THE BRITISH BANKERS’ ASSOCIATION

The UK’s top business lobbying organisation. DIRECTOR GENERAL The BBA is the leading trade association for
It aims to influence government policy on a JOHN CRIDLAND the UK banking and financial services sector
wide range of business matters. and speaks for over 200 member banks

“The chancellor has made clear the DIRECTOR GENERAL

UK is open for business. The extra 1p
cut in corporation tax will help firms ANGELA KNIGHT
increase investment. Meanwhile, sig-
nificant changes to entrepreneurs’
taxation will rightly focus much-need- “Banks recognise the importance of
ed support on businesses with growth their role in securing economic recov-
potential.” ery and they understand the need to
strike a balance between raising
taxes, funding growth and maintain-
ing the UK as a global centre for
OIL & GAS UK banking and financial services. THE DIRECTORS’ VIEW
While corporation tax is paid on prof-
Industry body that represents the its, the bank levy represents an addi- Institute of Directors (IoD) provides sup-
interests of the offshore oil and gas tional fixed cost for larger banks against banks not paying such a levy, port and information for business leaders
industry in the UK by working operating in the UK. and domestically, as they compete as well as political analysis
closely with companies across the It also controversially can include the with other sectors of the financial
entire sector, governments and other business that banks are doing outside services industry. DIRECTOR GENERAL
stakeholders to address crucial issues the UK. Without satisfactory double This change is not as straightforward MILES TEMPLEMAN
such as taxation. taxation arrangements in place, this is as it first appears. Banks like other
putting banks operating in the UK at businesses want a predictable tax
CHIEF EXECUTIVE a long term disadvantage – both regime so they can plan their business “The IoD welcomes the acceleration
MALCOLM WEBB internationally, as they compete accordingly." in the reduction in Corporation Tax
to 26 per cent. The IoD also wel-
comes the very clear statement that
“The industry is shocked to now be to sustain. Importantly it will also the 50 per cent rate of income tax is
hit by a tax increase that raises the most likely increase this country’s THE ENTREPRENEUR a temporary measure. The 50 per
tax rate to at least 62 per cent, with dependence on imported oil and gas cent rate will damage long term eco-
some of the most mature and there- and thus diminish its energy security. Sara Murray is a British entrepreneur and businesswoman who founded the price comparison nomic prospects and needs to be
fore vulnerable fields now paying up At a time when we could see invest- website confused.com and developed buddi, a miniaturised tracking device for vulnerable people repealed as soon as possible. We
to 81 per cent. Today’s move in the ment recovering following the last welcome the raft of supply side
Budget runs counter to the govern- period of fiscal instability, this further mote that and the Enterprise measures announced in the Budget.
ment’s stated desire to promote shock will only damage investor con- FOUNDER OF CONFUSED.COM Investment Scheme so people The combination of reduced corpora-
growth, jobs and exports – all of fidence and make many question SARA MURRAY know about them and under- tion tax and planning liberalisation
which this industry was delivering whether the UK is an appropriate stand their value. Currently will help to lift business confidence
and will now find much more difficult destination for their investment.” most companies don’t apply at a difficult time. However, the
“The changes are a move in as they don’t know what they scale of deregulation in areas that
the right direction but will not are and see them as compli- really matter to business in general,
make a noticeable difference. cated and assume they are such as employment law, is still very
THECITYUK The reduction in corporation unlikely to be eligible. limited. And while the 21 new enter-
tax means that some com- There are two things I prise zones have real potential, we
TheCityUK's purpose is to promote the competitiveness panies can make a bit more wish the government question why the whole of the UK
of financial services – to make the UK the best place in money, but it is too small to had done – open up can’t be an enterprise zone. This was
the world to establish a financial services business change a company’s deci- public procure- a Budget aimed at changing percep-
sion on whether it is ment to smaller tions and boosting business confi-
CHIEF EXECUTIVE based in the UK or not. firms so that dence about long-term economic
CHRIS CUMMINGS The government needs they are able to prospects in the UK.”
to do something sig- get in on the big-
nificant for high- ger contracts.
“The government has taken important steps in growth businesses. And make it easi-
the Budget to create the right environment to Data shows that er to hire the first THE AA
demonstrate that Britain is indeed ‘open for particularly in a few employees.
business’ and capable of competing on a global recession, it is this Currently, smaller
stage. The chancellor’s commitment to ensure 10,000 subset ot firms tend to rely
the UK’s place as a leading financial services companies where on freelance staff
centre will provide the catalyst for Britain’s pri- high growth comes to avoid the
vate sector growth, attracting large companies from. excessive paper-
and institutions into the UK, as well as providing The R&D tax credit work involved in
the necessary conditions to encourage the suc- change is good but the hiring full-time
cess of SMEs and facilitate export-led growth.” government should pro- staff.

THE TUC The UK’s largest motoring organisation which provides services to get you safely from A to B

The UK’s national trade union body, representing
the vast majority of organised workers
GENERAL SECRETARY
BRENDAN BARBER
“Today's measures do nothing to end the
basic error of imposing deep, rapid and unfair
spending cuts on an economy where unem-
ployment is rising and growth faltering. While
there are some welcome measures on funding
for apprenticeships and much needed relief AA PRESIDENT sions in North Africa pushing the oil
on fuel duty, most of it is about taking us back EDMUND KING price back into the $115-$120-a-bar-
to the 1980s with deregulation gimmicks, rel price range, pressure on pump
hand-outs to big business and a deterioration prices and inflation could grow again.
of working conditions that failed to deliver “We applaud the chancellor's decision The increased approved mileage rates
jobs or growth then and won’t today. Overall, to listen to the AA campaign to cut from 40p to 45p are long over-due
there was little in the way of help for hard fuel duty rather than hike it by 5p a and very helpful. Companies have
pressed ordinary people fearful for their jobs litre. A £2.50-a-tank hike would have been insulated against higher fuel
and reeling from inflation driven by the VAT been the last straw for poorer drivers costs while employees, charity work-
increase. For the young unemployed the best who spend a quarter of their house- ers and midwives using their own
the chancellor had to offer was cut-price hold income on motoring. However, cars for work have borne the burden
unpaid work experience.” with jittery stock markets and ten- and in effect taken a pay-cut.”

CITY VIEWS: IS IT FAIR THAT BANKS SHOULD BE HIT AGAIN SO SOON AFTER THE MERLIN AGREEMENT? Interviews by Eric Wilkens

ROBERT BELL | OCEANIC & INDUSTRIAL FENTON FERGUSON | AON BENFIELD DAVID FARRER | HOMEFUNDING
“What does fairness have to do “If the government con- “It’s not fair that the
with the government’s treat- tinues to treat the banks banks are continued to be
ment of the banks? We live in a poorly, we should be wor- treated poorly when they
democratic dictatorship society. ried about banks leaving try and recover. Until the
People will always look for loop- London. It’s not an equi- banks recover, the country
holes for ways to benefit them- table approach and will won’t recover from the
selves.” drive the banks away.” recession.”
 26 News | Budget Special CITYA.M. 24 MARCH 2011

Deficit cuts imperilled by June-2010

Nov-2010
2009

-4
-5
2010

2.4
1.8
2011

2.3
2.1
2012
GDP GROWTH FORECASTS (%)
2.4
2.6
2013

2.9
2.9
2014

2.7
2.8
2015

2.7
2.7

sluggish growth for 2011 Mar-2011

June-2010
Nov-2010
-4.9

2.1
2.1
1.3

2.8
3
1.7

2.4
2.8
2.5
CPI INFLATION FORECASTS (%)
2
1.9
2.9

2
2
2.9

2
2
2.8

2
2
Mar-2011 2.2 3.3 4.2 2.5 2 2 2
▲

UK ECONOMY Meanwhile the growth forecast for predicts -- up from £43.1bn this fiscal 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16
BY JULIAN HARRIS this year dropped to 1.7 per cent, from year, and set to jump to £66.8bn by PUBLIC SECTOR NET BORROWING FORECASTS (% GDP)
November’s prediction of 2.1 per cent. 2015-16. June-2010 11 10.1 7.5 5.5 3.5 2.1 1.1
CHANCELLOR George Osborne’s The OBR expects growth of 2.5 per The chancellor attacked the previ-
deficit reduction plan hangs in the cent in 2012, and 2.9 per cent in the ous Labour administration for the UK Nov-2010 11.1 10 7.6 5.6 3.5 1.9 1
balance, according to official govern- following two years -- so that the gov- government’s annual deficit. “We have Mar-2011 11.1 9.9 7.9 6.2 4.1 2.5 1.5
ment forecasts released yesterday. ernment’s targets should still be hit. a higher deficit than Portugal, Greece PUBLIC SECTOR NET DEBT FORECASTS (% GDP)
The Office for Budget Responsibility Yet the GDP forecasts were described and Spain,” Osborne said.
(OBR) – the new independent fiscal “overoptimistic” by the Centre of Debt is again expected to exceed 70 June-2010 53.5 61.9 67.2 69.8 70.3 69.4 67.4
watchdog – revised up its forecasts for Economic and Business Research. per cent of GDP, the OBR revealed. Nov-2010 53.5 60.8 66.3 69.1 69.7 68.8 67.2
public sector borrowing by “around Interest on government debts will Total net debt will hit 70.9 per cent of Mar-2011 52.7 60.3 66.1 69.7 70.9 70.5 69.1
£10bn a year in the medium term.” hit £48.6bn in the next fiscal year, it GDP in 2013-14, it predicts.

GOVERNMENT SPENDING 2011-12 ANALYSIS l Impact of fiscal changes on ANALYSIS l Deficits and fiscal
different income brackets tightening in peer countries G7 members

Other Social protection 3.0%

£74bn £200bn
1.0%
Debt interest 2.5%
0.5%

Structural deficit tightening 2010 to 2011

£50bn Spain
Public order 2.0%
and safety
0 Australia
Portugal
Greece UNITED KINGDOM
£33bn 1.5%
Housing and -0.5% France
Environment
£24bn £710bn Personal social
services
-1.0%
1.0%
0.5%
Mexico
Russia
China

Italy
Turkey
Canada
South Africa India
Industry, agriculture £32bn -1.5% Germany
and employment
£20bn 0 Japan
-2.0% Indonesia Argentina
Defence Direct tax Indirect tax Benefits & tax credits Net impact -0.5% Brazil
£40bn -2.5% United States

Education
Health Bottom 2 3 4 5 6 7 8 9 Top All -1.0%
£126bn Equivalised Net Income Decile 0 2 4 6 8 10 12
£89bn
Transport Source: HM Treasury Size of structural deficit in 2010 Source: HM Treasury
£23bn

GOVERNMENT REVENUE 2011-12 ANALYSIS l OBR: Employment may drop in ANALYSIS l Official inflation forecasts keep rising
2011-12 despite growth
Income Tax 5
Other £158bn 4
GDP Employment
35
Inflation %
£85bn % Growth (millions)
GDP
GROWTH 34
3 FORECAST Forecasts:

Council tax 33 4 March 2011

2
£26bn November 2010
32

1
31
June 2010
Business rates
£25bn £589bn 0 30 3

29
-1
National Insurance TOTAL
£101bn EMPLOYMENT 28
-2 FORECAST
VAT 27
2
£100bn
-3
26

Corporation tax Excise duties -4 25

£48bn £46bn
2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2009 2010 2011 2012 2013 2014 2015

Tax-free threshold on ISAs hit by change Jobs to decline this year

in inflation measurement from April 2012 despite economic growth
▲

In February the CPI jumped to 4.4 per In November the OBR forecast infla- UK ECONOMY However, employment is still
▲

UK ECONOMY
BY JULIAN HARRIS
ALLOWANCES for several direct taxes
will rise at a slower rate than before,
after changes made by chancellor
George Osborne yesterday.
The measure of inflation used to cal-
culate increases in direct tax
allowances will change from April
next year, Osborne announced.
Thresholds for capital gains tax
(CGT), national insurance (NI) and
ISAs, will now be pegged to the con-
sumer price index (CPI) rather than
the retail price index (RPI).
The CPI typically runs below the RPI.
cent (from four per cent in January),
yet the RPI also spiked by 0.4 per cent,
rising to 5.5 per cent.
The change will bring a significant
boost to the government coffers,
according to Henderson’s Simon
Ward.
“Switching to CPI for direct taxes
will raise £105m in 2012-13, rising to
£1.08bn in 2015-16,” Ward said.
However, CPI inflation will average
4.2 per cent this year – over twice the
Bank of England’s target – the OBR
admitted yesterday. It also revised up
its inflation forecast for 2012, from
two per cent to 2.5 per cent.
tion at just 2.8 per cent this year, yet its expected to rebound in the medium
prediction has been shattered in EMPLOYMENT will fall by 100,000 in term, with an extra half a million
recent months. 2011-12, despite the recovery continu- jobs created by 2013-14, and an extra
Higher expectations for govern- ing with 1.8 per cent economic million by 2015-16.
ment borrowing and the slowdown in growth, official forecasts claimed yes- “Over the next five years we expect
growth were blamed on inflation by terday. market sector employment to rise by
the OBR. Along with downwardly revised 1.3m, partly offset by a roughly
“Higher-than-expected inflation is growth expectations for this year, the 400,000 fall in general government
expected to squeeze household government’s fiscal watchdog paint- employment,” it said in a statement
incomes and weaken consumer spend- ed a gloomier picture for the jobs published after the budget.
ing growth,” it said. market. Unemployment will rise from
“The upward revision to spending The number of people claiming eight to 8.3 per cent of the labour
primarily reflects the impact of higher unemployment benefit will rise to force by the second quarter of this
near-term inflation, which pushes up 1.55m in 2011-12, from 1.48m in the year, the OBR expects, yet it remains
social security and debt interest bills,” current fiscal year, the Office for confident of it falling to 6.4 per cent
the OBR also added. Budget Responsibility predicts. by 2015.
CITYA.M. 24 MARCH 2011 News | Budget Special 27

A muted market response Osborne kills off 43 types

shore up confidence. Marginal improve-
ments in income tax and the changes to
petrol duty may help, although we did see
a wobble in shorter term growth fore-
Needless to say, reaction amongst the
UK’s blue chip stocks has been some-
of tax relief from system
what muted and even the big energy
companies’ stock prices closed with little

casts. This certainly didn’t support the
pound. But the fact that there is confi-
dence the deficit and inflation will be
reined in over the mid-term seems to help.
COMMENT If there was one surprise today, it was
perhaps the bonus tax facing the energy
DAVID JONES companies. While this still needs to be
refined, it has the scope to raise as much
change. The reduction in corporation
taxes as the government attempts to
make it more attractive to keep compa-
nies headquartered in the UK is another
step to aiding economic recovery.
Shareholders haven’t responded with
much fanfare. But earnings from the
FTSE 100 are so diversified globally that
▲
TAXATION
COMPLICATED and ineffective tax
reliefs were struck off the govern-
ment’s books yesterday as the chancel-
lor committed to simplifying the tax
regime.
George Osborne removed 43 types
ommendations made by the Office of
Tax Simplification, will cut the UK’s
tax code by 100 pages.
“Our purpose is not to increase
taxes, it is to simplify them,” he said.
Osborne also proposed merging the
two major taxes on salaries – national
insurance and income tax – into one

T
HE Treasury has made a decent
start to its austerity measures. The
Budget appears well-balanced
despite the fact there were hints of
give-aways as the government looked to
as the banking levy. And with the expec-
tation that crude will remain above $100
a barrel, suggestions from the chancellor
that the tax will be withdrawn when oil
falls below $75 a barrel seem irrelevant.
what happens in the UK alone is unlikely
to drive the kind of big market reaction
some may have been looking for.
David Jones is IG Index chief market
strategist MARKETS: P17
of tax relief from the system, such as
the Millennium Gift Aid, which he
pointed out “we won’t need for anoth-
er 989 years”.
The moves, which come from rec-
to “dramatically simplify” the system.
Operating them as separate taxes
“imposes totally unnecessary costs
and complexity on employers, ” he
said.

Entrepreneurs
among Budget
big winners five per cent of the company and have
▲

ENTREPRENEURS worked there for at least a year.

BY STEVE DINNEEN
ENTREPRENEURS were among the
biggest winners from the Budget, with
a raft of measures aimed at encourag-
ing people to invest in their own busi-
nesses.
The changes, most of which will
come into play on 6 April, will include:
•A hike in the lifetime limit for
entrepreneurs from £5m to £10m.
•Relaxation of the Enterprise
Investment Scheme (EIS) rules, making
it easier to take advantage of capital
gains tax (CGT) and income tax relief.
•An easing of the conditions neces-
sary to benefit from Venture Capital
Trusts (VCT).
Osborne announced the lifetime
limit for entrepreneur’s relief will dou-
ble to £10m, greatly increasing the
benefits for anyone disposing of shares
in their own company.
It allows business owners to pay
just 10 per cent capital gains tax,
instead of the higher threshold of 28
per cent, up to a lifetime limit of
£10m, after which they will revert to
the higher threshold.
To qualify you need to own at least
The Treasury estimates the move
will cost around £310m over the
course of the parliament.
The limit was set at £1m just two
years ago, rising to £2m in April 2010
and £5m in June 2010.
Entrepreneurs will also benefit
from a £500 increase in the annual
exemption from CGT to £10,600.
The Treasury announced the maxi-
mum investment to qualify under the
EIS will double to £1m and tax relief
on both EIS and VCT initiatives will
increase from 20 per cent to 30 per
cent. The maximum investment in a
single company has also risen from
£2m to £10m.
The size of companies that qualify
under both schemes will rise from 50
employees or less to 250 or less, with
the gross assets allowed more than
doubling from £7m to £15m.
Osborne also pledged to consult on
ways to make EIS rules simpler by
removing more restrictions on which
types of investors can apply and which
shares qualify.
Changes to EIS and VCT rules are
designed to make it easier and more
lucrative to invest in small businesses.

New pension Charities get

rules to hit rich taxation boost
▲

PENSIONS INHERITANCE TAX

THE Budget changes will come into
play on the same day as the changes
to pension rules revealed earlier this
month.
High earners will lose out thanks to
new rules limiting annual contribu-
tions that qualify for tax relief to
£50,000, down from £255,000.
The higher tax bills can be paid
directly out of individuals’ pension
schemes.
The cost to the wealthy could run
into tens of thousands of pounds,
with some experts saying the changes
will add to the burden on pension
schemes.
CHANGES to inheritance tax rules in
yesterday’s Budget means that those
leaving 10 per cent or more of their
estate to charity will now also get a 10
per cent tax relief on their donations.
Charities welcomed the move, but
accountancy firm KPMG called the 10
per cent target for donations “ambi-
tious”, and said the net rate reduction
would only work out to four per cent,
falling from 40 per cent to 30 per cent.
The chancellor also made adjust-
ments to gift aid rules, raising the
benefit limit from £250 to £5000 to
allow “thank you gifts” for significant
donors.
 Could soaring phone sales be a
good signal for the price of gold?
Global economic
outlook becomes Investors
sunnier. favour shares Return of global
over safer assets, instability
as dividend yield increases price of
Financial
improves. gold five-fold
markets storm
21st century through the
back to multi- Is it time to
gold rush loses noughties.
year highs. sell gold?
Take a position at momentum.
igindex.co.uk
Gold hits all-
time high of
A 72% increase
$1445/oz. in
in smart phone sales
March 2011.
High growth drives higher gold
in emerging usage thanks High price
markets creates to 24mg of gold in encourages May 1999,
consumer every device. miners to dig Gordon Brown sells
demand. deeper. 400 tons of UK gold
reserves at 20-year
low of $275/oz.
Oversupply
causes price of Dollar grows
gold to tumble. stronger
China rises in
against the
the east, but is
euro.
accused of keeping
its currency low Demand for Credit rating
against the US gold boosted by Will demand downgrades
dollar. Indian wedding continue to drive the destabilise
season. price higher? the euro.
Quantitative
Take a position at easing in the
igindex.co.uk US helps drive
economic
growth.
Will a strong dollar
How will global
mean gold loses
currency
its lustre?
movements affect
Investors flee Take a position at
the price of gold? Global
to the safe igindex.co.uk
Take a position at Cash rich political uncertainty
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igindex.co.uk economy leads to increases.
inflation.
Sovereign debt
Political 79
Inflation unrest
crisis spreads
destroys increases in
across Europe.
Au
the value of Libya and the
traditional Middle East.
investments.
Iran’s nuclear
ambitions
cause alarm.
Gold
196.97
Spread betting can result in losses that exceed your initial deposit.
CITYA.M. 24 MARCH 2011 29

Wealth Management | Markets

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 Wealth Management
30
Becoming Chancellor
of your own affairs
With the tax squeeze intensifying for higher earners,
Donata Huggins looks at ways to rein in your spending
IISA
SA
llate?
ate? Cutting back your spending, however, will not require a red box
TENSE George Osborne stam-
A mered out an austere budget
yesterday. While he might
have offered a handful of
business friendly measures, he did-
n’t have much to say for high earn-
ers. With inflation soaring and real
income flat, everyone is feeling the
squeeze. Now then might be the
time to appoint yourself your own
Chancellor and to cut back your
domestic expenditure. Here are a
few things to consider.
MONITORING THE MONEY
Scaling back can only start when
you know where it’s going.
Thankfully technology can help us
out. Everyone can download
Moneydashboard.com for their com-
puter. The programme spins your
spending into daunting charts and
Have you invested your ISA allowance yet? graphs that force you to take a closer
look at your little indulgences.
There are also iPhone and smart-
Don’t snooze, the tax year ends on 5 April phone apps that you can download.
The Pennies app, for example, lets
you enter your spending on the
Whether you’re an experienced investor or new to the stock market, we’ll make it easy move.
for you to invest your tax-efficient allowance. After our quick online setup, you can take
your pick from a wide range of investments, or our plain-speaking experts can guide BIG CUT BACKS
Watching your cash will no doubt
you (at no extra cost). expose the areas where you need to
cut back. You’ll be shocked by how
Remember, tax allowances depend on your individual circumstances and the benefits much you spend on life’s little
of ISAs could change in the future. The value of investments and the income from them habits from cigarettes to posh cof-
fees and prepared sandwiches. The
can go down as well as up, and you may not get back your original investment. Office of National Statistics reckons
Services Authority under reference 146768. The Share Centre, PO Box 2000, Aylesbury, Bucks, HP21 8ZB. that the average smoker spends a
It’s quick. It’s easy. But it’s urgent.
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year. Of course, cancelling the
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The average gym membership costs
around £600 a year – that’s £50 a ses-
sion if you only go once a month.
CITYA.M. 24 MARCH 2011
Picture: REUTERS
BEING ECO-FRIENDLY AND AUSTERE
Going green not only uses less ener-
gy, but will also save you cash – and
quite a lot of it, in fact. If you get the
tube to work, cycling could save you
£1,000 a year. Insulating your loft
could save you £205 a year on heat-
ing bills after the first 12 months,
according to the Energy Saving
Trust. Even very basic things like
switching to energy-saving light
bulbs, shunning the tumble dryer
and turning off appliances will save
you £50, £45 and £37 a year respec-
tively.
BALANCE TRANSFERS AND BILLS
Kevin Mountford, head of money
comparison website
Moneysupermarket.com, claims that
many households could save over
£2,400 a year just by switching to bet-
ter bank and utility deals. For exam-
ple, Mountford’s research shows that
those who switched and bundled
together their broadband, phone
and TV services in the last 12 months
saved almost £200 – some saving as
much as £320 a year. Even simple
things such as moving your current
account and savings could give you a
little rates boost. Given the fact that
the Bank of England’s base rate is
just 0.5 per cent, some of the offers
at the moment look quite appealing.
GETTING MORE FROM YOUR ASSETS
Making the most of your assets isn’t
a bad idea either. Schemes for rent-
ing out a spare room or even your
entire house are becoming more
popular. HomeAway.co.uk for exam-
ple is already pairing up renters and
rentees for the Royal Wedding and
the Olympics. Other sites such as
Stuffusell.co.uk help you get a better
price when selling off things on
eBay.
 How did oil prices
get so pumped up?
Will the rise Costs hit
protect sterling’s UK UK drivers at
value? inflation the petrol
Take a position at rises. pump.
Political unrest igindex.co.uk
erupts onto the Libyan oil MPC considers
streets of Cairo production and raising
and Tripoli. Suez trade route interest rates.
threatened.
Spike in
demand for biofuel
ingredients
Demand for causes commodity
Speculative alternative fuels bubbles.
interest in increases.
smaller
Are shares a oil exploration Oil price
good prospect? companies rapidly hits
Take a position at increases. $100
igindex.co.uk a barrel. Hybrid
car sales feel
Is oil heading a boost.
back to its
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forecasts for its Take a position at Will shares
Falklands well. igindex.co.uk in Toyota, Nissan
and Renault
How far will
accelerate?
wheat and sugar
Take a position at
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igindex.co.uk
Petroleum and Production Take a position at
Falklands Oil Political pressure
uncertainty igindex.co.uk
and Gas come increases threat
increases
up dry. of regulation on
nervousness
drilling companies.
over global oil
Does the FTSE
reserves.
feel the benefit?
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igindex.co.uk
BP’s 2010
financial Where next April 2010,
report shows for BP’s share price?
first annual Take a position at BP oil spill
igindex.co.uk
loss since
Combined
creates worst
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BP’s dividend
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restored in well-capping costs
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March 2011. exceed $40bn. disaster in
June 2010.
US history.
Spread betting can result in losses that exceed your initial deposit.
32 Wealth Management | ISAs CITYA.M. 24 MARCH 2011

Look east for high D espite interest rates that are no

match for inflation, savers still
fail to make full use of their
ISA allowance. However, if they
are saving for the long-term, and are

ISA returns with a

prepared to deal with volatility in the
short-term, they might be better off
using their ISA allowance to invest in
an Asian exposed fund instead.
Although noteworthy in simplicity,
there is nevertheless confusion as to

fund invested in Asia

what an ISA actually is. Many savers
don’t realise that it is a tax umbrella
and not a product in itself. Martin
Lewis of MoneySavingExpert.com
uses the helpful analogy of an ISA
protecting your cash or shares in the
same way that cling film protects a
cake: “The tax man can no longer
take a bite”. Confusion over what an
With inflation biting into savings, Asian funds have a ISA is means that many savers are
unaware that they can shelter invest-
solid record of growth for the long-term, says Philip Salter ments beyond these borders that
could provide better returns. As Tom
Stevenson of Fidelity International
says, “ISAs are just a tax wrapper in
which you can put any investment.
They are just as useful for investing in
Asia, as anywhere else”.
It is worth noting that the top
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OINITIALCHARGEONMOSTFUNDINVESTMENTSMEANSYOUCANSAVEUP
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charge of £25 + VAT plus a £5 charge for reinvesting the dividend. This investment is compared to a product with
an initial charge of 5.5%, annual management charge of 1.5%, no dealing charge and no rebated AMC. Fund
manager rebate payments we receive for funds bought and held through us may change at any time. This
information is based on our understanding of current tax law and HMRC rules. Legislation and tax regulations are
not guaranteed and can change at any time. Current tax advantages may change and could be withdrawn, tax
rates and reliefs may change and depend on individual circumstances. If you are in any doubt about whether an
investment is suitable for you, please consult a financial adviser. Alliance Trust Savings Limited is registered in
Scotland No. SC98767; registered office, PO Box 164, 8 West Marketgait, Dundee DD1 9YP; is authorised and
Lines are open Monday to Friday 7.45am – 7pm. Calls may be recorded. Selftrade® is a trading name of Talos Securities Limited and regulated by the Financial Services Authority whose address is 25 The North Colonnade, Canary Wharf, London
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registered trade mark of Boursorama. Talos Securities Limited is incorporated in England and Wales (Registration No. 4196325,
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CITYA.M. 24 MARCH 2011 Wealth Management | ISAs 33

for Invesco. Just because the Office for

Budget Responsibility has downgrad-
ed the 2011 GDP forecast from 2.1 per
cent to 1.7 per cent, this does not
mean that the UK stock market will
be equally disappointing.
Picking funds solely on past per-
formance makes no sense. Dampier
says that people should always be
“wary of what other people have
been betting on over the years.”
However, caution aside, Dampier
suggests that with a long-term time
horizon, Asia and emerging markets
in general do still offer the potential
for “far superior growth” than else-
where. Adrian Lowcock of Bestinvest
believes that with younger and high-
er working age populations, we
should see more growth in the
emerging markets of Asia. A growing
middle class will have more dispos-
able income and demand luxury
Asian funds are an option for an goods. This view is reflected in
investor looking for high returns research from Fidelity, which sees a
number of trends in China pointing
to “a golden age for Chinese con-
Picture: sumption.” It argues that it is at an
GETTY inflection point similar to Japan in
1969 and South Korea in 1988, so the
40 per cent of GDP currently spent
Aberdeen Emerging Markets A Acc, ral disasters. Mark Dampier of on consumption in China will rise
although invested in Asian emerging Hargreaves & Landsdown points out TOP PERFORMING UK REGISTERED ISA ELIGIBLE FUNDS SOURCE: MORNINGSTAR towards the US consumption rate of
markets (34.46 per cent) and Asian that the stock market is not correlat- ISA Eligible Funds 22/03/06 to Latest Portfolio Morningstar OBSR 70 per cent.
developed markets (14.09 per cent), ed to GDP growth. As such, some 22/03/11 size (m) (£) qualitative rating rating Top performing Asian funds are
also holds significant equities in Asian markets might be overvalued, worth serious consideration. Asian
Latin America (29.56 per cent). There particularly in the short-term. Also, First State Greater China Growth A 132.18 621.02 Elite AAA countries have many problems,
is more than one way to skin a cat, inflation across a lot of Asia and the but as Adam Smith wrote: “there is a
but unequalled success over the last monetary reaction could certainly hit First State Asia Pacific Leaders A 107.83 5267.58 Elite AAA great deal of ruin in a nation.”
five years stems from one common upon the price of equities. In addi- Aberdeen Emerging Markets A Acc 106.85 2241.79 Elite AAA
Developed Asian countries are
factor: Asia. tion, Dampier believes that while well placed to benefit from their fast
This is not to suggest that investors Asia has been good, there are fund First State Asia Pacific A 100.94 840.45 Elite AAA growing and emerging neighbours,
should blindly jump into Asia with- managers with a proven long-term making for an appealing and
out a second thought. Emerging mar- track record investing outside of Asia, First State Global Emerging Markets A 95.9 668.61 Elite AAA balanced grouping. Asian markets
kets are likely to suffer volatility over including Richard Buxton, manager have the potential to convert the sav-
First State Global Emerg Mkts Ldrs A 95.67 1686.24 Elite AAA
the short-term, particularly with the of specialist UK equity portfolios and ings under your ISA from an invest-
problems of weak corporate gover- the Schroder UK Alpha Plus fund, and Aberdeen Asia Pac A Acc 78.7 2218.16 Elite AAA ment trailing inflation to one
nance, political instability and natu- Neil Woodford, who runs five funds outstripping it.

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¹ Provided that your funds are free to move and are not subject to any notice period. Our Savings Promises will form part of your savings account terms and conditions. These Savings Promises DO NOT apply to accounts opened with Cheshire Building Society, Derbyshire Building Society and Dunfermline Building Society.
* Applies to accounts opened from 01 February 2011.
Rate correct as at 01 March 2011. Champion ISA is a cash ISA. The core rate is based on an average of the top 5 paying branch based instant access cash ISAs, limited access cash ISAs and notice account cash ISAs (including any bonuses) published on www.moneyfacts.co.uk, available from Halifax, HSBC, Lloyds TSB, Barclays,
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the 1st of the following month. Interest is calculated daily and paid annually on 30 September. AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year. The gross rate of interest is the interest rate payable before any income tax is deducted (if
you do pay tax). The rate advertised is a limited offer and may be withdrawn without notice. Applications are required. Standard terms and conditions available on request. Nationwide Building Society, Head Office, Nationwide House, Pipers Way, Swindon, Wiltshire SN38 1NW.
 34 Wealth Management | Funds
Facing the University
Challenge: saving for
your child’s education
With spiralling school and university tuition fees, families
are looking for tax-efficient ways to save, says Craig Drake
G
EORGE Osborne made it clear
yesterday that the Treasury’s
pockets are empty. As such,
parents hoping for tax breaks
and contributions to their savings
for their child’s education will likely
be doing so in vain. At the same
time, school fees are on the increase
and the cap on university tuition
fees rose last year to £9,000 per
annum. With these noticibly rising
expenses, parents will be increasing-
ly looking at how they can best save
for the years ahead and provide the
best education for their children.
Graham Able, former headmaster
of Dulwich College and now CEO of
the Alpha Plus group of schools and
colleges, reports that despite the
economic downturn of the last few
years prestigious schools are not see-
ing any downturn in demand, with
Weatherby pre-prep facing the
prospect of having to turn down 81
prospective pupils this year. No mat-
ter the economic environment, it
seems parents place the importance
of a private education high up in
their priorities.
But the burden has now grown.
School fees constitute a large cash
outflow that used to diminish when
one’s offspring turned 18, flew the
coop and went off to university.
UNIVERSITY FUNDING APPROACHES
Haig Bathgate
Turcan Connell Educational Fund
A trust deed is used to appoint the
individual trustees.
The funds are placed into an offshore
bond, which is an investment wrapper
issued by an offshore life company
offering significant advantages in
managing investments for a trust.
Investments can be made from
CITYA.M. 24 MARCH 2011
With the advent of top-up fees, this
has changed. So your starter for ten
in the university challenge is:
“Should parents be saving for their
children’s university education?”
Dr Terrence Kealey, the vice chan-
cellor of Britain’s first entirely pri-
vate university, the University of
Buckingham, is unequivocal: “the
best present that a parent can give a
child is to leave university without
debt. In order to achieve this, they
should prepare in advance.”
So how do parents go about
preparing for the payment of such a
large sum? Petronella West, director
of wealth management company
Quorum Investment, who estimates
parents would have to save £59,836,
says: “What we find the most impor-
tant step, and something that we do
a lot of, is cash flow modelling to
plan for the future, irrespective of
the point at which the client has
decided to start saving. You should
always consider your budget and the
flexibility of payments, your time
horizon for the investment and your
tolerance to investment risk. Risk
can be mitigated and managed via
suitable asset allocation. Don’t put
all of your eggs in the same basket
and hedge your bets by investing
across the spectrum of asset classes,
£50,000 upwards; and additions to be
made in increments of up to £2,500
thereafter on a monthly, quarterly,
annually or ad hoc basis.
Turcan Connell offers several different
strategies aimed at providing diversi-
fied solutions with active asset alloca-
tion and fund manager selection.
CITYA.M. 24 MARCH 2011 Wealth Management | Funds 35

Everybody knows that

Bamber Gascoigne
was a better
FUNDS IN THE BUDGET
University Challenge IN BRIEF
presenter than Jeremy
Paxman.
BAD NEWS FOR OIL PRODUCERS
Picture: GETTY Those who have exposure to North Sea
oil and gas producers in their investment
portfolios will be hit by one of the many
new taxes introduced in yesterday’s
budget. Dubbed the “fair fuel stabiliser”,
it increased the taxes being levied on
these companies from 20 per cent to 32
per cent.
This increase, applicable from midnight
last night, will kick in whenever the oil
price is over $75 a barrel.
To give an example of the short term
effects of the Chancellor of the
Exchequer’s announcement, Nautical
Petroleum’s share price dropped by 8
per cent yesterday afternoon. Time will
tell if the tax causes long term harm.
JUNIOR ISAS INTRODUCED
The government outlined plans in the
budget to introduce ISAs for the under
18s in order to fill the void created by
the abolition of child trust funds (CTF).
The Junior ISA will be avaialbble to all
children under the age of 18 who do not
have a CTF.
Though the size of the allowance has not
been announced, predictions are that it
will be around the £3,600 mark, with
the product being similar to standard
ISAs and offer cash account and stocks
and shares versions.
Draft legislation, set to be published on
31 March alongside the Finance Bill
2011, will set out proposed account fea-
tures.
GREEN BANK CREATED
According to the Chancellor, the cre-
ation of a “green investment bank” will
encourage investment in new energy
businesses where returns are deemed
not viable by the market. £1bn has
already been committed to the project,
but a further £2bn will be allocated in
order to prop up the green industry in
Britain.
George Osborne announced that the
measures will enable the Green
Investment Bank to start operation one
year earlier than planned – in 2012. On
top of the funds from taxpayers, the
government will leverage a further
£15bn from private sector investment in
green projects.

barriers which are being created and

“The best present that a
parent can give a child is
that they leave university
without debt”
investment styles and money man-
agers.”
THE OPTIONS AVAILABLE
Turcan Connell is one of the few
asset management firms around
that currently offers a fund
designed expressly for the challenge
of helping parents and grandpar-
ents save towards the cost of univer-
sity education. Structured as a trust,
it provides a fully managed frame-
work which allows a gift, or series of
gifts and it is targeted at those who
wish to set aside capital for the spe-
cific objective of funding education
while at the same time reducing
their inheritance tax liabilities.
According to joint senior partner
Douglas Connell, “the cost of fur-
ther education is an increasing
source of anxiety for many families.
Parents and grandparents are right-
ly concerned about the financial
many of us are worried about gradu-
ates starting their careers with the
millstone of significant debt weigh-
ing them down.”
But with specialised funds thin on
the ground, and the government
not in position to throw out any
gifts in the form of specific tax
breaks, Gemma Godfrey, head of
research at Credo Capital, points to
easier ways that parents can save:
“The Junior ISA, scheduled to be
phased in this autumn, is a welcome
prospect for parents wishing to save.
The maximum amount allowed to
be invested is yet to be announced,
but as a guide, the Tax Incentivised
Savings Association has recom-
mended either £3,600 (bringing it in
line with stakeholder pensions) or
the adult cash ISA limit (£5,340 after
April), to increase with inflation
each year. This would certainly aid
parents and has the benefit of con-
tributions being locked in, meaning
that investments couldn’t be
removed from the fund until the
child reaches 18.”
So the top tips to succeeding in
the university challenge? Plan your
cash flows, start saving early and
take advantage of all the beneficial
tax schemes in your grasp.

Petronella West
Investment Quorum Wealth Management

Vehicles to consider: Risk can be mitigated and managed

Regular payments into a stocks and
shares ISA
Regular payments into a maximum
investment plan
Making use of index linked national
savings certificates (when available)
Regular savings into unit trusts/OEICs
via suitable asset allocation. You
should be wary of putting all of your
eggs in the same basket. At the same
time, you should hedge your bets by
investing across the spectrum of
asset classes, investment styles and
money managers.
 Lifestyle
36
Tea total: a new
brew sensation
Zoe Strimpel meets
the ex-banker who’s
cashed in on the
healing power of tea
W
HAT do the credit crunch,
European leveraged capital mar-
kets and looseleaf tea have in
common? The answer is Ajit
Madan, who left his job at Societe Generale
when the credit crunch rendered his slice
of the pie a mere shadow of its former self,
to follow his entrepreneurial dreams. “It
was a part of the market that crated in the
financial crash,” he says over jars of herbs
and tea in the shop he now owns with his
sister, Lubna, a homeopath. “It was a
€70bn market that went down to €2bn.
There were no more international deals –
no more challenges.”
His sister had already started the ball
rolling with the Camellia’s Tea House
(named after the tea species used to pro-
duce Chinese tea). Tea had played a
poignant role in both their lives, recalling
childhood visits to their grandmother in
Lucknow, Uttar Pradesh (India). When Ajit’s
golden opportunity for change arose in
2009, he decided to enter the business. “I
thought there was a gap in the market for
tea,” he says. “So I financed the setting up
of the shop and our blending studio.”
CULINARY ACADEMY




   

CITYA.M. 24 MARCH 2011
| Food & Drink
That’s right: blending studio. This is not
your average tea business. Ajit claims that
Camellia’s stocks the largest selection of
herbal tea in Europe, though that claim did
not sit well with City A.M.’s German photog-
rapher, who says his country’s shops outdo
it in range.
But it hardly matters. What is unique
about Camellia’s – and responsible, one
imagines, for its sales doubling year on year
– is the bespoke element, the mixing and
matching of leaves and fruit and flowers to
create “remedy” teas as well as those enjoy-
able for being delicate and delicious. So
appealing is the product and concept that
the likes of the Burj al Arab hotel, Dubai’s
most aggressive answer to the question of
what money can buy, has nabbed
Camellia’s tea for its spa. The shop has also,
oddly, become a favourite among Japanese
pop stars.
In the blending studio, which is in
Wandsworth, Lubna creates tea and lemon, orange. Zoe, Lubna and Ajit flowers, which smells of a fruit salad.
“herbal infusions” for a wide range of ail- Tea as a whole is also an impressive sub- trying Zoe’s brew at The “happy tummy” tea is good too, and
ments – rather like a beneficent witch, stance, not dissimilar to wine in its com- Camellia’s tea house. certainly soothing for my ravaged post-hol-
whose “double double toil and trouble” plexity. There are 1,500 types, according to iday belly, settling it with star anise, pep-
results in brews for everything from bad the UK Tea Council, with a Premier Cru- Picture: permint, rosehips and liquorice.
digestion to menstrual cramps. style “first flush” category (the buds that Micha Theiner Then I get to make my own blend and,
come from the top of the bushes). popping in spoonfuls of liquorice (which I
PREMIER CRU Facing the shop’s rows of labelled jars, I love), ginger, black tea, orange peel and star
I’m neither a tea lover nor a believer in the lead with my nose. Sniffing and tilting and anise into a jar, I feel like a child with a
science-busting powers claimed by home- staring into the potpurri-esque heaps, I opt chemistry set. Mixed up and brewed, it
opathists. But an hour spent sniffing and for a range of both “tea” (defined by con- tastes rather good. Indeed, far more pleas-
tasting in the tea shop showed me how tea taining black or white tea) and tisanes ant than anything likely to be produced
– done right – is damn hard not to love. The (herbal infusions). White peonie proves a with a bunsen burner and test tubes.
scents are intoxicating: jars wafting with good base; but my favourite is the Chinese 12 Kingly Court, London W1B 5PW. Tel: 020
aromas of tobacco, fruit, flowers, hay, oats, white tea with dried apricot and marigold 7734 9939, www.camelliasteahouse.com
The City club where it
pays to be a member
 Eight Bank wants to
help you network,
#     says Zoe Strimpel

&   "      "
 $ $

L
ONDON is the world’s leader when it
comes to private members’ clubs.
Maybe it’s because we’ve all been
 -*#&#4 #(  $ ! ( 1".", 3)/ , scarred by sticky floors and suffocat-
&))%#(! ),  "). )'*.#.#)( ),  ,&2 ')(-.,.#)( ---#)( 1 "0 ing crowds at some point in our lives, or
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out at 11pm. Whatever it is, private is how
 3)/ 1(. .) !#0  -"% .) 3)/,  .,1),% 0(#(!- 3)/ ( ."#(% ) we roll, and nowhere does this stand to
$)#(#(! )/,   $  ." *, . *& .) -)#&#4 "0 benefit you more than the City, where net- Hayman, Chairman of Coutts
/( ( &,( ")1 .) ))% ,-" "&."3 ( .-.3 '&- working is oxygen and the pubs are often
too noisy for productive chat .
Private is Entrepreneurs, Christina Ioannidis, author
of Your Loss: How to Win Back Your Female
" &-- ))'- #- &-)  #( #(#(!     ) ,#(! &##)/- Eight Bank (pictured) has taken a back how we roll Talent and City A.M’s very own Going Out
--)(& '(/- ( )%.#&- #( /- 1#." )/, " - ( ,.(,-5 seat since the launch of its flashier, above- columnist Tim Badham, founder of
,.#0 &#, ground sister Eight Moorgate, but – buried
under an alley a stone’s throw from Bank –
in London, Innerplace, the nightlife concierge compa-
ny with a big client base. Membership of
)/ ( 0( "#, )/, /&&3+/#** ( &&/,#(! '.#(! ( *,#0.
#(#(! ,))'- ), 3)/, 0(.- *,.#- /-#(-- (- .  ),& *,#-
it’s the truer banker’s den.
Having tried to compete with the
and nowhere Eight is £800 per year; by recommendation
(www.eightclub.co.uk).
     %   
    
flashier likes of Shoreditch House, Eight
Bank – which supplies pool tables, a cine-
does this Another hidden gem – albeit just outside
the City – is Crazy Bear in Covent Garden
ma and art exhibitions where Moorgate
has dining rooms, a liibrary, a tailor and
stand to (www.crazybeargroup.co.uk). I paid a visit
this weekend, not having known of its exis-
 /), .,. )()( 
 
111.,'3)/% 111."&--,))'-)/% fine views – is returning to its roots and
adding an invigorated City focus.
benefit you tence, and was startled by the gilded opu-
lence of the interior. It’s just the kind of
 

      

   
#( ).,'3)/%
Networking has been given a facelift
with a panel of experts who are being culti-
more than in place to go to impress your clients in priva-
cy before a night out. And finally, Battery in
vated to post articles on the website and
organise talks. Among them are Michael
the City Canary Wharf will be worth some atten-
tion, too, when it opens in May.
CITYA.M. 24 MARCH 2011 Lifestyle | TV& Games 37

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How Does That Work? Sell Me the Answer

COFFEE BREAK
Copyright Puzzle Press Ltd, www.puzzlepress.co.uk

QUICK CROSSWORD
    

SUDOKU KAKURO
25 11 15 14 12 37 7
22 16 10
22  
21 4
Place the numbers from 1 to 9 in each empty cell so that each 35 
row, each column and each 3x3 block contains all the numbers Fill the grid so that each block 19 21
7
from 1 to 9 to solve this tricky Sudoku puzzle. adds up to the total in the box 12 16
  
above or to the left of it. 34 7
You can only use the digits 1-9 11 21 
  and you must not use the
14 38
20 16  
same digit twice in a block. 5 18
     The same digit may occur 28 16 
10 13 20
   more than once in a row or
column, but it must be in a 6
15
23
4
  
20 17
   separate block.
14
6 26
  9 13 24
 

   ACROSS DOWN
1 Make suitable for a 2 Substance for
 
  WORDWHEEL F H
new purpose (5)
4 Subject (5)
7 Unit of heredity found
staining or
colouring (3)
3 Taster (7)
Using only the letters in the Wordwheel, you have on a chromosome (4) 4 Level (4)
   ten minutes to find as many words as possible,
T C 8 Small animals or insects 5 Flowing or spurting
none of which may be plurals, foreign words or
proper nouns. Each word must be of three letters C that are pests (6)
9 Change direction (4)
intermittently (7)
6 Full agreement
LAST ISSUE’S or more, all must contain the central letter and
letters can only be used once in every word. There
A O 10 One who has achieved a high
level of spiritual insight (4)
between a number
of people (9)
SOLUTIONS KAKURO is at least one nine-letter word in the wheel.
L E 12 Face (4) 7 English conspirator
13 Disappointment (3-4) celebrated on
QUICK CROSSWORD 9 8 5 7 2 1 5 3 14 Not many (1,3) 5 November (3,6)
S A L V O S H A L L
8 6 4 9 6 2 7 9 SUDOKU          15 Becomes older (4) 8 Lush greenness
4 1 3 5 3 9 of flourishing
P E V I P L E          16 Person regarded as
I M A G O I T A T 5 9 2 7 1 8 1 vegetation (7)
1 7 5 9 7 8 6 4
         arrogant and annoying (4)
R R I L L A H
         17 Catch fire (6) 11 Gathered, as of
E B B E D L A R G E 3 4 2 5 1
natural products (7)
WORDWHEEL 18 Celebration of the
O B B Y         
7 2 1 3 6 4 4 3
K O R E A C H A M P
9 4 1 8 7 2 1          Eucharist (4) 12 Itinerant Australian
N E S O L O R
1 2 1 9 8 7 The nine-letter word was         
20 In an unfortunate or labourer (7)
O R B P I R A T E
L U E L M C S 8 3 1 2 3 4 1 2
SCHEMATIC
        
deplorable manner (5) 16 Drama (4)
L A T I N B A T H S 9 6 8 7 6 9 3 8         
21 Very cross (5) 19 Title (3)
 Sport
38 CITYA.M. 24 MARCH 2011

League cool
on terrace England stars
return talk happy to be
FOOTBALL

led by Terry
▲

PRO-TERRACING campaigners have

been dealt a blow after the Premier
League said it would oppose calls to
reintroduce standing areas in top-
flight stadia.
▲

The Football Supporters’
Federation (FSF) is hopeful that the
government will give thorough con-
sideration to their petition for the
return of standing areas, which were
banned following the Hillsborough
disaster in 1989.
But the Premier League, one of the
most powerful stakeholders in the
English game, says it has no appetite
for doing away with all-seater
grounds.
“Our view is that the benefits of all-
seater stadia far outweigh the return
of standing areas,” said a spokesman.
“They have led to more women and
more children attending the games
and no matter how safe standing can
be made, seating is always safer. We
will not be encouraging the govern-
ment to change the law.”
The FSF argues that many fans
stand for much of games already, and
held talks with government and the
police on Monday. Sports Minister
Hugh Robertson gave the meeting a
tepid reception, while the
Association of Police Officers, say
they would “need to be convinced of
a need to change” back to terraces.
FOOTBALL
BY JAMES GOLDMAN
ENGLAND striker Peter Crouch insists
their is no unrest in the camp follow-
ing John Terry’s reappointment as
captain.
Terry has controversially returned
in place of Rio Ferdinand after being
dropped from the role amid allega-
tions over his private life a year ago.
But Crouch believes Terry’s reap-
pointment will bring renewed stabili-
ty to the team in the wake of
Ferdinand’s ongoing fitness prob-
lems.
“It’s the manager’s call and there
are no problems from anyone,” said
Crouch. “I’m pleased for John and we
move on.
“There’s a lot of talk of unrest but
it’s not an issue. John Terry has always
been fantastic on the pitch, leading
Chelsea to Doubles, and he’ll be good
for us again.
“It is a shame for Rio because he’s a
top player and great to have around
because he’s a natural leader too. It’s a
shame that he’s had so many injuries
and that’s probably why the manager
decided to make the change rather
than have the armband being passed
around. The manager wanted to stick
with JT and that’s fine with all of us.”
Meanwhile, midfielder James
Milner, who is battling to be selected
ahead of shock call-up Matt Jarvis for
Saturday’s Euro 2012 qualifier against
Wales, believes it is crucial that the
more experienced players in the
England squad all act like captains,
and says it is more important that
they continue to improve as a team.
He said: “We have lots of good lead-
ers and you need more than one any-
way. It helps to have so much
experience around and we’ve got a
good combination of that as well as
the younger players.
“A few things have changed from
the World Cup, but ultimately all that
is important is that we keep trying to
get better and better. Fabio has the
trust of the squad, we stand behind
him and hopefully we can keep get-
ting wins on the board.”

Prior vows
to show his
true colours
CRICKET
▲

Afridi is the leading wicket taker at the World Cup Picture: ACTION IMAGES
ENGLAND wicketkeeper Matt
Prior believes it’s about time
Afridi plays down World Cup England did themselves justice at
the World Cup.
Embarrassing defeats by

dream despite crushing win Bangladesh and Ireland were off-

set by a victory over South Africa
and a remarkable tie against India
in the group stages as England
this competition I told my friends limped unimpressively into the
▲

CRICKET
BY JAMES GOLDMAN
PAKISTAN captain Shahid Afridi
believes it’s still premature to talk
of his side winning the World Cup
despite an emphatic victory over
West Indies in yesterday’s quarter-
final.
Afridi led the way with the ball
again taking another four wickets
in a crushing 10-wicket win,
Pakistan’s third such victory of the
tournament, as the Windies were
dismissed for just 111.
Pakistan reached their modest
target in less than an hour-and-a-
half without loss but Afridi, the
leading wicket taker in the tourna-
ment by a distance, was keen to
Subject to availability, terms and conditions apply. play down expectations.
“I’m very happy because before
and the nation that with this team I
wanted to play in the semi-finals,”
he said. “There will now be more
expectations to go on.
“But I am just thinking game by
game. The only thing we can do is
give 110 per cent. Every team from
now will come harder and harder.
“We will just keep making plans
for each team and try and stick to
those.”
Pakistan will face the winners of
today’s last eight match between co-
hosts India and defending champi-
ons Australia, while West Indies
head home after the tamest of exits.
“We definitely did not get
enough runs,” said Windies captain
Darren Sammy. “They bowled well
at us and we didn't counteract,
hence we were bowled out cheaply.
last eight.
Andrew Strauss’s men face co-
hosts Sri Lanka on Saturday and
Prior hopes the knockout stages
will bring out the best in him and
his side.
He said: “We came here to win
the World Cup, and if you leave
having not won it you will be dis-
appointed.
“We’re at the sexy part of the
competition – the knockout
stages – and everything that has
gone on before is irrelevant.
“To win an Ashes and to win a
World Cup in a winter is some-
thing quite phenomenal.
“It’s something all these guys
in this dressing room are fighting
to do. Anything short of that, and
we’ll be disappointed.”
CITYA.M. 24 MARCH 2011 39

Players more worried Andrew: No beef with Sir Clive

about staying in team

▲
RUGBY UNION work with Woodward should the Woodward subsequently branded
BY JAMES GOLDMAN RFU, as hotly tipped, appoint the Andrew’s vision “unconvincing” –
World Cup winning coach to but the former Newcastle director
FORMER England international Rob the currently vacant posi- of rugby described his relationship
Andrew claims he would have no tion of performance with Woodward as “fine”.
there has been little talk of how problem working alongside Sir director. Andrew added: “My life has been
England should line up in Wales. For Clive Woodward after he was yester- The pair have criti- around putting teams together and
me, you have to start with Wayne day confirmed as the RFU’s new cised each repeatedly making sure people work together
Rooney. director of rugby operations. since Andrew was pre- and I could not have
The United striker has flourished Andrew, whose previous position ferred for the elite achieved what I have
alongside Javier Hernandez at club as elite rugby director had been rugby director’s without being able to
level, and Jermain Defoe is probably made redundant, could be forced to job in 2006 – work with people.”
the closest thing to the Mexican in
FOOTBALL COMMENT the England squad, but I think a big
target man better suits what will be a
TREVOR STEVEN very British-style game.
That leaves Peter Crouch and Andy

W
HEN England’s players run Carroll and, while I feel Carroll is the
out at the Millennium man long-term, he is not fit enough
Stadium on Saturday they yet and Crouch is revelling in Spurs’
will not care one bit that good season.
John Terry has been reinstated as cap-
tain. Their primary concern will be to STEVEN’S XI | ENGLAND V WALES
play well enough to be picked again
next time; I know that’s just how it is
when you’re with the national team.
Whether it is Terry regularly wear- Hart
ing the armband – or Rio Ferdinand,
Steven Gerrard or even Frank
Lampard – won’t make them play any
better. The captaincy has been vastly Dawson Terry
overplayed. If there is an issue it is Johnson Cole
that Terry was stripped of the job and
has now been reappointed.
None of us really knows how Fabio Lampard Wilshere
Capello has handled it, but he was
forced to make a decision by
Ferdinand’s availability being limited Lennon Downing
by injuries. He had to pick someone. I
have no problem with it being Terry Rooney
and I know the players won’t either. Crouch
So much has been made of it that

SPORT | IN BRIEF
Spinner Titmus dies David Haye in the 12th round aquatics centre, velodrome
CRICKET: Former England when they meet in the sum- and other arenas, will be
spinner Fred Titmus has mer. Haye, the WBA title- opened in 2015. Suggestions
died, aged 78, following a holder, is set to collide with for names can be made at Outstanding bars and restaurants and the best views
prolonged spell of illness. the Ukrainian in Germany in www.legacycompany.co.uk
Londoner Titmus, who was either late June or early July. over the next eight weeks. of the match action at every home game
also an effective lower-order Klitschko said: “I will defi-
batsman, enjoyed a remark- nitely enjoy the fight for 12 Hoy adds to medal tally
ably long career spanning 33 rounds. Eventually, in the CYCLING: Sir Chris Hoy cel-
seasons before retiring aged 12th round, I will knock him ebrated his 35th birthday by
50 in 1982. “Fred was a fine out. David, just get in the winning his 21st World Join the Club Level waiting list to take your
cricketer, a fine off-spin ring. Don’t find an excuse, Championship medal as
bowler and a very useful just get in the ring.” Britain’s sprint team pow- matchday experience to the next level
batsman,” said former Test ered to a bronze medal in
umpire Dickie Bird. “In that 2012 park name hunt Holland. After qualifying for call 0845 262 0001 email clublevel@arsenal.co.uk
era there were so many off- OLYMPICS: Members of the the final in third position,
spinners around and he was public have been invited to Hoy, Jason Kenny and Matt visit www.arsenal.com/clublevel
up there with the best of pick names for five new Crampton eased past
them.” neighbourhoods to be built Australia in 44.235 seconds,
within the Olympic Park with France winning gold
Klitschko: I’ll KO Haye after next year’s London from Germany. The GB pur-
BOXING: Defending IBF and 2012 Games. The first hous- suit team of Sam Harrison,
WBO heavyweight champion ing in the rename Queen Steven Burke, Andy Tennant
Wladimir Klitschko has Elizabeth Park, which is cur- and Peter Kennaugh also
vowed to knock out Britain’s rently home to the stadium, won bronze.

Results
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email sport@cityam.com
 Copyright © 2011 United Parcel Service of America, Inc.
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