Government may sell 40 billion pound student loan book - report

LONDON (Reuters) - The government is considering whether to sell its 40 billion pound student loan book as part of a series of privatisations that includes selling off the Royal Mail Group, the Sunday Times newspaper said.

The government is testing the market with the sale of a 900 million pound tranche of loans, which was announced by Business Secretary Vince Cable on March 26. The newspaper said that the government was now looking at wholesale privatisation.

It said that the sale of the loan book may not raise a significant sum but would slash public debt by removing the loans from the government's balance sheet.

The Student Loans Company, which lends out about 5.5 billion pounds a year, had 28 billion pounds of loans outstanding at the end of March 2012. Senior civil servants say a hike in tuition fees could drive up the total to 40 billion pounds, the newspaper said.

The Department for Business, Innovation & Skills, which oversees the Student Loans Company, declined to comment.

(Reporting by Brenda Goh; Editing by Hugh Lawson)

View the original article here

Partners with industry to fund $3 billion aerospace centre

LONDON (Reuters) - The government said on Monday it will join industrial partners to create a 2 billion pound aerospace centre, part of efforts to bolster manufacturers as it struggles to revive a flagging economy.

Aerospace is one of Britain's most important industrial sectors, and the new UK Aerospace Technology Institute is expected to focus on developing technology for the next generation of quieter, more energy-efficient aircraft.

Each partner is providing half the funding for the venture, which the government expects to secure up to 115,000 jobs in the aerospace sector and its supply chain.

Almost all the government contribution is new money, the Department for Business, Innovation and Skills said.

The announcement comes two days ahead of the state budget, in which Chancellor George Osborne is expected to stick to his guns on austerity, despite mounting calls for a change of course in an economic environment characterised by near-zero growth and slow progress on deficit reduction.

"We're doing all we can to maintain this jewel in our crown (and)... maintain Britain's position as the centre of aerospace technology," Deputy Prime Minister Nick Clegg said in a statement.

The government says aerospace supports more than 3,000 companies and employs 230,000 people in Britain, and expects the global civil aerospace market to grow to become worth more than $4.5 trillion (2.97 trillion pounds) by 2031.

Companies with aerospace operations in Britain include BAE Systems, EADS and Boeing.

The government also said it had committed an additional 500 million pounds to boosting sectors in which Britain has a comparative global advantage, such as agricultural technology and life sciences.

While Britain does have a relative head start in some high-tech sectors, others are catching up. China has replaced Britain in the world's top five arms-exporting countries, a Swedish think-tank said on Monday.

(Reporting by Mohammed Abbas; Editing by John Stonestreet)

View the original article here

Senate Democrats' budget plan has $400-600 billion deficits

By David Lawder

WASHINGTON (Reuters) - Annual deficits under a new plan from Senate Democrats would be in the $400-600 billion range for much of the next decade, a level they say would allow stronger near-term job growth than Republicans' balanced-budget vision.

The plan unveiled by Senate Budget Committee Chairwoman Patty Murray on Wednesday offers up some modest spending cuts and seeks nearly $1 trillion in new tax revenue, but leaves major government programs largely unchanged - a stark contrast to Republican Paul Ryan's radical revamp of healthcare benefits in an effort to slash deficits to zero by 2023.

Murray's plan, which is expected to be passed by the Senate Budget Committee this week, showed that deficits would average 2.4 percent of economic output through 2023, a rate many economists view as sustainable. The Senate hasn't passed a budget in four years.

Deficits have exceeded $1 trillion during each of the past four years due largely to economic damage from the recent financial crisis. Under the assumptions used in Murray's budget, the fiscal 2013 deficit is forecast at $891 billion, or 5.6 percent of gross domestic product.

The Democratic plan would add $5.2 trillion to public debt over the decade, pushing it above $18 trillion in 2023. As a share of a growing economy, however, the debt would decline gradually to 70.4 percent from 76.6 percent now.

The plan, given to Budget Committee members only after the panel opened debate on it, aims to shrink deficits by $1.85 billion over 10 years - including the replacement of about $960 billion in automatic spending cuts known as the sequester.

It adds $100 billion in new spending to rebuild roads, bridges, schools and workers' job skills and prescribes $975 billion in spending cuts and $975 billion in new revenues from the elimination of tax deductions and loopholes that benefit the wealthy.

"The highest priority of our budget is to create the conditions for job creation, economic growth, and prosperity built from the middle out, not the top down," Murray told the committee.

Ryan's plan, expected to be passed by the House Budget Committee late on Wednesday, aims to slash deficits by $4.6 trillion and reach a small surplus by 2023 through deep cuts to domestic social programs such as Medicaid healthcare for the poor.

Ryan's plan benefits from a $620 billion tax increase on the wealthy enacted in January, but will not levy any more new taxes. It calls for repeal of President Barack Obama's 2010 healthcare reforms for savings of $1.8 trillion.

For the third year in a row, Ryan has proposed major changes to the Medicare healthcare system for the elderly and disabled, converting it after 2024 to a voucher-like system that gives seniors a subsidy to purchase private health insurance or coverage through the existing fee-for-service Medicare program.

Murray's plan would make no changes to Medicare's structure but claims it will achieve $265 billion in savings from the program through unspecified efficiency changes that build on Obama's healthcare reforms. Senate Budget Committee aides said these would be determined by choices made in future legislation. Another $10 billion in savings would come from new efficiencies in the Medicaid program.

Budget Committee Republicans criticized Murray's plan as a timid effort that preserves the status quo in the face of a massive baby boom generation that will "bankrupt" Medicare.

"Their proposal goes to extraordinary lengths to shield the federal bureaucracy from any reform, even as millions of Americans are trapped in failed government programs," said Senator Jeff Sessions, the panel's top Republican. "The Democrat budget enriches the bureaucracy at the expense of the people."

The Democrats' plan would also reduce spending caps starting in 2015 for savings of $240 billion from the military, $142 billion from discretionary domestic spending and $76 billion from certain benefit programs. The programs and projects that would bear these cuts are not specified, leaving that task to appropriations committees.

On the tax side, the budget offers little specificity on which credits, deductions and loopholes should be closed to raise the $975 billion in new revenues.

The Ryan plan is expected to go to a floor vote in the Republican-controlled House next week, while the Democratic-controlled Senate will vote on the Murray plan. House and Senate leaders would then try to work out differences between the two.

(Reporting by David Lawder; Editing by Sandra Maler, Andrew Hay and Paul Simao)

View the original article here

Qatar in talks to invest up to 10 billion pounds in UK projects - report

(Reuters) - Qatar has begun talks with the UK government to invest up to 10 billion pounds into key infrastructure projects in Britain, the Financial Times reported on Wednesday citing people involved in the negotiations.

The Financial Times reported that officials and ministers from both countries held talks over what schemes the Qataris could invest in and whether a specific fund could be set up for the same.

Although the 10 billion pounds investment figure was cited, a timeline for the investment has not been agreed, the FT said.

Potential projects include power plants, road and rail projects and even the Thames 'super-sewer' project under London, the daily reported. The new 14 billion pound nuclear reactor at Hinkley Point in Somerset planned by French utility EDF was one of the schemes discussed, FT said.

(Reporting by Karen Rebelo in Bangalore; Editing by Bob Burgdorfer)

View the original article here

BoE's Miles sees case for up to 175 billion pounds more QE

BATH, England (Reuters) - The Bank of England has a good case for restarting monetary stimulus, and may need to buy up to 175 billion pounds more of government bonds if growth is far below potential, a senior policymaker said.

David Miles, in a speech on Thursday, gave a detailed model of how policy should respond to the amount of slack in the economy - something the central bank has generally avoided before, and which moves in the direction of policy guidance favoured by incoming central bank governor Mark Carney.

Miles is an external member of the bank's Monetary Policy Committee, and until this month he was alone in voting for an extra 25 billion pounds of asset purchases, also known as quantitative easing.

But his views appear to be gaining momentum. This month he was joined by Governor Mervyn King and markets expert Paul Fisher, prompting economists to pencil in a possible restart to the bond purchase scheme and pushing sterling to an 8-month low.

The central bank bought 375 billion pounds of government bonds between March 2009 and October 2012 to boost Britain's battered economy. But in recent months persistent inflation and doubts about bond buying's effectiveness at boosting growth had put further purchases in question.

However, in a speech at the University of Bath, Miles set out an economic model which, he said, better captured uncertain estimates of the state of the economy as well as the scope of stronger growth to boost its ability to overcome supply bottlenecks and avoid accelerating inflation.

"Based on my views about plausible ranges of outcomes, a good case can be made for more expansion," he said.

Miles said he was open to alternatives to buying government bonds, but added that he could not see any. If bond purchases were less effective than in the past, that generally meant more should be bought than before, he said.

The amount of slack in the economy appeared to be the most influential variable in Miles's model. In the central case that the amount of slack was estimated to be equivalent to 0-3 percent of annual output, this would point to 60 billion pounds more of asset purchases being needed, Miles said.

If slack were somewhere in a range of 0-6 percent, this pointed to 175 billion pounds' more purchases. Current estimates for the amount of slack in Britain's economy range from 0.8 percent to 5.2 percent, Miles added.

Some 25 billion pounds of bond purchases would be warranted if the amount of slack was low, even if the central bank was solely focused on cutting inflation, if the economy's supply capacity did not improve at all when growth recovered, he said.

TIME TO SELL?

Nonetheless, in a question and answer session after his speech, Miles stressed the central bank did not intend to buy bonds indefinitely, and still intended to sell them back.

"When there is a recovery that has some legs, I think it is then time to think about normalising monetary policy," he said. "At some point down the road, maybe not too far down the road, we can get back to a more normal monetary policy."

Miles said his model suggested the central bank should only start to reverse asset purchases when it forecast 3 percent annual growth over the next three years. Currently the central bank sees growth of around 1 percent this year, picking up to 2 percent in 2015.

However, the assumptions in Miles's model may be disputed by other members of the Monetary Policy Committee who do not share his enthusiasm for bond purchases.

It assumes that very loose monetary policy does not create any hidden risks - for example, financial market bubbles - and that medium-term inflation is driven by the size of the economy's output gap, not expectations of higher inflation.

Miles said not everyone would accept his conclusions, but that his approach offered a better way of thinking about the uncertainty affecting monetary policy in Britain now.

Strong employment combined with very weak growth currently make it particularly hard for economists to reach reliable estimates of how much spare capacity is in the economy.

"Optimal policy depends on making judgements on the relative likelihood of different outcomes. It makes no more sense to just focus on the ... most likely outcomes than it would in making decisions on buying insurance or crossing a road," he said.

(Reporting by David Milliken; Editing by Jason Webb)

View the original article here