Business Blog

22 April 2013 Last updated at 05:21 ET

Google's executive chairman, Eric Schmidt, has defended his company paying just £6m in UK corporation tax.

His comments came after a committee of MPs last year denounced multinationals - including Google - who pay little tax on their UK earnings, as "immoral".

In an interview to be broadcast on The World at One on BBC Radio 4, Mr Schmidt said his firm invested heavily in the UK and its services boost the economy.

He conceded that "Britain has been a very good market for us".

"We empower literally billions of pounds of start-ups through our advertising network and so forth," he said.

"And we're a key part of the electronic commerce expansion of Britain, which is driving a lot of economic growth for the country."

He added that Google's behaviour reflected the way all big international companies manage their taxes.

"The same is true for British firms operating in the US, for example," he said.

"I think the most important thing to say about our taxes is that we fully comply with the law and we'll obviously, should the law change, we'll comply with that as well."

Chancellor George Osborne, along with leaders in France and Germany, have called for international action to tackle so-called "profit shifting" by multinational companies to avoid taxes.

North Korean trip

Mr Schmidt also spoke about his well publicised trip to North Korea in January, saying his aim had been to plant a "seed" in the minds of government officials that letting the internet into the reclusive state would be necessary to having a "proper country."

"North Korea is by far the most isolated country on earth," he said.

"There's essentially no internet access. There are roughly a million mobile phones, but they don't even have the basic capability of browsing.

"So the average North Korean person is completely cut off from any of the kinds of conversations or knowledge that's going on globally. It's by far the worst such [country]."

But Mr Schmidt could not gauge the North Koreans' response.

"One of the characteristics of the North Koreans is that you can't tell what they're going to do because they don't actually acknowledge what you say," said Mr Schmidt.

He said officials listened to his speech, but that "they don't really answer you".

"The fact of the matter is the North Korean government is particularly good at PR about themselves. And if you look at the PR and essentially the spin and the stuff they say, it's bizarre."

22 April 2013 Last updated at 07:32 ET

The UK government is preparing to sell its one-third stake in Urenco, the world's second-largest provider of nuclear fuel.

The uranium enrichment company is estimated to be worth about 10bn euros ($13bn; £8.6bn).

Business and Energy Minister Michael Fallon said the "time is right" for the sale, adding it made "good commercial sense".

Several buyers are said to be interested in buying the stake.

They include French nuclear group Areva, the Canada Pension Plan Investment Board, and reactor builder Westinghouse.

The remainder of Urenco is owned by the government of the Netherlands, as well as by the German power companies E.On and RWE.

"The decision to proceed towards a sale comes after the government secured agreement from its Dutch and German partners," the UK's Department for Business, Innovation and Skills said.

As yet, no decisions have been taken with regards to how or when the sale will happen.

"Any sale will only be concluded if the government is satisfied that the UK's security and non-proliferation interests can be protected and that value for money is achieved for the UK taxpayer," the department said.

As Urenco owns top secret uranium enrichment centrifuge technology, which the authorities are eager to protect from falling into the wrong hands, all three countries would need to approve any sale of a stake.

21 April 2013 Last updated at 09:08 ET

UK Chancellor George Osborne believes the SNP "are tying themselves in knots" over plans to retain the pound in the event of a yes to independence.

He insisted that a currency union could only work as part of a political and economic union.

Scotland's SNP government wishes to maintain sterling in the event of a yes vote in next September's referendum.

Deputy First Minister Nicola Sturgeon said keeping the pound was the "common sense position supported by the facts".

However, in a UK government article published on the HM Treasury website, Mr Osborne and his Treasury chief secretary, Danny Alexander, said the Nationalist plan "did not add up".

They write: "The conclusion is clear. The pound we share now works and it works well. Under independence all the alternatives are second best. So our question to the Nationalists - are you really saying second best is good enough for Scotland?"

The opinion comes ahead of the publication on Tuesday of the UK government's analysis of the implications for the currency of Scottish independence.

The Scottish government has set out plans to retain the pound as part of a "sterling zone" with the rest of the UK.

Economics experts in the Fiscal Commission Working Group, set up by First Minister Alex Salmond, have already concluded keeping sterling as the currency in an independent Scotland was "sensible" and an attractive choice for the rest of the UK.

The article by the two Treasury politicians stated: "This isn't a question of whether or not Scotland could go it alone - of course Scotland could.

"The real question is whether going it alone is the best way for people living in Scotland to realise their aspirations and provide security for themselves and their family.

"We hope very much that people living in Scotland will decide to stay. The United Kingdom has done so much together and can achieve so much more in the future."

It added: "So, if Scotland does vote Yes on 18th September 2014, they [SNP] say they want to hand, to what would become a foreign government, key decisions over the Scottish economy.

"This is one of the big contradictions in their whole economic approach. Campaigning to 'bring powers home' with one hand, while giving them away with the other. Calling for 'full fiscal freedom' with one breath, but calling for a 'full fiscal pact' with the next. It simply doesn't add up."

The senior UK government figures said the UK was a "deeply integrated" single domestic market with a large percentage of Scottish exports being done with the rest of the UK and thousands of people working for the same companies across borders.

'Right for Scotland'

But Scottish government minister Ms Sturgeon said that an independent Scotland using the pound would mean sterling's balance of payments would be "massively boosted by Scotland's huge assets, including North Sea oil and gas - which alone swelled the UK's balance of payments by £40bn in 2011-12".

She added: "At present, the Scottish Parliament controls just 7% of Scotland's revenue base, and that would only increase to 15% under the terms of the Scotland Act.

"With independence, Scotland will control 100% of our revenues, which is what it needs to be able to build a stronger economy and fairer society.

"The combination - which only comes with independence - of keeping the pound, accessing Scotland's abundant resources, and taking decisions on tax and other economic policies that are right for Scotland, is the best way to boost jobs and growth."

21 April 2013 Last updated at 07:33 ET

Former Chancellor Alistair Darling has urged Labour to be cautious about committing itself to future spending plans right now amid a growing debate in the party over the issue.

Reports that Labour has decided to go into the next general election pledging to spend more than the government have been dismissed by senior figures.

Ministers say Labour is "turning left".

Given the uncertain economic picture, Labour should "concentrate its fire" on the coalition, Mr Darling said.

Prime Minister David Cameron has said Labour's plans would return the country "to the mess" it found itself in before the coalition took power while deputy prime minister Nick Clegg said Labour has "retreated into the comfort of opposition" and was promising more "reckless spending, borrowing and debt".

Despite Labour's lead in national opinion polls. there has been unease in certain sections of the party about the lack of detailed policies being put forward and calls for greater clarity about its spending plans should it return to government.

A pamphlet produced by the Fabian Society next week - said to have been discussed at senior levels of the party - will urge Labour to break with the coalition's plans and pledge to spend more in certain areas after 2015.

Shadow chancellor Ed Balls has insisted no decision has been taken on whether, if returned to power in 2015, Labour would stick with the coalition's spending plans - as Tony Blair did for two years after winning the 1997 election.

The Conservatives have said not to do so would be irresponsible and would set back efforts to cut the multi-billion pound deficit.

But Mr Darling - who was chancellor between 2007 and 2010 - said the government's own spending plans were unclear and Labour should not reveal its intentions until it hears what Chancellor George Osborne is proposing.

'Not working'

Mr Osborne will outline spending plans for 2015-6 - the first full year after the next election - in June, with further extensive cuts expected. The government is seeking to cut more than £80bn from public spending between 2010 and 2015 and has said austerity measures will continue to 2018.

"I don't think my Labour colleagues need to take a position (on spending) until we see what the present government is proposing," Mr Darling told Sky News, adding that the current environment was "very uncertain and unpredictable".

"We don't actually know what they are doing. It's very difficult to plan ahead in any sort of sensible way. I think what we are better doing at the moment is concentrating our fire on the government."

Figures to be published on Thursday will show whether the UK grew in the first quarter of this year, or has slipped back into recession, which would be the third downturn since 2008.

'Great triumph'

Mr Darling said Mr Osborne's credibility had been further weakened in recent days by another downgrade to the UK's credit rating, by the Fitch agency, and by a warning from the International Monetary Fund (IMF) that the UK may need to slow the pace of deficit reduction if growth did not pick up.

"How long does the present government simply lumber on and hope something will turn up?" he added.

"What you saw last week were more and more people saying (Mr Osborne's) policy isn't working. I've been saying that for the last three years, and it was pretty unfashionable to do so, but what you're now seeing are respected figures inside and outside the UK calling into question the strategy."

But Mark Field, Conservative MP for the City of London, told Sky's Murnaghan show that Mr Osborne was "getting caught in the crossfire" of a heated political battle about austerity measures in the United States.

"The big test isn't so much what the IMF say but what the markets say," he said.

"The one lesson is that we have kept our interest rates very low. The lesson from 1931 and from 1976 is once you lose market sentiment then really all is lost.

"It has been a great triumph from George Osborne and one he should be rightly proud of."

21 April 2013 Last updated at 09:05 ET

German airline Lufthansa has cancelled the majority of its flights scheduled for Monday due to a strike.

The airline said about only about 30 of its flights would run as planned on Monday, out of more than 1,700 originally scheduled.

Ground staff have called a one-day strike in a pay dispute.

Last week Lufthansa rejected union demands for a 5.2% wage increase over the next 12 months.

Strikers are also looking for guarantees over job cuts.

Like many airlines, Lufthansa is looking to cut costs in the face of stiff competition from low-cost carriers and big Gulf airlines, as well as rising fuel prices.

Unions staged a similar one-day strike last month. Short "warning strikes" are a common tactic among German unions, designed to put pressure on wage negotiations.

In a statement on its website, Lufthansa said passengers should expect "massive" flight cancellations and delays that will start to affect long-haul flights from Sunday.

21 April 2013 Last updated at 12:29 ET

George Osborne is set to boost lending to small businesses as he faces growing pressure over his austerity policies.

The chancellor is expected to announce an extension to the Bank of England-run Funding for Lending Scheme (FLS) in the coming weeks.

The scheme was launched in August and was due to expire in January 2014.

The move comes amid pressure from the International Monetary Fund (IMF) for Mr Osborne to reconsider the pace of his austerity programme.

It also follows the decision by Fitch Ratings to strip the UK of its triple-A status on Friday, becoming the second of the big three rating agencies to do so.

The extension to the FLS may be announced before the IMF arrives in the UK to begin regular annual consultations with the government next month.

Sluggish growth

The scheme's launch last year was designed to boost lending to small businesses and households by providing banks with cheap loans on the proviso that they pass them on to customers.

The scheme has so far been criticised because Bank of England figures suggest participating banks were lending less money overall in the second half of 2012 than they were in the previous six months.

But it has also been credited with helping lower the cost of mortgages.

Mr Osborne first suggested extending the scheme in his Budget in March, and the Bank of England's Monetary Policy Committee said there may be "merit" in an extension when it met earlier this month.

The government hopes such schemes will help boost growth, which has remained sluggish since the UK first fell into recession during the 2008 financial crisis.

On Thursday, the Office for National Statistics will release its first estimates for how much the economy grew in the first three months of this year.

Many economists expect the economy to have grown, but only by about 0.1%.

'Time to consider'

Although it has yet to start formal discussions with the UK government, there are increasing signs the IMF believes the slow pace of growth means the UK should consider slowing the pace of its spending cuts.

Last week the IMF downgraded its growth forecasts for the UK, and chief economist Olivier Blanchard warned the UK was "playing with fire" and should consider alternatives to its current austerity drive.

IMF chief Christine Lagarde later told the BBC that "now might be the time to consider" adjusting the pace of the austerity programme.

But she stressed the importance of dialogue with the UK government.

IMF officials are due to arrive in the UK next month for annual consultations that allow it to monitor member countries and issue recommendations about economic policy.

Mr Osborne said he would defend his policies, saying: "Britain's got the right plan in terms of dealing with its deficit."