Insurance industry warns of fraud

28 July 2011 Last updated at 04:13 GMT The insurance industry says bogus claims are costing ?2bn a year Bogus insurance claims in the UK rose almost 10% in 2010 from 2009 to an average ?18m every week, according to the Association of British Insurers.

Investigators uncovered 133,000 fraudulent claims, with about 66,000 of these related to home insurance.

Motor fraud was the next most common, with 40,000 cases uncovered.

"Fraudsters continually look for new ways to con insurers, so we are upping our game," said Glen Marr director of the Insurance Fraud Bureau.

Examples uncovered included:

A claim for back injuries while working in a nightclub was rejected when Facebook images showed the claimant performing gymnastics;A claim for face injuries said to have resulted from a falling toilet roll holder in a fast food outlet was rejected when it was shown that the equipment would have had to have fallen upwards to cause the injury;A claim by a woman for the loss of a ?2,000 watch after a night out was rejected when the photograph she provided of her allegedly wearing the watch turned out to be that of a friend;A claim for injury said to be caused by falling over a wall was rejected when it was proved that there was no wall at the scene of the alleged incident.

The ABI estimates that insurance fraud costs ?2bn a year, adding, on average, an extra ?44 a year to the bill for every UK policyholder.

Crackdown

Over the last five years both the number and overall value of such frauds detected had risen by over 100%, the ABI said.

Nick Starling, the ABI's director of general insurance and health, said that tougher surveillance measures were being introduced to tackle bogus claims.

"Early next year we will be setting up a national Insurance Fraud Register, which will contain details of all known insurance cheats."

He also highlighted the launch of a national police unit to investigate such fraud.

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Moody's warns over Spanish rating

29 July 2011 Last updated at 14:48 GMT Spain is continuing to see a number of protests about spending cuts and high unemployment Moody's has warned it may downgrade the credit rating of Spanish government bonds, saying last week's second rescue package for Greece had done little to ease debt concerns in the eurozone.

The rating agency said it was reviewing Spain's current Aa2 grade, adding that if it was downgraded, it would probably be by just one level, to Aa3.

Moody's added that the Spanish economy remained "subdued".

The Spanish government has now called an early general election.

The announcement was made just hours after Moody's made its credit rating warning, and will see Spain go to the polls on 20 November.

Explaining the decision, Prime Minister Jose Luis Rodriguez Zapatero said he wished to "project political and economic certainty" over the months ahead.

However, it could be benefit the opposition conservative Popular Party, as it is ahead of the ruling Socialist Party in the polls.

The government could have waited until March of next year to hold the general election.

'Bond precedent'

In explaining why it was reviewing Spain's credit rating, Moody's highlighted the fact that as part of the second bail-out deal for Greece, private bondholders were being invited to participate.

Continue reading the main story Sarah Rainsford BBC News, Madrid

This is another blow to Spain - anxious to convince investors it won't need a Greek-style bailout. But Moody's still has concerns, so it has put Spain on review, for what's likely to be a one-notch downgrade of its government debt.

The ratings agency points to the slow pace of economic growth here, and the high levels of debt in Spain's autonomous regions. They account for almost half of state spending and several warn they'll overshoot the budget deficit target set by Madrid.

The Prime Minister, Jose Luis Rodriguez Zapatero, has insisted that won't affect his target of cutting Spain's overall deficit to 6% by the end of the year. But investor doubts, coupled with concern over the details of the latest bailout for Greece, has already pushed Spain's borrowing costs higher and higher.

The Prime Minister has now announced an early general election for November; the main opposition party has long insisted a change of government is the only way to recover confidence in this economy.

The private bondholders, such as banks, are being asked to exchange their current Greek bonds for ones which pay a lower rate of interest over a longer term.

Moody's said this set a "precedent", adding that it had "signalled a clear shift in risk for bondholders of countries with high debt burdens or large budget deficits".

However, if Spain is downgraded to Aa3, this remains a healthy investment grade.

Moody's also said five Spanish banks could have their credit ratings downgraded because of the same concerns.

These include the largest two lenders, Banco Santander and Banco Bilbao Vizcaya Argentaria (BBVA).

'Fiscal slippage'

Despite the forthcoming general election campaign, Spain's central government is continuing to enforce cost-cutting efforts to reduce its public deficit.

However, Madrid is hampered by the fact that Spain is a heavily devolved country, and its regional governments, such as those in Catalonia and the Basque region, are not moving as fast or as deep in trimming their spending.

Moody's highlighted this problem, warning of "fiscal slippage" at the regional and local government level.

Spain is also struggling with the eurozone's highest unemployment rate, which now stands at 20.9%.

Spain's main share index was down 0.7% in afternoon trading, after falling as much as 2.4% immediately following Moody's announcement.

The yield on the Spanish government's 10-year bonds rose 10 percentage points to 6.10%.

The euro declined, falling 0.3% against the dollar to $1.4287.

"The trigger is that the [Greek] deal last week has not really rebuilt confidence across the eurozone, so Spain is still on their radar screens with costs rising," said Giada Giani, analyst at Citigroup.

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S&P warns of US rating downgrade

15 July 2011 Last updated at 02:13 GMT US Federal Reserve chief Ben Bernanke has said a default would cause a "major crisis" Standard & Poor's has become the latest ratings agency to issue a warning of a possible downgrade to the US's debt rating.

It said there was a "one-in-two" chance that it may cut the US's AAA rating if a deal to raise the government's debt ceiling is not agreed upon soon.

The warning comes as cross-party talks in Washington have failed to reach a consensus on the issue.

The US has until 2 August to raise government borrowing limits.

"Today's CreditWatch placement signals our view that, owing to the dynamics of the political debate on the debt ceiling, there is at least a one-in-two likelihood that we could lower the long-term rating on the US within the next 90 days," the agency said.

The agency added that it was concerned the talks between the government and the opposition had become "more entangled" and the two sides were not budging from their respective positions.

"Consequently, we believe there is an increasing risk of a substantial policy stalemate enduring beyond any near-term agreement to raise the debt ceiling," S&P explained.

No-win situation Continue reading the main story

We believe that an inability to reach an agreement now could indicate that an agreement will not be reached for several more years”

End Quote Standard & Poor's As a result of the stalemate between the parties, the government could find itself in a precarious situation.

If it finds itself unable to borrow more money, there is a likelihood that the government will not be able to make scheduled payments on Treasury bills, bonds and other securities held by investors.

S&P said that in such a scenario, the government may be forced to curtail current expenses in an attempt to avoid such a default.

It warned that such a move would have a negative impact on the US economy.

"We think that the effect on consumer sentiment, market confidence, and, thus, economic growth will likely be detrimental and long lasting," it explained.

The agency said that while cutting government spending would dent consumer confidence, a default on payments had far bigger consequences.

"If the government misses a scheduled debt payment, we believe the effect would be even more significant and, under our criteria, would result in Standard & Poor's lowering the long-term and short-term ratings on the US," it said.

Long-term solution?

The US's public debt has surged from from $10.6tn (?6.5tn) in January 2009 to $14.3tn at the end of May 2011.

Economists have warned that the world's biggest economy needs to come up with a long-term solution to contain the rising debt levels.

President Barack Obama has proposed a plan for up to $4tn in budget deficit reduction over the next 10 years, but Republicans have rejected that and other proposals because it calls for raising taxes.

On Thursday, President Obama told lawmakers he wanted an agreement on a debt deal within 24-36 hours, according to aides.

The comments came as a fifth consecutive day of cross-party negotiations failed to make a breakthrough. The president is scheduled to hold a news conference to discuss the troubled talks at 1100 (1500GMT) on Friday.

S&P warned that if the US authorities are not able to agree on a consensus plan, the issue may linger on for years to come and hurt the US economy.

"US political debate is currently more focused on the need for medium-term fiscal consolidation than it has been for a decade," it said.

"Based on this, we believe that an inability to reach an agreement now could indicate that an agreement will not be reached for several more years."

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Union warns over Tube volunteers

12 July 2011 Last updated at 04:18 GMT Union claims volunteers could be used for crowd control at busy Tube stations There could be "lethal consequences" if London Underground uses volunteers to guide passengers during the 2012 Olympics, a union has warned.

The RMT union said using "non-trained staff" at busy stations was a "recipe for disaster".

The union claims volunteers will be used for crowd control but Transport for London (TfL) insists they will only give travel information.

It added its trained customer service staff will be out assisting customers.

The RMT called on London Underground to reverse plans to cut 650 station staff jobs saying the need to use volunteers to fill in 400 to 600 shifts during the Games, "demolishes" the firm's case for job cuts.

'Bursting point'

The union claim volunteers, who will be recruited to help people with so-called "way finding", will be in effect managing the crowd at busy stations.

RMT leader Bob Crow said: "Using unqualified, non-professional, non-trained staff at key crowd control pressure points is a recipe for disaster with potentially lethal consequences.

"With the Tube already at bursting point, and with millions more expected for the Olympics, the last thing needed is wholly unprepared volunteers controlling hundreds of thousands of passengers through stations like Oxford Circus or Stratford."

He said the RMT is now calling on LUL to reverse the 650 jobs cuts and to "get back to the safe and sensible policy of having trained operational railway workers carrying out safety-critical operational railway tasks".

A Tfl spokesman said: "The RMT is quite wrong - all London Underground staff carrying out safety critical work on stations now and during the Olympics are and will be licensed.

"We have developed extensive staffing plans for the busy Olympics period which will see existing rostered station staff supported and supplemented by Revenue Control staff, LU's Special Requirements Team of flexible station staff and operational trainers who are all operationally licensed."

He said information volunteers, who do not carry out safety critical work, will be utilised to provide customers with advice on their onward journey and directional information around stations as it frequently does during large events.

"We'll meet the challenge of the Games by having our trained customer service staff out on stations where they can assist customers, not behind ticket office windows," he added.

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IMF warns US on 'fragile' economy

29 June 2011 Last updated at 15:07 GMT Barack Obama is locked in talks with Congress over raising America's $14.3 trillion debt limit The International Monetary Fund has warned that the US debt burden is on an "unsustainable trajectory".

But the IMF said the US must avoid a sharp correction in order to protect its fragile economic recovery.

The IMF report forecast economic growth of 2.5% this year and 2.7% in 2012, which is below the Federal Reserve's own estimate of 3.3% next year.

"The [US] recovery has proceeded at a relatively slow pace... and has recently weakened," the IMF said.

The US budget deficit is projected to reach $1.4 trillion this year, above last year's $1.29 trillion gap and just below a record $1.41 trillion reached in 2009.

In its annual review of the US economy, the IMF urged Washington to reach a swift agreement on a deal to raise the government's borrowing limit.

The Obama administration and Congress are locked in negotiations over making budget cuts before approval is given to raise the debt ceiling.

The US Treasury already has reached the existing $14.3 trillion legal limit on the nation's debt and needs to raise the debt ceiling by 2 August to avoid a default.

Failure to agree a debt limit deal would cause a "severe shock" to the economy, the IMF said, and could lead to a downgrade in the country's coveted AAA debt rating and send interest rates soaring.

"These risks would also have significant global repercussions, given the central role of US Treasury bonds in world financial markets," the IMF said.

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Hutton warns over pensions plans

23 June 2011 Last updated at 03:33 GMT Lord Hutton's review has formed the basis of plans for public sector pensions reform The government could force people out of pension schemes if reforms are too punitive, ministers will be warned.

The message will come from Lord Hutton of Furness who advised the government on changes to public sector pensions.

In a speech, he will warn of the dangers of raising pension contribution levels so high that scheme members have no alternative but to leave.

Downing Street said the government wanted to continue to have constructive conversations with the unions.

Significant exodus

The former Labour Work and Pensions Secretary will urge ministers to have a "full and proper consultation and discussion with the trade unions".

In a speech on Thursday at the Institute for Public Policy Research, he will reiterate that with average life expectancy increasing change is unavoidable.

But he will warn there is a danger of a significant exodus from the local government pension scheme in particular if contributions are raised too high and no other compensation is provided.

The scheme, one of the largest in the public sector, has just over four-and-a-half million members.

Lord Hutton will call for consultation with the unions to try to avoid what he will describe as "the confrontation and division that marked previous decades".

Strike looming

According to the Guardian, Lord Hutton will say: "If these reforms have any chance of succeeding then people need to know that they are being treated fairly… there should be full and proper consultation and discussion with the trade unions.

"That is how we do things in Britain - the public would take a very dim view of any government that fails to honour this basic requirement.

"We must try and avoid the confrontation and division that marked previous decades and must not turn the clock back."

About three-quarters of a million public sector workers are due to go on strike on Thursday next week over pension reforms.

Lord Hutton's independent review of the future of public sector pensions, which was published in March, has formed the basis of the government's plans for change.

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Unison warns of pension strikes

18 June 2011 Last updated at 01:40 GMT Many Unison members work in the NHS The leader of Britain's biggest trade union says public sector workers could mount the biggest industrial action campaign since the General Strike.

Unison's Dave Prentis said the unions were prepared for "sustained and indefinite" strikes in protest at the government's pension plans.

The government said on Friday the pension deal on offer was the best the unions would get for many years.

Mr Prentis told The Guardian he still hoped to negotiate a settlement.

The Chief Secretary of the Treasury, Danny Alexander, said unions would make a "colossal mistake" if they rejected the coalition government's plan.

The BBC's political correspondent Ben Wright said: "Privately, talks are continuing between the trade unions and the Treasury about the government's proposals but publicly the two sides are locked in a war of words."

The government wants to reform public sector pensions - meaning a later retirement age and higher contributions for most workers - and claims the current pension system is unaffordable in the long-term.

Continue reading the main story Sector Employee contribution Pension age

*Depending on scheme. Source: IPSPC

Mr Alexander said the government was proposing public sector workers - bar the armed forces, police and fire service - would receive their occupational pension at the same time as the state pension in future.

Many can currently receive a full pension at 60. The state pension age is due to rise to 66 for both men and women by April 2020.

Teachers' unions in England and Wales have already voted to strike on 30 June to protect their pensions.

The strike by the National Union of Teachers (NUT) and the Association of Teachers and Lecturers (ATL) will disrupt thousands of schools.

Unison has 1.3 million members and they have not yet been balloted on industrial action.

Mr Prentis said if strikes did happen they would be the biggest since the General Strike of 1926 and, unlike the miners' strike in 1984/5, the unions would win.

Mr Alexander claimed the unions were "hell bent" on strikes

Unison has members working for local authorities, the NHS, colleges and the police.

Public sector workers are already facing heavy job cuts and a pay freeze.

Mr Prentis said: "I strongly believe that one day of industrial action will not change anyone's mind in government... we are prepared for rolling action over an indefinite period."

He also called on the Labour Party to support Unison's battle against the pension reforms.

Mr Prentis, whose union is affiliated to Labour, said: "We want our Labour Party to be the voice of opposition. We're worried that some of the senior people in the party still have to make statements as if they are in power, not opposition.

"If the Labour Party stays quiet that will be an issue," he added.

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Moody's warns on US debt ceiling

3 June 2011 Last updated at 02:04 GMT The treasury department has taken steps to avoid further borrowing pending the debt limit increase Moody's has warned it may downgrade the US debt rating if Congress fails to increase the US debt limit in the coming weeks and risks default.

The agency warned of political "entrenchment" preventing an increase.

Republicans on Wednesday blocked a bill to raise the debt limit, demanding Democrats first agree to spending cuts.

The US risks default if Congress does not authorise more borrowing by August. A downgrade would increase borrowing costs, slowing the economic recovery.

The US runs a $1.5tr (?916.8bn) deficit and is already about $14.3tr in debt.

The country reached its debt ceiling last month, but the US treasury department has begun taking extraordinary measures to avoid breaching the limit.

Flurry of negotiations

Leaders of both parties agree to the need to trim the budget in the face of massive budget overruns, but Republicans have refused to allow tax increases, while Democrats have vowed to protect costly social programmes.

The White House argues the United States would face "catastrophic" consequences if Congress does not raise the cap on total US government borrowing by 2 August.

Republicans and Democrats have engaged in a flurry of negotiations led by Vice-President Joseph Biden, but on Thursday no solution seemed imminent.

And US President Barack Obama, who has called for Congress to raise the debt limit without conditions, has held meetings with congressional leaders of both parties.

Also Thursday, US Treasury Secretary Timothy Geithner held a meeting at the US Capitol with Republicans, including many newly elected congressmen who have indicated they see little risk to a showdown.

In a statement on Thursday, Moody's warned that if Congress does not act to increase borrowing authority in the coming weeks, it could downgrade the AAA rating on US government debt "due to the very small but rising risk of a short-lived default".

Such a move would increase borrowing costs, hindering the already struggling economic recovery.

"The rating outlook will depend on the outcome of negotiations on deficit reduction," the agency said, in what analysts interpreted as a criticism of both parties.

"A credible agreement on substantial deficit reduction would support a continued stable outlook; lack of such an agreement could prompt Moody's to change its outlook to negative on the AAA rating."

The agency said it had anticipated "political wrangling" on the debt increase but noted "the heightened polarization over the debt limit has increased the odds of a short-lived default".

Moody's move took Washington by surprise, even though in April, ratings agency Standard & Poors warned it could cut its credit rating on US government debt over concern Democrats and Republicans would not be able to agree a plan to reduce the growing deficit.

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Hard times ahead, economist warns

27 May 2011 Last updated at 16:10 GMT By Hugh Pym Chief economics correspondent, BBC News Mr Dale says he could change his mind about raising rates at any point The Bank of England's chief economist has told the BBC there are "relatively hard times ahead".

Spencer Dale said the possibilities of growth remaining feeble and inflation high were "very significant risks".

Mr Dale, who sits on the Bank's Monetary Policy Committee (MPC), has voted for interest rates to rise in recent months.

Mr Dale was on a two-and-a-half day visit to the Scottish Borders and Edinburgh.

He visited a textile factory and a timber processing plant, as well as speaking at meetings of the CBI and Chambers of Commerce.

It was part of the MPC's regular programme of trips around the UK to gauge the state of the economy.

During the visit, he took time out to speak to the BBC.

Inflation risk

I first asked Mr Dale about why he had voted at four successive meetings for a 0.25% increase in the Bank's official interest rate.

He has been in a minority on the committee, with the decisions coming down in favour of holding rates at the record low of 0.5%.

He acknowledged that economic growth was subdued.

"I am not confident about the strength of the recovery, particularly in terms of the weakness we see in the household sector and the implications that may have for consumption," he said.

But the Bank's top economist added: "I am even more worried about inflation and the risk that we may see price pressures from the rest of the world continue to push up and the high levels of inflation we have seen in the UK persist for longer than we otherwise expect."

So should households expect an increase in the cost of borrowing sometime this year?

"I think the level of interest rates at the moment is at an extraordinary low level - the Bank rate is at the lowest level it's ever been," he said.

Continue reading the main story

I understand exactly the pain that many households are feeling and have huge sympathy for them ”

End Quote Spencer Dale Bank of England chief economist "At some point, I do expect interest rates to rise, but how quickly and how much, I really can't say."

Mr Dale made it clear that he was open-minded and could change his vote at future meetings of the MPC.

"I could change my view at any point in either direction - that's the only way you can behave as a policymaker," he told me.

"You have got to approach this job with a big dose of pragmatism and humility. We don't know precisely what's going on in the economy at the moment and we know even less about how the economy is going to evolve going forward.

"So all you can do I think is remain open-minded, keep challenging yourself and then vote in terms of the interest rate you think is most appropriate to get inflation back down to target."

'Bleak time'

Households are facing an intense squeeze with average pay rises about half the annual rate of inflation.

Mr Dale argued that this was part of the rebalancing of the economy away from consumption and borrowing towards investment and export growth.

He pointed out that monetary policy could not offset this process. But he added: "I understand exactly the pain that many households are feeling and have huge sympathy for them."

I asked him whether there was light at the end of the tunnel with some indicators still looking bleak.

"I think the next year or two will be a relatively bleak time. I think we have relatively hard times ahead," he replied.

"But I think we are starting towards a path of sustainable recovery.

"The lower level of sterling should help to support this rebalancing of the economy and, moreover, I do expect inflation to start to fall in a year or two's time and that will also help to reduce some of the pressures."

But is he worried about growth remaining pretty weak?

"I am worried about growth remaining feeble and I am also worried about inflation remaining high - and if you like that's the dilemma facing the MPC at the moment - trying to balance these two very significant risks."

Mr Dale left the impression that the Bank of England was well aware of the conflicting pressures in the economy and that there would be challenging times ahead as policymakers decided when to make the first move on interest rates.

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