Pension funds were put on alert yesterday as government statisticians paved the way for an overhaul of inflation measures that could shave billions of pounds from interest payments on holdings of gilts. Jil Matheson, the National Statistician, will consult on options for "improving" the retail prices index, the benchmark used in inflation-protected government bonds. Economists said that a rejig could shave anywhere between 0.3 and 0.9 of a percentage point off the RPI permanently, hurting owners of inflation-proofed government bonds but generating interest savings for the Chancellor. Alan Clarke, director of fixed income strategy at Scotiabank, said that George Osborne would save 3bn pounds a year from a 0.9-point reduction in RPI inflation, according to The Times.
An official told reporters in Dubai that Saudi is pumping about 10m barrels of oil a day, slightly up from last month, and will do more if customers want it. Although the price of crude has fallen so far this year, prices have spiked almost 20% in the past three months amid escalating fears of a showdown over Iran's nuclear programme. Saudi's oil minister, Ali al-Naimi, said last week that current prices are not justified by the mix of supply and demand. The Organisation of Petroleum Exporting Countries has been under pressure from western governments to lift production amid fears that the recent rise in prices will further sap economic growth, The Telegraph reports.
Germany's top banker appeared to liken European Central Bank plans to buy unlimited eurozone bonds to the work of the Devil yesterday as the war of words between Berlin and Frankfurt intensified. Jens Weidmann, head of the Bundesbank, quoted from Goethe's play Faust, a classic of German literature, to warn central bankers against rushing to print money. Mr Weidmann's pointed remarks followed calls for him to tone down his rhetoric from Wolfgang Schäuble, the Finance Minister. Mr Weidmann was the only member of the Frankfurt-based ECB's board to vote against the bond-buying plan. In a speech, the Bundesbank chief recounted how the demon Mephistopheles, "disguised as a fool", had convinced an emperor to issue large amounts of paper money, which, for a time, solved the kingdom's financial problems, The Times says.
Vodafone has taken the first step towards a negotiated settlement over its $2.2bn tax dispute in India. The company said yesterday that it was considering putting money aside to settle the case that has overshadowed its investment in the world's second-largest mobile phone market. The British group was exonerated by India's Supreme Court in January in a dispute over unpaid capital gains tax, only to be targeted by the Government with retrospective changes in foreign takeover law designed to claw back tax on its acquisition of Hutchison's Indian operations in 2007. Andy Halford, Vodafone's chief financial officer, said that "the situation has changed" and the company was examining the option of reaching a settlement. He added that India was making "more conciliatory noises" on the total amount Vodafone might have to pay to end the dispute, writes The Times.
A key partner in India's ruling coalition has withdrawn support from the government and said its ministers would resign in protest over a plan to allow foreign retailers such as Tesco into the country. "Our ministers will go to Delhi to resign. We will not stay in UPA II," the head of the regional Trinamool Congress party, Mamata Banerjee, told reporters, referring to the ruling coalition led by the Indian National Congress party. The withdrawal of Trinamool, which is staunchly opposed to a move to allow foreign supermarkets into the retail sector, leaves the government weakened and dependent on outside support to pass legislation, AFP reported. The reforms unveiled by Prime Minister Manmohan Singh last week include allowing in foreign retail giants such as Walmart and Tesco, as well foreign airlines, and included a 12% hike in the price of subsidised diesel, The Telegraph explains.
BP has held talks to sell its Texas City refinery to Marathon Petroleum, according to people familiar with the matter, the latest stage of a big asset disposal plan to cover the costs of the 2010 Deepwater Horizon disaster. While it is unclear if a deal will be reached, one person familiar with the matter said BP and Marathon had been in talks for months. A sale could raise up to $2.5bn, a second person said. The sell-off would close a contentious chapter in BP's history. Texas City, the third largest refinery in the US, was the site of an explosion in March 2005 that killed 15 people, The Financial Times reports.
The political manouvering around BAE Systems' proposed £30bn merger with Eads continued yesterday as the European aerospace giant assured the German government that it would guarantee for two years about 20,000 jobs at its military industrial unit in the country. The guarantee, made by Eads's chief executive, Tom Enders, is thought to cover most, if not all, of its Cassidian defence and security unit, which employs 12,000 of the group's 49,000 staff in the country. It comes a year after Eads guaranteed until 2020 the jobs of the 20,000 staff it employs in Germany to make its Airbus aircraft, helping to settle a dispute with staff. Eads is not able to offer such a long guarantee to its defence workers because the contracts they fulfil tend to be shorter-term. A spokesman for Eads declined to comment on any talks with the German government, according to The Independent.