Wednesday newspaper round-up: Alistair Darling/PBR, Royal Bank of Scotland, Tesco

9th Dec 2009 06:31

Britain faces a "fiscal crisis" and is no longer "resistant" to the prospect of a humiliating and damaging debt downgrade, Moody's has warned.In an acutely embarrassing blow for Alistair Darling only hours before today's pre-Budget report, the ratings agency said that Britain faces the threat of a debt spiral unless drastic action is taken to rebuild the public finances. Within four years almost 10p in every pound of tax paid by British families and companies will go straight towards interest payments on the national debt, even in an optimistic scenario, the agency said, the Telegraph reports.Alistair Darling will admit today that Britain faces an era of deep spending cuts as he pledges to halve the £180bn budget deficit while protecting hospital, school and police services. In a surprise move he will disclose a Treasury "assessment" that has been conducted in recent weeks to determine the sums needed to safeguard the front line in health, schools and the Home Office, the Times reports.The FT adds that Alistair Darling will flesh out the biggest squeeze in public spending for a generation in his pre-Budget report, with only schools, hospitals and the police being spared average cuts of about 14%over three years. Mr Darling's pledge to protect "frontline services" sets out Labour's election battlelines, but implies three years of pain for all other areas of spending, including defence, housing and business support.A handful of senior traders in a Royal Bank of Scotland joint venture are set to share a bonus pool of more than $40m (£25m) this year. Details of the payments are likely to provoke new anger about pay in the financial sector. The Government has been trying desperately to prevent a possible bumper bonus round this year and may use today's Pre-Budget Report to announce a tax on bonuses, the Times reports.The credit downgrades of Dubai's government-owned companies have triggered an accelerated payment clause on a $2bn debt issued by the emirate's utilities provider. Dubai Electricity and Water Authority's $2bn securitisation programme, Thor Asset Purchase Company, an instrument originally maturing in 2036, may have to be redeemed in full on December 14 - the day Dubai World's property developer, Nakheel, is due to redeem a $4bn Islamic bond, or sukuk, the FT reports.The property subsidiary of Dubai World, the stricken Gulf investment group, could have lost up to $6bn (£3.7bin) in the first half of this year had it not been given government bailouts, it has emerged. The continued bad news from Dubai World sent investor confidence in the Gulf state crashing yesterday, while in Britain fears about the state-backed investment company hit Royal Bank of Scotland, one of its main lenders. Leaked documents indicated that Nakheel, Dubai World's property division, which owns The Palm and The World developments, lost 13.4bn dirhams (£2.2bn) in the first half of the year, the Times reports. Paul Volcker, the chairman of President Obama's Economic Recovery Advisory Board, stunned a business conference in Sussex yesterday, saying there is "little evidence innovation in financial markets has had a visible effect on the productivities of the economy". The former US Federal Reserve chairman told an audience that included some of the world's most senior financiers that their industry's "single most important" contribution in the last 25 years has been automatic telling machines, which he said had at least proved "useful", the Telegraph reports.The art market defied the economic gloom on Tuesday evening when a drawing by Raphael was sold at auction at Christie's in London for £29.2m - more than three times the previous record for an Old Master drawing at auction. The sale of the drawing, "Head of a Muse" - which was estimated to sell for £12m-£16m - came at the end of a dramatic evening that also saw a Rembrandt portrait sell for £20.2m. The previous record of £8m was held jointly by Michaelangelo and Leonardo drawings, the FT reports.Mining giant BHP Billiton has sold its distressed Ravensthorpe nickel mine to Canadian copper miner First Quantum Minerals for $340m. The West Australian mine was mothballed in January amid plunging nickel prices and a blow-out in project costs. BHP was forced to write-down the value of Ravensthorpe as well as its Yabulu refinery in Queensland to zero taking a $3.36bn hit in the process, the FT reports.Tesco warned the next government not to raise VAT too high as the retailer reported that its third-quarter UK sales had been "disappointing" despite a massive investment in its Clubcard loyalty scheme this year. Laurie McIlwee, the finance director at Britain's biggest supermarket group, said he was not concerned about VAT returning to 17.5 per cent on 1 January as scheduled, but warned: "If it went any higher it would have a negative impact, the Independent reports.Vast coal deposits lying deep beneath the North Sea will be burnt in situ to generate up to 5% of Britain's energy needs, under new plans approved by the Government last week. The UK Coal Authority has awarded licences to Clean Coal, an Anglo-American company, to develop five offshore sites for a technology called Underground Coal Gasification (UGC), the Times reports.