By
Tim Shipman

PUBLISHED:

17:02 EST, 22 Apr 2012

|

UPDATED:

17:02 EST, 22 Apr 2012

Warning on a economy: Former chancellor Ken Clarke warned of ‘long tough work’ forward on inhabitant finances

Ministers have been systematic to ready adult to £16billion of serve spending cuts amid warnings that it could take years to get a economy behind on track.

The skeleton emerged as former Chancellor Ken Clarke yesterday warned it would take ‘long tough work’ before a economy earnings to normal.

‘2012, we think, will positively be challenging,’ he said.

Treasury Chief Secretary Danny Alexander will tell colleagues they contingency pull adult lists of projects that could be axed in an emergency.

Whitehall departments will be told to emanate their possess ‘rainy day funds’ so they don’t pull on a Treasury’s inhabitant reserves, slashed from £4billion to £2.8billion.

In a debate today, Mr Alexander will exhibit he is grouping his colleagues to set aside 5 per cent of their budgets as a mini-reserve. If ministers wish to spend income on pet projects, they will have to cut something else before seeking for income from Treasury funds.

He will say: ‘It means departments have to be means to understanding with problems that arise from within their possess budgets.’

The managed output of supervision departments is £327billion this year – incompatible a cost of gratification and debt seductiveness payments.

Putting aside 5 per cent of any bill would volume to £16.3billion of destiny cuts that could be finished if there is an mercantile downturn – yet a tangible figure for uninformed cuts will be rather smaller given some departments already have tiny haven funds.

Mr Alexander will also acknowledge usually 30 per cent of a open spending examination has been implemented so far. It means £56billion of a designed £79billion of cuts are still to take place.

Voters will find out on Wednesday if a UK has plunged into a double drop recession. Analysts trust a UK will narrowly equivocate disastrous expansion for a initial entertain of 2012, though a total are expected to uncover usually indolent growth.

Low on cash: Treasury Chief Secretary Danny Alexander will tell colleagues they contingency pull adult lists of projects that could be axed in an emergency

The Lloyds TSB Spending Power Report found yesterday families are feeling a biggest fist on their spending energy in some-more than a year. Last month it fell by 1.1 per cent after acceleration compared with a year ago – equal to £113 reduction a year to spend on non-essential items.

The Whitehall skeleton prove a Treasury still does not trust adequate has been finished to change a enlightenment of wicked spending. Every dialect will have to send sum of their spending to a Treasury on a monthly basis.

They will have to supply a same total to a Treasury as they do to bodies like a National Audit Office – finale a use of ministers concealing spending bungles from a Chancellor.

Ministers who are incompetent to control spending will have a volume they can spend but Treasury capitulation slashed.

Mr Alexander will say: ‘These new controls are not usually a tweak to a Whitehall machine. They are another vigilance of a invariable integrity to broach a mercantile converging we promised. When we demeanour during a disaster Britain’s finances were authorised to get into, we contend “never again”.’

■ David Cameron will commence a media shell currently following a downturn in a polls and in an bid to seaside adult flapping Tory hopes of internal choosing success on May 3.

The Prime Minister will seem on BBC Radio 4’s Today programme, and bear a apart barbecuing by BBC domestic editor Nick Robinson for a radio news.

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By
This Is Money Reporter

Last updated at 11:36 AM on 23rd February 2012

Mild weather led to a drop in energy use and a 30 per cent slump in
profits to £522million at household supplier British Gas last year,
according to owner Centrica.

But a bumper year for its upstream gas and oil exploration business,
which generated a 33 per cent jump in profits to £1 billion, helped it
push up company-wide operating profits by 1 per cent to £2.41 billion in
2011.

The leap in profits on the wholesale side of the business has sparked
fresh calls for cuts to household bills, as fuel campaigners claim that
cost as well as mild weather has led to people turning down or switching
off their energy supply.

Cutting back: British Gas saw average household gas consumption fall 21 per cent last year, while electricity use dropped 4 per cent

British Gas hiked gas and electricity bills by an average of 18 per cent and 16 per cent respectively in August. It has since announced a 5 per cent cut in electricity prices in January.

The firm saw average household gas consumption fall 21 per cent last year, while electricity use dropped 4 per cent.

The UK’s biggest gas supplier, which lost 97,000 customers in 2011, managed to claw back some of the fall in profits from supplying gas and electricity to households by offering residential services such as boiler repairs. Profits from this area of business were 10 per cent higher at £264million.

Meanwhile, the upstream business smashed through the £1billion barrier for the first time after benefiting from higher wholesale commodity prices and a good production performance.

The company claims it has invested £1.80 for every £1 it has earned over the past five years. Its dividend for shareholders was increased by 8 per cent to 15.4p a share. Shares in Centrica were up 2.35p to 295.85p in early morning trading.

Chief executive Sam Laidlaw said it had been a tough year, ‘both for Centrica and our customers’, but that the company was still making the investments ‘on which Britain’s energy future depends’.

However, Ann Robinson of comparison service uSwitch.com said: ‘The important thing here is that the drop in residential profits is more than offset by an increase in profits at the wholesale end of the business.

‘Against this background I suspect that many of its customers will  be even more disappointed that while their bills soared by £256 or 24.9 per cent as a result of two price hikes, the supplier has subsequently cut just its electricity price by £26 or 5 per cent.’

‘Affordability is already a huge concern and while British Gas has pointed to the mild winter weather as the reason why household consumption has fallen, our own research shows that people are turning down and switching off because of cost.’

And she added: ‘I would urge all suppliers to acknowledge the pressure their customers are under and to cut their prices again.’

Adam Scorer of Consumer Focus said the energy industry was ‘close to recession-proof’, with healthy profits still being made despite a big dip in consumption over a mild winter.

‘British Gas happens to be the most open of all the Big Six,’ he said. ‘But as long as the market is not felt to be fully transparent, consumers will continue to question every price rise, every profit statement and every explanation as to why bills are so high.

‘Consumers need to be assured that the price they pay is continually fair, and that the competitive energy market is working in their interests. Getting greater clarity over pricing and profits is essential to rebuild faith in this market.’

Centrica has meanwhile performed a U-turn by increasing its stake in British waters after months of threatening to boycott the North Sea over UK tax rates.

The energy giant rowed back from its hard-line stance as it spent £246m across nine separate ventures.

Previously, Centrica said the 81 per cent tax it paid on its UK operations following Chancellor George Osborne’s tax hike tipped the balance against pouring more money into the region.

View from the City

Angelos Anastasiou of asset manager Investec said Centrica’s results were ‘pretty much in line, despite the warm fourth quarter’.

‘Confidence still needs to be regained in the UK supply market, however, we reiterate that we believe that the share price is already factoring in an unreasonably pessimistic scenario on the supply side,’ he said.

‘Longer term, the value remains there and we still believe that we are close to reaching conclusions to the political situation that will allow this value to be unlocked.’

Mr Anastasiou said risks posed to Centrica’s business include political interference, regulatory changes and movements in wholesale energy prices.

Graham Spooner, investment research analyst at The Share Centre, said Centrica’s full year results were mixed in terms of hitting analysts’ projections.

‘The gas and electricity provider faced challenging conditions in 2011, as did consumers. This, along with a warmer winter and higher wholesale gas prices, hit the company’s profits, which were 2.4 per cent below analysts’ expectations,’ he said.

‘For investors, the utility company is geared towards income with a current yield of over 4 per cent. Investors will be pleased to hear the company has increased its dividend for the year by 8 per cent to 15.4p.

‘The share price has underperformed in the last 12 months and at this level it looks more attractive for income seekers. However, any potential increase could be somewhat limited. We continue to recommend Centrica as a “buy” for investors looking for a low-risk income stock.’

Stock trend: Centrica shares have struggled to make progress over the past year

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