Cable Frustrated By Treasury 
Business Minister Vince Cable is finding that his attempt to reduce at the regulatory burden on business is being frustrated by the Treasury’s apparent unwillingness to take part in his “red tape challenge”.

The red tape challenge was launched as an attempt to begin cutting the 21,000 regulations on the statute books for Britain’s businesses by asking the public to tell the government which red tape they wanted to see dropped.

Officials in the two departments are at loggerheads over the Treasury’s refusal to allow the business department to scrutinise the regulatory burden being caused by tax regulation. Spokespeople at the Treasury say that they are more than capable of dealing with tax issues through the Office of Tax Simplification (OTS).

“The Treasury is not in the red tape challenge because it is too important,” said one business department official. “But the department is a big barrier to cutting regulation because there are quite a lot of tax regulations.

“The Treasury thinks the OTS should do this, but you have to see red tape holistically. The Cabinet Office is pushing other departments to take part and the Treasury should be doing it too.”

The Office of Tax Simplification was launched in July 2010 to provide the Government with independent advice on simplifying the tax system and does appear to be seeking the views of business owners.

Throughout October, for example, it is holding a series of workshops across the country to discuss the recent small business review discussion papers. However, it has not published a paper on tax simplification since this Summer.

And however much the Treasury denies that it is not cooperating, the argument does nothing to promote the idea of a united government working to deliver a better environment in which business can grow.

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Pension Age Rise Delayed 
The state pension age for women was due to rise to 65 by 2018, before rising again for both men and women to 66 by April 2020. That left some 245,000 women facing a wait of between 19 months and 24 months. And the worst hit 33,000 women, all aged 57 now, had complained that the changes gave them an unfair two-year wait for their pension.

Faced with criticism from every quarter and extensive lobbying from pensions campaigners and women’s groups, Ministers have now agreed to delay the second rise in the pension age from the April to the October of 2020.

Work and Pensions Secretary Iain Duncan Smith agreeing that the existing plans were “on balance, unfair”, adding that the new 18-month cap “will free up a lot of women, I hope, from their concerns and worries.”

Echoing his comments, Lib Dem Pensions Minister Steve Webb said that the Government has “delivered on its promise “ to consider the impact of the pension changes on those “most adversely affected.”

Joanne Segars, Chief Executive of the National Association of Pension Funds (NAPF), said: "This takes some of the sting out of what was a very raw deal for many women. People need time to prepare their finances for the transition into retirement, and there is now a clearer ceiling on what to expect.”

It has been calculated that this move will cost the Government around £1bn. And it will spend £45bn extra on pensioners by 2025 because of the triple guarantee to uprate the basic state pension by the highest of earnings, prices or 2.5 per cent.

When the state pension age was set at 65 in1926 there were nine people of working age for every pensioner. There are now three people of working age for every pensioner and that is set to fall to nearer two by the end of this century.

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Fewer Students Staying In Education 
According to recent research carried out by the Association of Colleges (AC), there has been a marked drop in the number of students staying on at college after the age of 16 as a result of Government cuts.

Half the 182 colleges surveyed in a major study published today said that student numbers had dropped this year. The axeing of education maintenance allowances (EMAs) is cited as the main reason for the fall in numbers.

The research is the first in-depth study of the impact of the Government’s decisions to cut EMAs and it also blames cuts n transport subsidies for the fall, which in one in four colleges was said to be up to 15 per cent.

The Connexions careers service has also been cut which, according to Martn Doel, Chief Executive of the Association of Colleges means that “there will be little colleges can do to encourage ...(students) back into education.”

At a time when the number of young people out of work has hit the million mark, it seems perverse that young people are not encourage to stay on for vocational training.

According to the report there were 600 fewer students enrolled on courses in further education and specialist colleges where students would be likely to opt for vocational courses, such as sport and leisure, hair and beauty and construction.

Sally Hunt, general secretary of the University and College Union, said: "As youth unemployment soars towards record levels, the Government needs to urgently reassess its priorities and make access to education easier for the poorest in society. Better transport subsidies and free meals for the poorest students would [be a] step in the right direction."

The Education Secretary, Michael Gove said that EMAs would be replaced by more targeted funding at a lower cost.

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Banks Ready To Accept Ring-Fencing 
When the heads of the major UK banks appeared in front of the House of Lords Economic Affairs Committee this week they accepted that ring-fencing their retail operations from their investment arms was probably a “done deal”, which they would accept.

The ring-fencing proposal was put forward by the Independent Commission on Banking (ICB) and its Chairman, Sir John Vickers, argued the downgrade of British banks on the back of the Commission's final report was an "entirely benign development" for the economy.

The banking heads were not fully in agreement with the proposal however; Stephen Hester, Chief Executive of Royal Bank of Scotland said that there was a significant risk that the costs of the proposal “will not be balanced by their benefits”.

And Sir Win Bischoff, chairman of Lloyds Banking Group, argued that the cost estimate given by the Commission of £4bn to £7bn could be far higher and that the report had not provided a definitive analysis of these costs.

Other heads echoed the caveats; HSBC Chairman Douglas Flint said: "Ring-fencing won't impact the availability of funds (to lend to businesses), but it will impact the cost.”

Ana Botín, Chief Executive of Santander UK, warned the Committee that the bank might have to cut back on "certain services" it provides to small and medium-sized companies as a result of the regulatory changes.

Bob Diamond, Chief Executive of Barclays, also questioned the value of ring-fencing, arguing that investment banking was not inherently more risky than retail banking. And Mr Hester agreed that since the crisis, RBS had lost more money on "regular lending" than on its investments.

However, despite the hints of deleterious knock-on effects to business and investors, the conclusion was that the banking industry as a whole accepted the need for banks to be reformed "to the point where taxpayers don't have to put up (any more money)".

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SMEs Face “Deeper” Funding Problem 
In an interview yesterday Business Secretary Vince Cable has admitted that small and medium-sized businesses (SMEs) face a funding problem despite the Project Merlin deal to encourage bank lending to them.

Mr Cable defended the Project Merlin agreement but admitted that “new mechanisms” would have to be considered, including the ‘credit easing’ announced by the Chancellor last week.

In an interview with The Guardian Mr Cable said that Project Merlin had been just one response to the “near collapse” of the banking system in 2008.

"I think the Merlin agreement, contrary to some of the criticism, has been useful. But there is a deeper problem and that is why new mechanisms have to be looked at," he said.

However, as recently as last month, the Governor of the Bank of England, Sir Mervyn King implied that Project Merlin’s figures were misleading.

Under the credit easing scheme, the Treasury will buy small firms' corporate bonds, providing cash direct to SMEs unable to gain funds from the banks, with the Bank of England acting as the Treasury's agent.

The scheme in itself could be viewed as an admission that the banks are still not lending properly and its announcement has been jumped upon by critics of Project Merlin as an admission of just that. It also represents a major step by the Treasury and brings it closer to direct involvement in monetary policy.

Mr Cable admitted that there were “procedural issues” with the credit easing policy, such as the small size of the SME bond market, but he believes that securitizing SME loans, where loans are bundled together and sold to investors, cold be one solution.

"It would have to be coupled with measures to ensure that the banks ensure that credit goes where it is supposed to go," he added.

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