Just when you thought it was safe to come out into the open. As if it weren’t enough that the euro is crumbling, that the banking sector is still vulnerable; that Britain is steeling itself for its biggest spending squeeze in living memory, along comes Barclays Capital with some really bad news.

Having slid its slide rule over Britain’s demographics, it is warning that the real threat to the economy is not the fallout from the current financial mess, but the weight our ageing population will impose on the budget.

It is hardly a new warning: economists were getting hot under the collar about this decades ago. Back in the early 1990s it was all the OECD and IMF ever talked about. In a few years, they said, the baby boomers will retire and before you know it Britain, and for that matter most of the Western world, will see the proportion of its population in a retirement balloon.

The consequences are depressingly predictable: the budget deficit will climb higher and higher as those pensioners collect their retirement and medical benefits – all to be paid by a shrinking core of taxpayers.

The difference between then and now is that the squeeze is finally starting – this year, according to Tim Bond of Barclays. The bank forecasts that in a relatively short space of time, the interest rate on long-dated gilts – which in turn determine interest rates throughout the economy – will rise from around 4pc to well over 10pc. It is hard to overemphasise the significance of this sea change. Put simply, for the next decade, life will become increasingly expensive for the average household, squeezing ever deeper into their incomes. Standards of living will diminish.

The analogies with the financial crisis are plain to see: for years, Britons have lived beyond their means, financing it by, in effect, borrowing off future generations, whether through debt, by creating unrealistic pension obligations or social welfare systems that simply cannot be funded without an ever-greater contribution from the working population. Demographics is destiny, they say, and the statistics suggest the UK is destined for a major squeeze.

As if evidence were needed, it was provided in graphic form yesterday by BT, which admitted its pension deficit has now risen to a staggering £9bn. Shocking as this is, it is only a microcosmic example of what has happened across the UK and other Western nations over past decades. Once the financial crisis is well and truly over, the time will soon come for Governments to work out how on earth they intend to honour these unwise contracts without consigning vast numbers of their population to economic stagnation.

http://www.askhowtoearn.com

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/

Britain’s biggest energy supplier is inviting business owners to apply to join a new “listening panel”. The lucky hand-picked few will have “unprecedented access” to British Gas and its executives, we are told. They are to be flown to offshore gas fields, winched up gas-fired power stations and dazzled by energy trading rooms.

If they survive all that, they can tell managing director Phil Bentley and the senior leadership team exactly what they really think of British Gas.

For the “one or two business owners” chosen to join the 20-strong customer panel (the rest will be domestic customers) this is no doubt an opportunity to ask the company some tough questions.

They could start with asking why it makes switching from its services so hard and why its championing of “plain English” contracts do not stop it from hiding rules in the small print that would challenge even the most eagle-eyed linguist.

The more cynical commentators would suggest this is just a PR stunt. And they have. Consumer Focus energy expert Audrey Gallacher says that “only time will tell’’ if British Gas will take notice of its customer panel. “Consumers are already suspicious that all this talk of ‘listening’ is nothing more than PR window dressing,’’ she said.

The announcement is timed with the rollout of the company’s new Smart meters. Households can chose to use these devices if they want but will not be forced to do so by law until 2020.

The Government is, however, expected to announce soon that it will require businesses to use smart meters more quickly than previously expected. The decision will affect approximately 2.2m electricity meters and 1.5m gas meters.

Adoption of new technology on such a large scale will inevitably generate problems: meters failing; vital gas and electricity supplies cut off because of misunderstandings.

For that reason alone, having some small businesses feeding back their concerns into British Gas will be invaluable. Volunteers should visit: www.britishgas.co.uk/listening

http://www.askhowtosave.com

http://blogs.telegraph.co.uk/finance/richardtyler/

Richard Tyler is the Daily Telegraph’s Enterprise Editor. He writes about all aspects of business life and edits the Telegraph’s Your Business page, which appears in print every Tuesday and Sunday and is updated daily online.

United Utilities has warned that it will have to lower its dividend by 12.5pc and make more job cuts, after accepting the regulator’s decision to reduce customer bills over the next five years.

The FTSE 100 company said it has already cut 500 jobs and more will go as it undertakes a large cost-saving programme, primarily in its regulated business.

“It is inevitable that there will be more job cuts,” said Philip Green, chief executive of the water group. “But we are also bringing costs down in other areas, like customer service delivery, where costs have gone from £23 per customer to £19 per customer. We are also looking at pension costs.”

United has also signed new supplier contracts which it hopes will deliver significant savings and improve operational efficiency.

The company will pay a total dividend of 34.3p per share for the current financial year, dropping to 30p next year. It hopes to grow the payout by 2pc a year after that.

United has spent two months deciding whether to refer Ofwat’s tough pricing review to the Competition Commission. It was asked to reduce household bills by 0.4pc and accept a capital investment programme of £3.6bn rather than the £3.7bn it wanted between 2011 and 2015.

Shares in the company, which has 3.2m customers, rose 16½ to 525p and analysts expressed relief that the dividend cut was less than the 20pc-40pc many had feared.

United’s decision not to challenge the review came as Bristol Water, now majority-owned by French utility giant Suez Environnement, decided to challenge Ofwat’s pricing restrictions with the Commission. The regulator said it could raise bills by 7pc – a generous settlement compared with other companies – but Bristol Water wanted a 29pc increase, lifting average bills from £157 to £202 over the next five years.

Jeremy Williams, a spokesman for the company, said Bristol Water had “absolutely no choice” but to launch an appeal. “We have never done this before but it’s the only way we will be able to finance our investment programme,” he said.

“We don’t think Ofwat has taken into account the special circumstances of population growth and need for investment in the Bristol area. We are putting our faith in the Commission to do the right thing.”

The company serves 450,000 customers in the Bristol region, where the population is forecast to grow by 40pc in the next two decades. Severn Trent and South West Water owner Pennon announced this week they will not challenge Ofwat.

http://www.askhowtosave.com

http://www.telegraph.co.uk/finance/newsbysector/utilities/

The gap between public and private sector wages has hit a record level, according to official figures.

Workers in the public sector are now being paid more than £2,000 extra a year compared with employees in the private sector, after public sector pay continued to race ahead of inflation.

The average public sector worker was paid £23,660 a year, compared with private sector workers who were paid £21,528 a year, in the three months to the end of November.

This is the first time that the gap, which has slowly widened under the Labour Government, has hit more than £2,000 and came as figures showed that the discrepancy between pay increases in the public and private sector had never been so wide.

The data from the Office for National Statistics (ONS) prompted experts to warn that so far the private sector had borne the brunt of the recession and that the Government needed to take action sooner rather than later to tackle the growing public sector wage bill.

“Public sector pay has exploded out of control,” said David Frost, the director general of the British Chambers of Commerce.

The figures were published as part of the ONS monthly update on unemployment and wages, with many pleasantly surprised that the overall unemployment figure had dropped a by 7,000 to 2.46 million for the three months to November. Some are hopeful that unemployment, which many feared could climb well above 3 million, could peak at little more than 2.5 million.

However, the data on wages were far less encouraging, with average pay increases across all workers increasing by just 1.1 per cent, the lowest level since records began nine years ago.

Nearly all of the increase came from the public sector, with nurses, teachers, civil servants and other public workers enjoying an average annual pay rise of 3.8 per cent in the three months to the end of November. Meanwhile private sector employees saw their salaries rise by just 0.2 per cent, as thousands of firms froze their workers’ pay as part of a desperate bid to cut costs in the recession.

This gap of 3.6 percentage points is the widest ever recorded by the ONS.

John Philpott, the chief economist at the Chartered Institute of Personnel and Development, said: “I can understand the unease many private sector workers feel when they see their contemporaries in the public sector not only getting better conditions and pensions, but also better pay.

“But everyone knows the public sector gravy train is going to be derailed.”

Shadow Chief Secretary to the Treasury Philip Hammond said: “We have the largest deficit in the G20 and no credible strategy to get a grip on it, which is threatening higher mortgage rates and higher borrowing costs.”

Experts gave warning that the dire state of the public finances meant that public sector pay increases had to stop.

Corin Taylor, policy director at the Institute of Directors, said: “The private sector has responded very flexibly to the recession by cutting pay and freezing wages. And that has helped people stay in a job.

“The public sector has got to follow suit. The Government has no choice. It is borrowing £178 billion this year and it is coping with the largest peacetime deficit. Something has to give. There will have to be a public sector pay freeze or public sector pay cuts. It will be painful but it is necessary.”

The public sector has continued to take on new workers in recent months, the statistics showed, with 6.09 million people employed by the taxpayer compared with 5.8 million a year ago.

Both the NHS and Jobcentre Plus have been hiring more people, even though Alistair Darling has admitted cuts will have to be made to the public payroll.

Over the last year, despite, last month’s recovery, 723,000 jobs have been shed from the private sector.

Mr Frost said: “This just isn’t sustainable. My members are telling me that they are losing workers to the public sector, because not only can they see the better holidays and pensions, but also now the better pay.

“The wealth-creating private sector is losing out to the public sector. And we will have to pay for this – through higher taxes. We’ve got to get a grip.”

For many years public sector workers were paid less than those in the private sector, with workers willing to accept lower pay in return for greater job security and better pensions. However in the last decade public sector pay has increased at a far greater rate, with GP partners now earning £107,000 a year and many head teachers in secondary schools paid more than £100,000.

Mr Philpott added that many of the most menial jobs in the public sector have been outsourced as part of Gordon Brown’s private finance initiatives, “leaving many in the public sector as well paid managers.”

http://www.workfromhomeinuk.com/

http://www.telegraph.co.uk/finance/economics/

The rapid pace of technology is creating ‘micro-generations’, where teenagers are left behind by younger siblings, says James Delingpole.

My 11-year-old son, like all 11-year-old sons, thinks his Dad is incredibly, risibly out-of-touch. He mocks me for using words like “video” when I mean “DVD”, for preferring CDs to free downloads, for watching TV on the television instead of on the laptop, and for wearing my shirt with one top button undone when obviously it should be two.

But what the poor boy doesn’t yet realise is that the last laugh will be on me. Whereas it took me three decades to become the embarrassing fuddy-duddy I am now, he and his nine-year-old sister are going to be past their best in less than 10 years. Such is the weird side-effect of our fast-accelerating technology: you’re past it by the time you hit 20.

This phenomenon of the micro-generation gap – where 16 year-olds sneer at 19 year-olds for being oh-so-square, Daddy-O – came to light six months ago, in a widely publicised report written by a teenager on work experience at Morgan Stanley. Teenagers, revealed Matthew Robson (then 15), in a report named How Teenagers Consume Media, use their laptops as radios (streaming music from, say, Last FM so as to avoid adverts and DJ prattle), get round high cinema prices by watching pirated DVDs, prefer Facebook to Bebo, and never use Twitter, which they consider a hobby for old people like Stephen Fry.

The last two points came as an especial surprise to us oldsters, who imagined that teenagers Tweeted at least as regularly as we did, and that Facebook was more of a student-age thing while people of Robson’s age preferred MySpace. But we can hardly be blamed for failing to keep up with each tiny micro-trend: not when a new one seems to turn up every couple of years.

“People two, three or four years apart are having completely different experiences of technology,” Lee Rainie, director of the Pew Research Center’s Internet and American Life Project told The New York Times last week. “College students scratch their heads at what their high school siblings are doing, and they scratch their heads at their younger siblings. It has sped up generational differences.”

I’ve noticed this even in the tiny gap – exactly two years – between my younger children. Girl (9) is totally smitten with her Nintendo DS, as are most of her schoolfriends. Boy (11) considers that particular games console so impossibly uncool he won’t even borrow it. For him the only device worth having is an Apple iTouch, just like all his friends have got. This, I get the impression, has less to do with the joy of playing the games themselves than the matchless pleasure of running up huge and pointless bills downloading new apps from iTunes.

Before Boy and Girl came along I used to get all my techno advice from my stepson, Jim. But at 23, Jim is starting to seem dangerously passé. The other day we were playing on our new joint Christmas present to ourselves – Call of Duty: Modern Warfare 2 – on his Xbox, and wondering why the gameplay seemed to end after so few levels. After further inquiry Jim found the answer. “Hey, things have changed,” he said. “Nobody plays games on their own any more. They fight other people. On the internet.”

This is confirmed by research from Pew. Teenagers are much more likely to play online games than are twentysomethings (78 per cent versus 50 per cent), and also more likely to send instant messages (68 per cent versus 59 per cent). Which makes Jim as much a prisoner of his generation as I am of mine. Like so many kids of his era, he takes enormous pride in his ability to write text messages at high speed, because that’s what people born in the mid-Eighties trained themselves to do. When they hit their early teens and got their first mobiles, texts were the affordable alternative to phone calls, as well as the best way of communicating without being overheard by your parents.

For teenagers now, though, texting has been largely superseded by instant messaging – as Stephanie Lipman, a 17-year-old Londoner, explains. “I did text for a while, but instant messaging is so much better – like a constant stream-of-consciousness. You don’t have to bother with ‘Hello. How are you?’ or any of that. You just have this series of conversations with your friends which you can add on to when you’re in the mood.”

As Stephanie says, she just happened to be the right age for the right trend. Like most of her friends she subscribes to BlackBerry Messenger. When she was younger, BlackBerries were things that only businessmen had, but she came of age just in time to catch the tipping point for their transformation into the must-have teen accessory.

And what of the even-younger generations? According to Mizuku Ito, of the University of California Humanities Research Institute, they’ll make less distinction between online friends and real friends, and will be more discerning about what they choose to take from popular culture. And according to Larry Rosen, a California professor, they’ll be better at multi-tasking: his research has shown that 16 to 18 year-olds can perform seven tasks on average in their free time (texting, checking Facebook, watching TV, etc), whereas people in their early 20s can only handle six, while those in their 30s perform about five and a half.

My own prediction, from watching my 9 and my 11 year-old in action, is that kids will give up on conventional television. Boy and Girl now watch all their programmes via the internet on laptops, so that they can see exactly what they want when they want: Girl goes for Horrible Histories or cookery programmes on BBC iPlayer; Boy downloads the latest episodes of The Simpsons from the US. No one showed them how to do this, and they’re not especially techno-minded: they just intuited it in that scary way children do.

Will they all abandon printed books and start reading everything on Kindle? Or will it be the next micro-generation that does that? And will there be some kind of retro backlash where, in a statement of difference, kids start gravitating back to books and old-fashioned texting, or even vinyl LPs for their superior, warm, analogue sound?

The truth is we just don’t know, and anyone who claims otherwise is talking nonsense. As The Spectator’s techno guru Rory Sutherland, aka Wiki Man, points out, there’s not even consistency among age groups around the world. “For example, US kids were much earlier adopters of instant messaging than British kids, except in odd pockets like Cleveland, Ohio – where texting was huge. And in Japan eBay isn’t big, but Yahoo is colossal. And in Poland, they don’t Tweet, they Gadu Gadu, while in India and Brazil they prefer Orkut to Facebook.”

All we can say with confidence about future technologies is that they’re not going to be the disaster we Luddite oldies instinctively fear. (Remember the fuss about how texting was going to wipe out a generation’s literacy, thanks to abbreviations like gr8? These were largely an urban myth: hardly anyone used them, and those who did were shown by research to be children with the higher reading ages.) And that, in another couple of years, we’re going to find ourselves more passé than we could ever have imagined.

http://www.workfromhomeinuk.com/

http://www.telegraph.co.uk/technology/twitter/

Microsoft is placing big bets on Office 2010 changing life for small businesses.
Microsoft is shifting its focus from selling small businesses licences to install its software to a subscription model as it prepares for the launch of Office 2010. The biggest innovations in Office 2010 are associated with mobile phone and internet connectivity.

Robert Epstein, head of small business, Microsoft UK, told Your Business that he expected the addition of web-based applications to the Office range to radically change the way that small businesses buy and use IT.

The applications will let businesses access, edit and share their Word, Excel and Powerpoint files remotely through the internet even if the software is not installed on their laptops or smart phones.

A standard bundle of software, which includes hosted Exchange email that can be accessed via an internet browser anywhere, costs £6.71 a month with a 12 month contract. (e-mail only is £3.36)

Mr Epstein said Microsoft was “recommending” that all small businesses take a serious look at this way of buying IT and services rather than acquiring hardware like servers that had to be maintained.

”For a small business the obvious offering we are recommending is the online route,” he said. “It makes an awful lot of sense.”

”We could be aiming towards 20pc usage within 12 to 18 months in some shape or form,” he added.

Firms with security concerns about using software and saving data on an outside system may decide it is not appropriate, said Mr Epstein. Those that had paid for bespoke applications to work with their software are also likely to prefer to have the software installed on their own IT systems.

Analyst firm Gartner is predicting that working with internet-hosted software, known as Cloud computing, will be the hot technology trend in 2010, but Microsoft believes that most small businesses do not know about the potential. “The awareness of this is incredibly low. There’s a completely new way of acquiring and using IT,” said Mr Epstein.

Unlike some software service providers, Microsoft will allow businesses to use both installed Microsoft software and its software that is hosted on the internet.

It means that businesses could chose to move just new members of staff onto the online service rather than junking their existing systems overnight.

Microsoft has been selling web-based software to small businesses for some time, including its Microsoft Office Live Web software that lets firms create websites and, for a fee, access documents and manage customer information online.

But Mr Epstein said the latest updates now gave small businesses access to sophisticated business process tools in the office and remotely and the ability to better manage the demands of the increasing flow of information about customers and suppliers.

”It’s the big leveller for small business. That capability when the snow hits to convert that crucial meeting in room five to a video conference online with document sharing over your phone, web browser or PC,” said Mr Epstein.

Microsoft cut the cost of its existing subscription-based services by over 30% in November and has just announced lower than expected US prices for its five Office 2010 packages.

It was announced as new pricing and the change varied across the individual products. In a move that may appeal to start ups and home-based businesses, those buying Business and Office Professional are able to install the software on both their PC and laptops. However, only the entry level Office Home and Student version is available as a family pack, allowing usage on three PCs in one household. This version does not contain Outlook.

http://www.telegraph.co.uk/finance/yourbusiness/

Doug Richard, the entrepreneur and former Dragons’ Den panellist who chaired the Conservatives’ small business task force, is to call for a complete overhaul of Government support for small and medium-sized enterprises.

In a manifesto for enterprise to be published this week, Mr Richard will say that present Government policies hinder innovation and stifle economic development. He said that the Government’s BusinessLink venture, which is supposed to support small and medium-sized enterprises should be dismantled.

“In America if you want to start a new venture, whether it’s the next Google or a laundromat, everyone cheers you on, in Britain you enter a Kafkaesque world of bureaucracy,” Mr Richard, who is American, said.

He called for the Government to rule that a specific proportion of its multi-billion pound procurement budget must be used to support small and new businesses, modelled on the small business set aside system in America, where up to 5pc of publicly funded projects have to be contracts signed with smaller companies.

Mr Richard, who was the guest of Ken Clarke, the shadow business secretary, at the Conservative Party conference last year, is an influential figure in Tory circles and it is thought that his manifesto will be seized on by the Tories to cut business red tape and quangos.

“You should be able to start up a business in an afternoon,” he said. “What we have at the moment is powerfully ineffective. We need to champion the pivotal place in society of entrepreneurs and the potential of social enterprise as a pathfinder out of recession.”

Mr Richard is the founder of School for Startups which trains entrepreneurs. Also, he is the co-founder of Cambridge Angels, a fund to support small technology start-ups.

http://www.telegraph.co.uk/finance/yourbusiness/

Council tax will rise and services face cuts to plug the looming £60 billion hole in local government pensions, the Liberal Democrats have warned.

The “most vulnerable” people in society, including pensioners, would be hardest hit as councils attempt to reduce the pension deficit, the party said.

Council tax could be increased by hundreds of millions of pounds while the worst impact would be seen on local services.

Steve Webb, Liberal Democrat Shadow Work and Pensions Secretary, said: “The reality is that council tax will rise but it will be capped, so services will have to be cut.

“And if budgets have to be squeezed, then education and social services are the most likely to be in the firing line.”

The party claimed Freedom of Information requests made to pension fund managers in charge of local government pensions revealed 83 out of 87 schemes were in deficit in 2007.

And it suggested that since then, one in 10 funds have seen deficits up by more than 280 per cent.

The party forecast that all local government schemes would have a deficit of more than £60 billion next year.

Mr Webb added: “The Government has failed to grasp the nettle of local government pensions funding.

“A failure to set aside enough money and run the scheme responsibly means millions of people could be faced with cuts to vital services and council tax hikes, hitting pensioners especially hard.

“It’s totally unfair to burden people with these unexpected demands. Thanks to ministers sticking their heads in the sand many vulnerable people will suffer.”

However, Gail Cartmail, Unite’s assistant general secretary for the public sector, said the Liberal Democrats’ forecast was “far removed from financial reality”.

She said: “The Liberal Democrats are playing into the hands of commentators peddling the line that hard-working public servants are living in the lap of luxury once they have retired.”

The Government described the size of the deficit as “pure speculation”.

A spokesman for the Department of Communities and Local Government said: “This year’s valuation of the fund has not been carried out yet and is legally required to be based on market levels at the end of March – no one has any accurate way of knowing what that will be.”

http://www.telegraph.co.uk/finance/personalfinance/

Centrica has denied as “untrue” claims by the GMB union that it plans to shed 5,000 jobs at its British Gas subsidiary.

The union raised concerns on Thursday that Centrica was not keeping it informed about job losses, claiming it had seen an internal memo planning up to 25pc cuts to non-customer-facing roles.

Gary Smith, GMB national officer, said: “We have good reason to believe British Gas is planning to axe up to 5,000 jobs in its operations across the UK. Union members believe the cuts being planned are massive.”

The union recently announced that restructuring at British Gas was expected to lead to job cuts, but not on such a scale.

But Centrica categorically denied GMB’s statement, with sources saying that anything GMB might have seen was “historic”.

“This claim by GMB is untrue,” a spokesman said. “While we did remove about 300 non-customer-facing roles last year, we also announced the creation of more than 4,000 new roles.

“It is disappointing that the GMB has seen fit to tell the media, incorrectly, that we have plans to make major redundancies, as this will concern our employees.”

http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/

Cabinet minister Harriet Harman proposed scrapping the compulsory retirement age. From the Government’s point of view, this change would have two happy effects.

It would cause millions of people to pay taxes for longer and also delay the point at which they ask for state pension promises to be honoured.

As regular readers will know, state pensions in this country are a massive Ponzi scheme which it would be illegal for anyone to operate in the private sector. National Insurance contributions deducted from workers’ pay packets this week are used to pay next week’s state pensions.

The fund has enormous and rising liabilities but no assets. Don’t take my word for it; Nye Bevan – one of the founders of the welfare state – jovially admitted: “The great secret about the National Insurance fund is that there ain’t no fund.”

To be fair to Ms Harman, removing employers’ ability to force employees to retire at the age of 65 can also be seen as an important extension of individual choice. No wonder Lord Mandelson lost no time in pointing out that the proposals are not official government policy.

Perhaps the old spin supremo is missing a trick here. Many voters might appreciate the chance to stay in work for longer, whether or not their employer still welcomes the wisdom that often comes with experience. Whatever his other interests, Lord Mandelson should not forget the grey vote.

The simple fact is that rising numbers of people are being forced by financial reality to work beyond state pension age. Dreams of early retirement are likely to remain just that for many people, as investment returns and interest rates fall while taxes taken out of pay packets and pension funds rise.

According to the Office for National Statistics, only 7.5pc of men aged more than 65 were still working in 1993 but 11pc did so last year; that’s an increase of 46pc. Women have experienced an even sharper increase in working beyond their state pension age of 60.

Just over 8pc did so at the start of this period but 13.4pc do so now; an increase of 65pc. Sadly, that gender gap may reflect the low-paid part-time work many ‘welderly’ – or working older people – find themselves obliged to accept.

Dr Amarendra Swarup of Pension Corporation, the company scheme specialists, said: “The lack of adequate preparation for baby boomers and the highest ever level of youth unemployment risk perpetuating the current pensions crisis for at least the next two generations.”

That’s a dismal prospect. As I may have pointed out in this space before, the only way to be sure you and your family are not personally affected is to save hard. That way, you can afford the luxury of choice about where and when to finish work.

Here and now, it seems unlikely that Ms Harman’s proposals will prove sufficient to keep her in her present job beyond state pension age; she turns 60 in July.

http://www.telegraph.co.uk/finance/personalfinance/comment/iancowie/