Osborne Scratches State's Seven-Year RBS Itch

It was the Government’s version of a seven-year itch.

Since the autumn of 2008, ministers in successive Labour, Coalition and Conservative administrations have wondered how to resolve the biggest legacy of Britain's banking crisis: the sale of its 78% stake in Royal Bank of Scotland (RBS).

Now, more than five years after becoming Chancellor, George Osborne has bitten the bullet and fired the starting gun on what will eventually be the largest privatisation in UK history.

Mr Osborne has long abandoned any pretence that he could break even when offloading the initial tranches of the shareholding; he commissioned a report from Rothschild earlier this year which recommended that a sale would offer value for money, while benefiting the bank, the Government and the UK economy.

More importantly, Mark Carney, the Governor of the Bank of England, offered his support for the sale process to begin.

Yet their collective endorsement does little to disguise the bald facts of Tuesday morning’s share sale: the taxpayer has lost more than £1bn on the sale of a 5.4% stake in RBS to institutional investors.

Treasury sources argue that that is the wrong way to look at the trade. The rescue of RBS in 2008 was not an investment, they say, but an emergency measure to prevent Britain’s banking system collapsing into the abyss.

They have a point. Yet the same Treasury officials have been quick to point out each time that taxpayers have made a profit on the sale of shares in Lloyds Banking Group.

It is also the case that RBS shares were trading above 400p as recently as February; it doesn’t take a conspiracy theorist to conclude that a loss-making sale less than three months before the General Election would have been far more politically toxic for Mr Osborne.

And it is difficult to find much evidence to support the Chancellor’s argument that the state’s shareholding in RBS is acting as a drag on the wider UK economy.

After all, taxpayers still hold nearly 73% of its shares following Tuesday’s £2bn sale, and they will continue to own a majority stake for at least the next couple of years.

As for the investors which took the shares off the Treasury’s hands, officials refuse to disclose their identities.

However, Sky News understands that 60% were sold to hedge funds and the remainder to ‘long-only’ investors (who can only benefit economically when the share price rises).

The buyers who plan to wait for RBS’s value to increase could be in for a long ride; the bank is still going through a painful restructuring, and the sins of the past will continue to haunt it for some time.

For the bank and Ross McEwan, its chief executive, the sale is a vote of confidence. He will hope that annual rows over bonuses, mis-selling and small business lending diminish in volume in proportion to the Government’s shrinking stake.

Mr McEwan will also be thankful that his pay, unlike that of his counterpart at Lloyds, is not tied to taxpayers recouping their investment in the bank.

And for Mr Osborne, make no mistake: this was a decision motivated by politics rather than prudent economics. Expect it to face tough scrutiny in the months ahead.

Travis Perkins Ups Dividend As House Prices Rise

Renewed confidence in the recovering construction market has prompted builders' merchant Travis Perkins to raise its dividend by over a fifth.

Travis Perkins' half year results show that profit before tax rose 3.2% to £158.6m as the firm said the housing market was benefiting from "solid mortgage availability, continuing Government support for first-time buyers and rising house prices".

These financial results come alongside a separate Nationwide data release which showed that UK house prices have returned to growth in July.

Following a surprise blip in June, where house prices fell 0.2% in the month, July saw a recovery with prices jumping 0.4% which equates to a year on year increase of 3.5%.

The average UK house price is now £195,621, equivalent to a two-year rise of 14.5% according to Nationwide's statistics. 

Commenting on the figures, Robert Gardner, Nationwide's chief economist, said: "After moderating over the past 12 months, there are tentative signs that annual house price growth may be stabilising close to the pace of earnings growth, which has historically been around 4%."

Last month the UK's biggest bank, HSBC, raised its UK house price growth forecast for 2015 - from 2% to 5%, to 5% to 10%.

Travis Perkins' investor release also pointed towards further house price growth as supply side constraints take hold:  "In the UK, demand for housing continues to outpace supply.

"Population growth, immigration and a trend towards smaller family units is creating around 225,000 new households per year, while only 141,000 new homes were built in 2014."

The builders' merchants optimism means that it has raised its dividend per share by 20.4% to 14.75p.

Despite the increase to the dividend investors opted to dump its stock sending shares 3% lower. Over the last 12 months, however, shares are nearly 30% higher.

City Trader Guilty Of Fixing Libor Rate

A city trader has been sentenced to 14 years in jail for fixing the rates of interest at which banks lend to each other - the so-called Libor rate.

Tom Hayes had been accused of eight counts of conspiracy to defraud between 2006 and 2010 for setting the rate on which trillions of dollars of financial deals are based.

The Briton worked in Japan for a Swiss and an American bank where he was accused of manipulating the British financial markets.

The Serious Fraud Office said that Hayes bribed traders across 10 lenders into fixing the Libor rate so he could make a profit in a bid to boost his own salary and bonus of up to seven figures.

After a nine-week trial at London's Southwark Crown Court he was found guilty by a jury, meaning he is the first person to be convicted by a British jury of rigging Libor rates.

Banks, including Barclays and Britain's part state-owned banks RBS and Lloyds, have paid billions in fines for manipulating Libor but until now no individuals had been convicted of a criminal offence.

The 35-year-old former banker with UBS and Citigroup was found guilty of all the eight charges he faced.

Hayes, of Fleet, Hampshire, stared straight ahead emotionless as the verdicts were read out.

His wife, who has accompanied him to court on several occasions, and his parents sat with their heads bowed while verdicts were delivered.

Around £220trn of financial products are linked to Libor rates around the world, including the majority of household mortgages, credit card bills, car loans and saving rates. 

The judge Mr Justice Cooke described Hayes as "by nature a gambler" who was driven by a thirst for money.

Prosecuting QC Mukul Chawla said Hayes built up a network of contacts in an attempt to find bankers who could help him manipulate the Libor rate to his advantage.

He would "cajole", "beg" and "bribe" brokers, the jury was told.

Mr Chawla said: "On an almost daily basis he set out to dishonestly manipulate or rig Libor at his bank and other banks."

Before joining UBS in 2006, Hayes worked for Royal Bank of Scotland and Royal Bank of Canada.

Described as "extremely intelligent", he was paid £1.3m before tax in salary and bonuses by UBS between September 2006 to December 2009.

In 2009, he joined Citi after feeling "that UBS were not paying him enough" and went on to receive £3.5m before tax for just nine months' work.

Even after he was sacked, he was allowed to keep his £2.2m bonus.

He made money for his paymasters by betting against the future value of the Libor rate offered by banks lending Japanese yen - rates he had arranged to be set - but was sacked after his methods were formally reported to senior management.

Hayes claimed that his trades made more than £186m for UBS.

His arrest took place in the UK in December 2012 after his return from Tokyo.

The trader admitted responsibility for what he did but claimed it was not dishonest as his bosses knew what he was doing.

The US is also seeking his extradition for offences connected to the American financial system.

Edward Heath: Five Police Forces Investigate

Five police forces have confirmed they have received allegations of child sex abuse involving the former prime minister Sir Edward Heath.

Police in Jersey, Wiltshire, Hampshire, Kent and London are all investigating allegations involving the former politician. 

Late last night, the Hampshire force was the latest to confirm it is looking into allegations made against the former PM.

Earlier, police in Jersey said they were investigating claims that he would take children from care homes for a ride in his yacht.

Wiltshire Police, meanwhile, disclosed it has received a number of calls to a helpline it set up appealing for potential victims and witnesses.

Kent Police said it had received a report of a sexual assault against Sir Edward in East Kent in the 1960s.

Detectives are making initial inquiries and will get a full account of the complainant's story.

Finally, the Metropolitan Police is looking into accusations by a man, now aged 65.

He claims he was raped at the age of 12 by Sir Edward, in Mayfair, London.

A Metropolitan Police spokesman said: "In April 2015 an allegation of rape was made to the Metropolitan Police Service (MPS).

"An officer from Operation Fairbank interviewed the complainant that same month and obtained a full account. Support services were offered.

"However, after a full assessment of the allegation there were no lines of inquiry that could proportionately be pursued by the MPS."

He would not say anything more about why the decision had been taken.

It's also claimed the politician was seen by a Met Police detective going into a north London property where boys were abused in the '70s.

The first allegation against Sir Edward emerged on Monday.

Wiltshire Police disclosed the force was being investigated for failing to handle an apparent allegation made against the politician in the 1990s.