London, United Kingdom (AHN) – The Bank of England will inject an additional $117.7 billion into the economy in an attempt to encourage commercial bank lending and stimulate sagging growth.

That decision was reached by the Bank of England’s Monetary Policy Committee when it met and voted on Thursday.

The move boosts the amount of the bank’s asset purchase program, financed by issuance of central bank reserves, to $431.7 billion, bank officials said.

Businesses in the United Kingdom welcomed the move.

In a statement, the bank’s Monetary Policy Committee explained why it acted.

“The pace of global expansion has slackened, especially in the United Kingdom’s main export markets. Vulnerabilities associated with the indebtedness of some euro-area sovereigns and banks have resulted in severe strains in bank funding markets and financial markets more generally. These tensions in the world economy threaten the UK recovery.”

“In the United Kingdom, the path of output has been affected by a number of temporary factors, but the available indicators suggest that the underlying rate of growth has also moderated. The squeeze on households’ real incomes and the fiscal consolidation are likely to continue to weigh on domestic spending, while the strains in bank funding markets may also inhibit the availability of credit to consumers and businesses.”

“While the stimulatory monetary stance and the present level of sterling should help to support demand, the weaker outlook for, and the increased downside risks to, output growth mean that the margin of slack in the economy is likely to be greater and more persistent than previously expected.

“CPI inflation rose to 4.5 percent in August. The present elevated rate of inflation primarily reflects the increase in the standard rate of VAT in January and the impact of higher energy and import prices. Inflation is likely to rise to above 5 percent in the next month or so, boosted by already announced increases in utility prices,” the committee added.

“But measures of domestically generated inflation remain contained and inflation is likely to fall back sharply next year as the influence of the factors temporarily raising inflation diminishes and downward pressure from unemployment and spare capacity persists,” the committee explained.

“The deterioration in the outlook has made it more likely that inflation will undershoot the 2 percent target in the medium term. In the light of that shift in the balance of risks, and in order to keep inflation on track to meet the target over the medium term, the Committee judged that it was necessary to inject further monetary stimulus into the economy.”

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London, England, United Kingdom (AHN) – The international banking regulator, the Bank for International Settlements (BIS), urged over the weekend the Bank of England to raise the country’s record-low interest rates.

The regulator warned that financial stability of Britain is at risk unless the country’s central bank imposes tighter monetary policy.

Although the BIS, in its yearly report released on Sunday, made the same warning to central banks around the world, it singled out the Bank of England because Britain’s inflation rate had exceeded the BOE’s 2 percent target since December 2009.

The BIS pointed out that the United Kingdom’s consumer price index has reached 4.5 percent, while the country’s key lending rate continues to be at 0.5 percent since March 2009.

The BIS stressed that the BOE’s extremely accommodative policies threaten to embed high inflation in the system and damage prospects for long-term growth. It also places at risk financial stability because the very low rates encourage risk-taking in the financial sector.

The BIS said central banks must be prepared to hike key lending rates at a faster pace than previous monetary tightening episodes.

The BOE favors low rates because the recent rise in commodity prices was a one-time incident and there is enough slack in the economy to keep wage pressures down. But the BIS disagrees with the bank’s assumptions.

The BIS said there is still a threat of second-round effects because higher food prices could cause higher salaries in emerging markets, which in turn, could cause an increase if the global supply chain.

Despite inflation rate in England hitting 4.5 percent in April, and economists expectation of a key lending rate increase within the year, the Bank of England’s monetary policy committee has not yet indicated an interest rate hike is underway soon.

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Some parts of Europe are experiencing a drought that is particularly severe in certain areas of England, France and Germany.

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Malaga, Spain (AHN Sports) – Five players finished the opening round of the Andalucia Open with five-under par 65s Thursday at the Parador de Malaga Golf and Johan Edfors and two of his Swedish countrymen were among those atop the pack.

Edfors won three events on the European Tour in 2006 but hasn’t won since. He was joined by Oscar Floren and Ricard Karlberg. England’s Robert Rock and Jamie Elson rounded out the quintet.

Rock has played in nearly 200 events without a win, he has three runnerup finishes to his credit.

Former Open champion Paul Lawrie of Scotland was one of five players who were a shot off the lead with four-under par 66s.

Jose Maria Olazabal, the victorious Ryder Cup captain for Europe, begain his preparation for the Masters in two weeks with an even-par round of 70. Colin Montgomerie, the winning captain before Olazabal, joined him in the group at 70.

Pre-tournament favorite Alvaro Quiros finished one-over for the day with a 71.

Miguel-Angel Jimenez, whose company runs and promotes this event, finished two-over for the day with a 72.

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London, England, United Kingdom (AHN) – British ministers said that the United Kingdom is set to seize the assets of embattled Libyan strongman Moammar Gaddafi in Britain in the coming days.

The minister said the Treasury had established a unit that traced the Libyan dictator’s assets made up of billions of dollars in bank accounts, commercial property and a $15 billion (GBP 10 billion) mansion in London.

The Treasury estimated Gaddafi’s total liquid assets in Britain at $30 billion (GBP 20 billion), mostly in London.

The assets will be frozen as part of a global effort to unseat Gaddafi from his grip on power for decades.

Whitehall, however, emphasized that the ongoing identification and subsequent seizure of the dictators’s assets is secondary to getting Britons out of Libya where the civil unrest keeps building up.

Libyans have taken their cue from Egyptians, who successfully ousted President Hosni Mubarak from power.

On Thursday, British Prime Minister David Cameron – who is in Muscat, Oman for a British Petroleum event – apologized for the problems related to the evacuation of British nationals in Libya. The BP plane that the coalition government borrowed turned out to have mechanical problems and was delayed by at least 10 hours before it could fly out of Gatwick Airport.

While Cameron was in the Middle East, Deputy Prime Minister Nick Clegg was on a family holiday at a ski resort in Davos, Switzerland, causing a vacuum in political leadership in 10 Downing Street.

Clegg had to cut short his vacation and admitted he “forgot” he was supposed to run Britain while Cameron was on an overseas official trip.

Despite the blunders in the evacuation effort, Britons stranded in Libya were finally able to leave the country aboard military planes and a Royal Navy warship.

Cameron said he was disappointed with the decision of British Airways and BMI to cancel scheduled flights out of Tripoli because the government initially held back chartering aircraft so as not to disrupt the scheduled flights of the two commercial air carriers.

Shadow Foreign Affairs Secretary Douglas Alexander, who used to hold the transportation portfolio under the Labour government, said the Tories should have recognized as early as Monday that BA and BMI would likely not fly into a war zone and chartering planes became more difficult because of the high cost of insurance for planes flying into Libya.

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London, England, United Kingdom (AHN) – Pressure is being exerted on the Bank of England to hike key lending rates as its Monetary Policy Committee meets Thursday to discuss a possible interest rate increase to curb inflation.

Two former MPC members cited the anticipated 4 percent inflation rate – twice the bank’s target of 2 percent – as their reason to favor a benchmark lending rate hike. DeAnne Julius and Tim Besley said Wednesday that if they were still members of the MPC, they would vote for an increase on the current record-low 0.5 percent interest rate.

Two current MPC members, Andrew Sentence and Martin Weale, indicated they would also favor a key lending rate hike.

Joining the growing clamor to adjust the interest rate to curb inflation is the Chamber of British Industries, which forecasts that the key lending rate would climb to 1.25 percent by the end of 2011.

The very low interest rates in some developed nations are being blamed for the rise in cheap money, which artificially upped assets prices and demand for goods and food. In turn, higher demand for these items caused prices to go up and stoked U.K.’s inflation rate to reach 3.7 percent.

However, on the other end, some business groups such as the British Chamber of Commerce favor keeping the status quo. The BCC said the move would protect small- and medium-sized businesses from paying higher loan rates.

Six other MPC members are in favor of retaining the current rate, while MPC member Adam Posen is pushing for another round of a $75 billion (GBP 50 billion) quantitative easing.

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London, England, United Kingdom (AHN) – A study released Monday by the British think tank Institute for Fiscal Studies said that more Britons will pay higher income tax rates.

With these changes, effective tax rates for middle-income Britons could reach 83 percent, the IFS estimated. It is the same tax rate for Britain’s top earners which the Labour government imposed in 1979.

Beginning April, 750,000 Britons will pay 40 percent higher income taxes because of reforms initiated by the coalition government. Under the changes, the level which residents will begin paying income taxes will be increased by $1,500 (GBP 1,000) to $11,212.50 (GBP 7,475) a year.

But tax credit reductions will make the marginal rates of 175,000 working parents reach 70 percent. Hardest hit would be a worker who earns $67,500 (GBP 45,000) and with a non-working spouse and two children. This worker will be worse off by $1,500 (GBP 1,000), the think tank pointed out.

That would be on top of higher National Insurance premiums and value added tax.

By 2014, another 850,000 Britons will pay higher tax rates that when the next general election takes place, the number of higher-rate taxpayers would hit five million.

The coalition government, however, continued to justify the changes, claiming those who have the capacity to pay higher taxes carry the greatest burden. A Treasury spokesman added tax credits will be enjoyed by residents who need them most. The changes also moved almost one million taxpayers out of paying taxes, while 23 million taxpayers in the basic rate bracket will even gain $255 (GBP 170) a year, the spokesman said.

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London, England, United Kingdom (AHN) – The British coalition government has thrown in the towel when it comes to regulating bankers’ bonuses. Prime Minister David Cameron admitted Monday he is helpless in preventing the financial institutions from making huge payouts to executives amid heavy public criticism and slow recovery of the British economy.

Cameron’s admission of defeat ends a two-year battle with banks to limit the amount of bankers’ bonuses, particularly for banks that were not bailed out by the government. The prime minister said he is in favor of more restraint, but would not micromanage the banks to achieve that.

Some Liberal Democrats in the coalition are pushing for another round of onerous taxes on bonuses. The government collected last year a 50 percent tax on bonuses above $37,500 (GBP 25,000), which earned for the government $5.25 billion (GBP 3.5 billion). But the Tories explained it was a one-off deal.

However, the policy does not apply to banks partly owned by the government such as the Royal Bank of Scotland and Lloyds. For No. 10 Downing Street to approve high bonuses for these banks, ministers want the banks to first increase their lending to small businesses.

According to a 2010 survey, 2,800 bankers in Britain got over $1.5 million (GBP 1 million) bonuses. Reports said RBC Chief Executive Stephen Hester would get a $3.75 million (GBP 2.5 million) bonus, while City bonuses could top $10.5 million (GBP 7 million). The 2010 bonus is expected to total $13.5 billion (GBP 7 billion).

As a face-saving measure, ministers are planning to publish information on the five highest paid executives at each bank and for bonuses above $1.5 million (GBP 1 million).

Deputy Prime Minister Nick Clegg called on bankers, particularly those whose banks got bailout money from taxpayers, to show extra sensitivity on the matter.

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London, England, United Kingdom (AHN) – British Prime Minister David Cameron admitted Sunday to being worried over the country’s inflation rate.

Britain’s consumer price index reached 3.3 percent in November, while the Bank of England’s target is to keep inflation rate at 2 percent throughout 2011. The recent 2.5 percent hike in value added tax is feared to kick up further the country’s CPI to 4 percent.

Cameron said that while he is aware that soaring prices of goods and services is harmful to the economy because it eats people’s savings and he does not want a return to the past of galloping inflation rates, the prime minister said he was leaving it up to the Bank of England to decide on interest rates.

The British central bank, which had kept the key lending rate at a record-low of 0.5 percent, will be under pressure to hike the benchmark interest rate as a tool to contain inflation.

However, Cameron said the Bank of England must balance between adjusting interest rates based on inflation trends and the impact of a one-time increase in prices due to the VAT hike.

Among the most hit by the high inflation rate are salaried workers whose wages went down in the last three months to December by 1.1 percent. The double whammy for consumers is that a high CPI affects their employers’ profit and pressures companies to reduce costs and hold wage hikes, according to an official of VocaLink, which tracks salary movements.

Cameron refused to speculate if the VAT hike would result to job losses. The prime minister is slated to hold on Monday an employment summit in which 19 British companies will pledge to create up to 40,000 new jobs this year. The bulk of the jobs are in the retail industry.

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London, England, United Kingdom (AHN) – A report released Thursday by the Department for Work and Pensions found that about 1.5 million Britons abused the country’s welfare system the past decade by claiming welfare payments, but refusing work.

According to the report, about 750,000 of them were given sanctions and had their benefits cuts because they refused to follow regulations that would help them get jobs. Another 177,000 got Jobseeker’s Allowance and turned down offers, 444,000 more quit their work voluntarily and filed for Jobseeker’s Allowance and 123,000 were sanctioned because they claimed allowance after they were fired because of misconduct.

Employment Minister Chris Grayling said because of these abuses of Britain’s welfare system, the coalition government will impose tougher rules. Among the regulations the government is considering is to introduce fixed-term cuts in benefits beginning at three months and going up to three years for Britons who repeatedly refuse to obey regulations.

Another investigation the DWP initiated is on Britons receiving welfare, but who have moved overseas to warmer countries such as Spain and Thailand, or other western nations such as the U.S. and Sweden.

The department is also running after relatives who claim benefits of dead welfare recipients, those who have unreported assets such as property, savings or even yachts and those with exaggerated disability.

Minister for Welfare Reform Lord Freud estimated the cost to taxpayers for welfare payments to Britons living overseas at $99 million (GBP 66 million) in 2009.

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