Hammond Hits Back Over £2bn MoD Underspend

By Vincent McAviney, Sky News Political Producer

The Defence Secretary has hit back at criticism of a £2bn underspend by the Government department he oversees, saying the money will be spent on future kit for soldiers.

Philip Hammond reacted angrily to claims he had been "overzealous" in pursuit of an austerity drive that will see thousands of soldiers lose their jobs.

They were made in a Daily Telegraph article which suggested the underspend at the Ministry of Defence (MoD) was partly down to cuts in military personnel and equipment.

Mr Hammond said: "These retired 'senior military figures' (quoted by the newspaper) are presumably the same people who presided over an out of control defence budget that led to the previous Government sending troops into battle without the proper equipment needed to protect them.

Mr Hammond is overseeing a major cost-cutting exercise at the MoD

"They clearly have no idea how the defence budget now works.

"Instead of having to delay and cancel programmes as in the past, we now budget prudently and then roll forward any underspend to future years, allowing us to place new equipment orders."

Mr Hammond's comments came as a Sky News investigation revealed Government departments have spent hundreds of thousands of pounds on calls to directory inquiries numbers since the last election.

The MoD alone made 158,640 calls to 118 lines between May 1, 2010, and August 31, 2013 - the equivalent of 186 calls per day - at a cost of £271,000.

A spokesman said the number of calls made from fixed phone lines had fallen by more than three-quarters in the last four years.

However, the expenditure is equivalent to the annual salaries of 15 squaddies or nine junior officers, or around 270 sets of Osprey body armour.

The Department of Work and Pensions (DWP) made 97,265 calls between May 2010 and August 2013 at a cost of £72,387.

This was despite the department barring staff from calling 118 numbers in March 2011 and Secretary of State Iain Duncan Smith pledging to cut costs to help fund police and the forces.

The MoD says it has cut the number of directory inquiry calls it makes

Robert Oxley, campaign director of the TaxPayers' Alliance, added: "It's astonishing that so much taxpayers' money has been wasted needlessly dialling these services, especially in the internet age.

"Sadly, a blase attitude over who is picking up the phone bill is all too common in some corners of the civil service."

It is the second time in as many months the MoD's spending on phone calls has been brought into question, and comes at a time when the military is undergoing a massive cost-reduction programme which includes thousands of redundancies.

In August, the department revealed it had run up a £40,000 bill on calls to the speaking clock.

The MoD has said this was partly down to a "technical error" in one of its systems which meant the number was being dialled automatically.

Thousands of soldiers are losing their jobs as the MoD cuts costs

However, Sky News now understands that between May 1, 2010, and August 31, 2013, 99,887 calls were in fact made by departmental staff to the speaking clock at a cost of £39,845.

The faulty automated system placed an additional 28,663 calls to the number but the £12,355 cost of these calls is being repaid by the company which installed it.

A spokesman for the MoD said: "Calls to directory inquiries from the majority of the 260,000 MoD fixed phone lines are banned but some staff working in isolated locations, who do not have access to a military phone network or the internet, are able to call directory enquiries to obtain contact details."

A spokesman for the DWP added: "118 numbers are banned, except where they are used by jobseekers or their advisers when looking for work.

"The costs of these calls have been cut by more than two-thirds since 2010, as more of the 1.4 million claimants we support move online for their job searches."

Freedom of Information Act requests were submitted to all government departments, although some departments including the Home Office and the Department for Environment, Food and Rural Affairs refused to provide the information.

Several other departments said they had barred 118 calls, instructing staff to use internet search engines to obtain contact details.

Labour shadow minister Jon Ashworth told Sky News: "This is yet another example of the Government's failure to tackle waste.

"David Cameron and his ministers need to act now to stop allowing thousands of pounds of taxpayers' money being squandered on these costly calls."

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Cyclone Phailin Nears India As Thousands Flee

More than 440,000 people have been evacuated their homes in two states as a huge cyclone approaches the east coast of India.

India's weather office issued a red alert, saying the "very severe cyclonic storm Phailin" was packing gusts as high as 150mph (240kph).

The evacuation is one of the biggest such exercises in the country's history, said the national disaster agency.

A satellite image of the cyclone

At least 12 million people are in the path of the storm, which is already so large it has nearly filled the Bay of Bengal - an area the size of France.

The cyclone is expected to be the fiercest storm to hit India since a devastating cyclone killed 10,000 people 14 years ago.

Some forecasters likened its size and intensity to hurricane Katrina, which devastated the US Gulf coast and New Orleans in 2005.

Fishermen pull a boat from the waters of the Bay of Bengal to safer ground

Dr Liz Bentley from the Royal Meteorological Society told Sky News: "This particular part of the coastline is very low-lying so it (Phailin) will penetrate quite well in land.

"It is like a mini-tsunami hitting that - not caused in the same way as a tsunami but it's the same effect."

Large waves have already pounded beaches in the state of Andhra Pradesh.

Villagers along the coast were evacuated to schools in the north of the state and in neighbouring Odisha, while panic buying drove up food prices.

Relief items are packaged for distribution to cyclone evacuees

Authorities have been evacuating villagers along the coast to government-run shelters and schools in three districts of Andhra Pradesh state and five districts of Orissa state.

But many villagers said they had not been told to evacuate, and others were refusing to leave their homes.

"Of course I'm scared, but where will I move with my family?" said Kuramayya, 38, a fisherman from the village of Bandharuvanipeta, while 12ft waves crashed behind him. "We can't leave our boats behind."

Floods have already ripped down power lines

Satellite images showed Phailin some 310 miles (500km) off the coast and likely to make landfall within hours, with widespread flooding expected.

The Indian Meteorological Department said Phailin would hit between Kalingapatnam in Andhra Pradesh and the port of Paradip in Odisha. Storm surges 10ft above normal tides were predicted.

Residents move to safer ground

About 12 hours before Cyclone Phailin's landfall, meteorologists held out hope that the storm might hit while in a temporary weakened state, but no matter what it will be large and deadly.

Ryan Maue, a meteorologist at Weather Bell, a private US weather firm, said even in the best-case scenario there will be a storm surge of 20-30 feet (7-9 metres).

The predicted path of the cyclone

A storm surge - the giant wall of water that that a cyclone blasts ashore - is the big killer in such events.

The storm already has been large and powerful for nearly 36 hours, he said, and those winds have built up tremendous amount of surge, Mr Maue said.

He said: "A storm this large can't peter out that fast. There's nothing to stop it at this point."

Floods have already hit ahead of the cyclone

Officials cancelled holy day celebrations and stockpiled emergency supplies in coastal Orissa and Andhra Pradesh states.

If the storm continues on its current path without weakening, it is expected to cause large-scale power and communications outages and shut down road and rail links, officials said. There would also be extensive damage to crops.

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Malala Tells Obama: 'End The Drone Strikes'

Pakistani teenage activist Malala Yusufzai has told the US President that drone strikes in her country are "fuelling terrorism".

The 16-year-old schoolgirl, who was shot in the head and neck by Taliban gunmen who attacked her school bus in Pakistan's Swat Valley, met Barack Obama and the First Lady in the White House.

"I thanked President Obama for the United States' work in supporting education in Pakistan and Afghanistan and for Syrian refugees," she said after the meeting.

Malala with her father Ziauddin in Edgbaston, Birmingham

"I also expressed my concerns that drone attacks are fuelling terrorism. Innocent victims are killed in these acts, and they lead to resentment among the Pakistani people.

"If we refocus efforts on education it will make a big impact."

The US military and the CIA have carried out hundreds of drone strikes against militant groups in the northwest Pakistan since 2004.

But the Pakistani government complains that they also frequently kill civilians and turn ordinary people against Islamabad and the US. 

Malala attracted the anger of the Taliban by writing a blog chronicling the challenges of daily life under the Islamists.

Hundreds of drone strikes have been reported in Pakistan

She is now living in Britain, where she underwent treatment for the injuries sustained in the attack, and campaigns for girls' right to education.

Mr Obama praised the teenager for her "inspiring and passionate work" and signed a proclamation to mark the International Day of the Girl.

A statement issued by the White House said: "The United States joins with the Pakistani people and so many around the world to celebrate Malala's courage and her determination to promote the right of all girls to attend school and realise their dreams."

Malala had been among the favourites for this year's Nobel Peace Prize, but the award was handed to the Organisation for the Prohibition of Chemical Weapons.

In 2012 Barack Obama condemned Malala's shooting as "barbaric". White House spokesman Jay Carney said. "I know that the President found the news reprehensible and disgusting and tragic."

The teenager was treated in Britain following her shooting in 2012

The Pakistani army retook control of Swat later that year, and Malala received the country's highest civilian award.

Since then she has been nominated for several international awards for child activists - including the EU's Sakharov human rights prize which she won earlier in the week - and has written a book about her campaign work called I Am Malala: The Girl Who Stood Up For Education And Was Shot By The Taliban.

Last week Pakistani Taliban spokesman Shahidullah Shahid said the group stood by its decision to target the teenager, who he said "targeted and criticised Islam".

"She accepted that she attacked Islam so we we tried to kill her, and if we get another chance we will definitely kill her and that will make us feel proud.

"Islam prohibits killing women, but excepts those that support the infidels in their war against our religion.".

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De Villota Death 'Directly Linked To Crash'

The family of Spanish test driver Maria de Villota have claimed her death on Friday was a direct result of her crash at Duxford Aerodrome in Cambridge last year.

A statement issued by the family read: "Maria left us while she was sleeping, approximately at 6am (on Friday), as a consequence of the neurological injuries she suffered in July of 2012, according to what the forensic doctor has told us.

"Maria is gone, but she has left a very clear message of joy and hope which is helping the family move on in these moments."

She had been test-driving a MR-01 car when she crashed

Dr Joaquin Lucena Romero, the head of forensic services at Spain's Institute for Legal Medicine, has declared de Villota's death was "due to natural causes" following a post-mortem.

But Britain's Health and Safety Executive (HSE) say they are still investigating potential links between the accident 15 months ago and her death last week.

An HSE spokeswoman stated the organisation "would expect to be kept informed of any new evidence".

The accident occurred after 33-year-old de Villota had been test-driving an MR-01 race car for Marussia, the English-Russian Formula One team based in Oxfordshire.

Despite her injuries she made a remarkable recovery in one month

After driving the vehicle at speeds of 200mph she pulled off the track and accidentally hit a stationary vehicle at low speed.

The accident left her in a critical condition and caused the loss of her right eye, though she made a remarkable recovery after just a month in hospital. Marussia were cleared of liability relating to the car

The Grand Prix Drivers' Association (GPDA) have announced they will hold a minute of silence at Sunday's Japanese Grand Prix.

A statement released by the GPDA read: "All F1 drivers of the Grand Prix Drivers' Association are very saddened to hear of the tragic death of our former member Maria de Villota.

"She has been an active member and contributed to driver safety in a very enthusiastic and most professional manner.

"Her positive attitude, maturity and extreme commitment will never be forgotten and are something we have learned from. Maria will be missed and always remembered by all of us."

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'White Widow' Lewthwaite 'Key' In Al Shabaab

By Alex Crawford, Special Correspondent, In Kenya

Sky News has obtained a Kenyan intelligence report which for the first time shows the reach of the al Shabaab terror network - which carried out the Nairobi shopping mall attack - and the extent of British involvement within the group.

It suggests that Samantha Lewthwaite - the British woman known as the 'White Widow' because she was married to one of the 7/7 London bombers - is an important figure in the terror outfit, plotting multiple bomb attacks across Kenya.

Sky has also been given access to a personal diary of hers which gives a fascinating insight into her mind, where she talks about her ambitions for her children and her love for her husband.

The intelligence report, which is 35 pages long, gives a detailed breakdown of how the network is operating throughout Africa with recruits and cells working in a huge range of countries including Somalia, Uganda, Burundi, Zambia, Tanzania, Mali and South Africa as well as further afield in Yemen and Pakistan.

The report says Lewthwaite is a 'logistician' in a six-person terror cell

But what seems clear is that the group's stronghold and focus is in Kenya with major operational bases in the capital Nairobi and Mombasa.

The report is highly damaging for the Kenyan authorities as it also shows there were clear warnings up to eight months ago that a "Mumbai-style attack" was being planned in Nairobi on the Westgate shopping mall.

It goes on to identify 29-year-old Lewthwaite as a "logistician" within a six-person terror cell which the Kenyans believe was co-ordinated by Abdulkadir Mohamed Abdulkadir, whose alias is Ikrima.

Ikrima is a Kenyan who the authorities believe has been elevated to al Shabaab management.

He was the target of the US Navy Seals' mission last weekend which set out to "capture or kill" him from the Somalian port town of Barawe.

She is implicated in the Nairobi shopping centre attack in September

The mission was aborted when the Seals encountered tougher resistance than expected when they landed.

The other members of the terror cell Ikrima was co-ordinating include Fahmi Jamal Salim, who is apparently the cell leader and who the intelligence agencies believe is now married to Lewthwaite.

Other members are said to be Jermaine Grant, who is currently on trial in Mombasa on terror charges which he denies.

The report details how the group was plotting multiple attacks targeting the Kenyan parliament buildings, UN offices in Nairobi, restaurants and a string of assassinations focusing on senior politicians within Kenya.

Londoner Jermaine Grant is also believed to be part of the same group

Kenyan intelligence believes Lewthwaite was living in an exclusive villa in the Shanzu area of Mombasa when the attacks were being planned.

A police raid on a nearby apartment rented by Grant - which led to his arrest - then prompted a subsequent raid on the upmarket villa where Lewthwaite was living with her children.

But the mother-of-four was not there. The police say they found a stash of ammunition there as well as a laptop and excerpts of a diary or journal which Lewthwaite had begun writing.

Lewthwaite's husband Jermaine Lindsay (L) on a dry run for the 7/7 attacks

The journal appears to be the start of a book which Lewthwaite was working on entitled I Want To Be A Mujahid (Islamic military fighter).

It outlines questions she was going to pose to interviewees as well as gives an insight into her love for her husband and reveals a little about how she is bringing up her children.

She writes with pride about how two of her children want to emulate their father - Jermaine Lindsay, who was one of the London 7/7 bombers in the Tube and bus attacks in 2005 which killed more than 50 people.

She recounts how her husband had asked her children what they wanted to be when they got older.

Lewthwaite writes: "Both had many answers but both agreed to one of wanting to be a mujahid."

Extracts from Lewthwaite's diary recovered by police

She goes on to express her commitment and desire to be a good Muslim and how blessed she believes she is to have been married to a shaheed (martyr) in reference to her suicide-bomber partner.

We managed to persuade one of Kenya's most controversial religious scholars to sit down with us and talk about his views - which have led to him being accused by the UN of recruiting al Shabaab fighters and raising funds for the outfit.

Sheikh Abubakar Shariff, who is also known as Makaburi, told us the accusations against him were all "b*******".

Interpol recently issued a 'Red Notice' for Lewthwaite's arrest

He accused the Kenyan government of waging a religious war and allowing the persecution of Muslims who he believes are all being targeted and labelled as terrorists in the wake of the Westgate mall attack.

"Because of the failings of our Government and our military and police in stopping the attack, we, as Muslims, are all being targeted now," he told me.

Makaburi who is also accused by the Kenyan authorities of inciting violence and of encouraging young men to take up jihad (or Holy war) in Somalia, denied he was a member of al Shabaab but said: "I am a Muslim. I speak truthfully. I might have association with al Shabaab without me knowing they are from al Shabaab.

"I cannot say no, I don't know al Shabaab. Maybe one of my friends is a member of al Shabaab without me knowing. But do I have, what you call it, ties with al Shabaab? No, I don't."

He went on to say under his interpretation of the Koran, the Westgate attack was justified because of all the wrongs being meted out to Muslims by the West, the Kenyan Defence Force (who are fighting al Shabaab in Somalia), Ethiopians and other military in "Somalia, Guantanamo Bay, Iraq and all over the world every day".

There is little chance the woman being hunted by Interpol is still in Mombasa, but what the intelligence report indicates is it is now a major hub as well as gateway to terrorism for those bent on violence.

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Royal Mail Shares Soar In First Trades

Shares in Royal Mail have soared in conditional trading, with their value jumping more than 30%.

The spike has boosted the value of the company to more than £4.5bn, up from the pre-flotation pricing of £3.3bn.

Shares opened at 8am on the London Stock Exchange at 430p each and jumped above 450p within minutes.

The pre-float purchase price was set at 330p per share.

The rise will fuel the debate over whether the sale, one of Britain's biggest privatisations for decades, was priced too cheaply, following criticism from Labour that the Government was short-changing taxpayers.

The first two days of conditional trading allows institutional investors to trade with one another, with full trading getting under way next Tuesday.

In theory if the sale of the five-century-old service was cancelled the trades would be void.

Royal Mail's flotation leaves the Government with a 38% stake, but this could fall to 30% should it choose to exercise an over-allotment option, whereby extra shares can be sold if there is strong demand.

Demand from private investors for the flotation was seven times over-subscribed, with Business Secretary Vince Cable saying there had been 700,000 applications.

Around 150,000 Royal Mail staff will each get about £2,200 of free shares but they must hold on to them for a period of five years.

Full trading on October 15 commences the day before the result of a strike ballot by postal workers.

Members of the Communication Workers Union are expected to back industrial action over issues linked to pay and conditions, with any strike set to be held on or after October 23 - the start of the run-up to the busy Christmas period.

Although the Royal Mail has seen a decline in letter deliveries amid competition from private firms and increasing use of email, its parcel delivery service has strengthened due to internet shopping.

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Human Remains Found In Mansfield Garden

Police have found the remains of two people in a garden near Mansfield.

The discovery was made by officers in the back garden of a property in Blenheim Close, Forest Town, on Sunday, according to Nottinghamshire Police.

A spokesman said it is believed the remains had been there for some time.

Police were led to the address after information came to light about an "incident" alleged to have taken place in the late 1990s.

The remains have yet to be formally identified.

Post-mortem examinations to establish the cause of death are due to take place today.

The scene has been cordoned off while forensic examinations are carried out. A white police tent and a digger could be seen in the garden.

Police spokeswoman said the current residents of the property were not part of the investigation at this time.

"They have been really supportive and understanding of the investigation," a spokeswoman said.

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Nazi War Criminal Erich Priebke Dies In Rome

Former SS captain Erich Priebke, one of the last Nazi war criminals, has died in Rome, his lawyer has said.

Priebke, who turned 100 years old in July and who was sentenced to life in prison in 1998 for his role in a massacre at Rome's Ardeatine caves in March 1944, spent the last few years under house arrest at his lawyer's Rome apartment.

Priebke had appealed his sentenced, claiming to be too ill to stay in prison and he was granted a relaxed regime of house arrest.

July: Residents protest outside Priebke's appartment in Rome

Members of the Jewish community in Rome had recently protested against his apparent freedom to wander around the city at will.

Priebke had been living under house arrest in Rome after being sentenced to life imprisonment in 1998 for the killings of 335 civilians in the Ardeatine Caves near Rome in March 1944.

Priebke was sentenced to life in 1998 over the killing 335 civilians

In March 1944, Priebke was in charge of SS troops who executed  335 in retaliation for the killings of 33 German soldiers by a partisan group.

After the war he escaped to Argentina but was deported to Italy after being interviewed on US television and admitting his role in the massacre, which he said had been conducted against "terrorists".

His lawyer Paolo Giachini said in a statement Priebke had left a final interview as his "human and political testament".

It was not clear when it would be released.

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Lynne Spalding Found Dead In Hospital Stairwell

A British patient who disappeared from her room at San Francisco's main public hospital more than two weeks ago has been found dead in a stairwell at the building.

Lynne Spalding, 57, was admitted to San Francisco General Hospital for a urinary tract infection on September 19.

The mother-of-two was reported missing from her room there two days later.

A flyer used in the search for Ms Spalding. Pic: Find Lynne

Ms Spalding's relatives and friends spent days scouring the streets of San Francisco with flyers and set up a Facebook page to help find her.

But a member of the hospital's engineering staff found Ms Spalding's body on Tuesday - 17 days after she vanished - while conducting a routine check.

Authorities are continuing to investigate how the marketing and tourism executive, who was originally from Peterlee, County Durham, got there and what caused her death.

The hospital's chief medical officer Todd May said: "What happened at our hospital is horrible.

"We are here to take care of patients, to heal them, to keep them safe. This has shaken us to our core. Our staff is devastated."

Nurses were checking on her every 15 minutes, and she disappeared in the brief time between those visits, Mr May said.

The last time she was seen - about 10.15am on September 21 - she was in a "fair condition", the hospital said.

But friends said Ms Spalding was very thin, frail and on medication that could have made her confused when she disappeared.

Police inspect an outside stairwell at the hospital

The San Francisco Sheriff's Department provides security at the hospital.

Assistant Sheriff Paul Miyamoto said it was not yet known how long Ms Spalding had been in the exterior stairwell.

The rarely used stairwell is a fire exit that has an alarm on it, is locked from the outside and exits onto hospital grounds.

"All of us are committed to learning what happened and ensuring it never happens again," Mr Miyamoto said.

David Perry, who is acting as a spokesman for Ms Spalding's family, has told Sky News that relatives and friends are "horrified, dismayed and frustrated".

"For 17 days Lynne's body was there unfound in the very hospital where she'd gone for treatment," he said.

Mr Perry said officials have a lot of explaining to do as to why Ms Spalding "died alone, in the stairwell, at one of the finest medical institutions" in the US.

"There are a number of questions for San Francisco General Hospital and the San Francisco Sheriff's Department," he told Sky News.

About 100,000 patients pass through the hospital every year

"The San Francisco Sheriff's Department oversees searches and security at the hospital, and we were assured that a search had been done.

"If they searched for her 17 days ago, it wasn't a very good search because her dead body was discovered there."

But Mr Perry praised the work carried out by the San Francisco Police Department, which was responsible for searching outside the hospital.

Ms Spalding had lived in the city for more than two decades and had two grown-up children, a 19-year-old son and 23-year-old daughter, who both live in the US.

Mr Perry said Ms Spalding's children are "stunned".

He added: "She had dozens of friends. She was well known and well liked. She was a consummate professional."

The Sheriff's Department is conducting an internal investigation of its security measures at the hospital.

The Foreign Office said it was providing consular assistance to Ms Spalding's family.

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Woman Denied Help Gives Birth On Hospital Lawn

A photograph of an indigenous woman in Mexico taken as she gave birth outside a clinic where she was denied help has led to the suspension of the health centre's director.

Irma Lopez and her husband were turned away from the health centre by a nurse who said she was only eight months pregnant and "still not ready" to deliver.

But an hour-and-a-half later, her waters broke, and she gave birth to a son, her third child, on her own, as her husband pleaded with the nurse to call for help.

The 29-year-old said: "I didn't want to deliver like this. It was so ugly and with so much pain."

The photograph of her giving birth, her newborn still bound by the umbilical cord and lying on the ground, emerged in several newspapers, including the front cover of La Razon de Mexico, and was widely circulated on the internet.

It was taken by a witness to her ordeal at the Rural Health Centre in the village of San Felipe Jalapa de Diaz.

Mrs Lopez, who is of Mazatec ethnicity, and her husband had walked an hour to the clinic from the family's one-bedroom hut in the mountains of northern Oaxaca.

She was eventually taken in by the clinic after giving birth and discharged the same day with prescriptions for medicine and products that cost her about £19, she said.

"I am naming him Salvador," said Mrs Lopez, which means saviour in English. "He really saved himself."

Authorities in the southern Mexican state have now suspended the health centre's director, Dr Adrian Cruz, and launched an investigation into the incident, which happened on October 2.

The case has pointed to the persistent discrimination against Mexico's indigenous people, and the shortcomings of its health care system.

Hundreds of women still die during or right after pregnancy.

Mayra Morales, Oaxaca's representative for the national Network for Sexual and Reproductive Rights, said: "The photo is giving visibility to a wider structural problem that occurs within indigenous communities.

"Women are not receiving proper care. They are not being offered quality health services, not even a humane treatment."

Nearly one in five women in the state of Oaxaca gave birth in a place that was not a hospital or a clinic in 2011, according to Mexico's census.

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Energy Bills: SSE To Raise Tariffs By 8.2%

SSE has become the first of the so-called 'big six' energy firms to confirm it is raising prices ahead of winter, sparking a bitter backlash among consumer groups and politicians.

The company said household gas and electricity tariffs would rise by an average of 8.2% from November 15, affecting 4.4 million electricity and 2.9 million gas customers.

It is understood several of its competitors also plan to announce increases to bills amid a furious debate on potential reforms to the market centring on environmental and other charges imposed on customer bills by successive governments.

SSE, which trades as Southern Electric, Swalec and Scottish Hydro, blamed the decision to increase bills on rising costs outside its control, which it said it had absorbed for months at its retail division.

It said the move would equate to a typical dual fuel customer paying £2 a week more but pledged not to increase bills again until August 2014 having last imposed a 9% rise in October 2012.

SSE says its home energy business has run at a loss during 2013

There is a north-south divide to the increased charges with customers in the South East facing hikes as high as 9.7% while many in the North and southern Scotland face a 7% rise.

Will Morris, group managing director of SSE's retail business, said: "We're sorry we have to do this.

"We've done as much as we could to keep prices down, but the reality is that buying wholesale energy in global markets, delivering it to customers' homes, and Government-imposed levies collected through bills - endorsed by all the major parties - all cost more than they did last year.

Mr Morris explained: "85% of a typical energy bill is made up of costs outside our direct control and these costs have increased.

"So far this year we have made a loss from supplying energy as a result of the higher costs we have been facing and continue to face.

"We understand and regret that this will add to the pressures on household budgets, but there's a lot we can do to help.

"Rising unit prices do not have to mean rising bills and there remains huge potential for customers to save money by improving further their energy efficiency."

Labour leader Ed Miliband took to Twitter to condemn bill rises

The increases to household bills were announced at a politically-sensitive time, given the debate prompted by Labour leader Ed Miliband's pledge to freeze tariffs for 20 months should his party win the next election.

After the announcement, he took to Twitter to declare that the rise demonstrated "the need to freeze bills" but Downing St described the policy as a "con".

SSE insists its home supply business is currently run at a loss despite rising operating profits on the back of the cold end to last winter.

Its accounts also showed that investment fell by 13% year on year in the 12 months to March.

Ed Davey has insisted that Government is helping cut bills

SSE called for politicians to help cut bills by transferring the environmental and social obligations, making up almost 10% of a bill's total, to central government - claiming it would save consumers £110 annually in 2013 alone.

It accused policymakers over many years of failing "to highlight adequately the cost to consumers of the policies they have pursued".

Energy Secretary Ed Davey said the Government was changing energy bills by cutting the number of tariffs, making bills simpler and clearer, and getting people off poor-value dead tariffs and on to the "best deal for them".

The reaction to the price hikes from consumer groups was one of horror.

Ann Robinson, director of consumer policy at uSwitch, said: "This is a crippling blow for consumers, who are still reeling from last winter's price hike.

"Adding a further £111 to an already sky-high energy bill will leave consumers buckling under the pressure. This will be seen by many as the final nail in the coffin for affordable energy.

"Of course the danger now is that the other big six suppliers will follow suit. This raises the spectre of yet more households forced to cut back on their heating.

"Last winter almost seven in ten households (69%) went without heating at some point to keep their energy costs down, while over a third (35%) said that cutting back on energy usage was affecting their quality of life or health."

She concluded: "This is the grim reality we face as the cost of energy spirals ever higher."

:: A special edition of Jeff Randall Live will be largely devoted to energy pricing - at 7pm on Sky News.

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Energy Minister In Row Over Cost Of Taxes

Energy Minister Michael Fallon has sparked a row over the impact of Government energy taxes after appearing on Sky News.

After SSE became the first firm to hike prices ahead of the winter, Mr Fallon insisted only a "small amount" was added to bills because of Government measures.

He told Sky the cost of measures on energy efficiency and warming the homes of the elderly and vulnerable was "only 4 or 5%".

"There's a small amount added to each bill to help protect the most vulnerable, to keep their homes warm this winter and that's extremely important," he said.

"The bulk of this [rise] is from the energy companies."

He added: "For energy efficiency and to help keep homes warm for the most vulnerable, only 4 or 5% of your bill goes on that so a very small piece on top of it."

But he then clashed with Tony Keeling, SSE's director of customer services, who appeared on Sky to defend the energy company's controversial price rise.

Mr Keeling blamed the hike on three causes - the global cost of energy, the rising cost of getting energy to UK homes and Government schemes.

"About 10% of everyone's bill is effectively extra tax on top of the VAT," the SSE executive told Sky's Eamonn Holmes.

Pressed to clarify his original comments, Mr Fallon agreed the total hit to bills from the Government was "just under 10%".

He said the original figure he gave was for energy efficiency and future investment but conceded "another amount" was also charged to pay for keeping the elderly warm.

Mr Keeling backed the Government's schemes but suggested they should be paid for through general taxation, instead of added to energy bills.

Ed Miliband jumped on the price rise as justification for a freeze

This would allow for it to be targeted at the better-off, he argued, saying: "At the moment it is a blanket charge and some people can't afford that."

The levies pay towards cutting the cost of energy waste and encouraging low-carbon investment as well as helping vulnerable households pay for their supply.

SSE claims transferring the costs of these "environmental and social policies" to the taxpayer would slash up to £4bn from UK energy bills, saving families around £110 each.

It accused policymakers over many years of failing "to highlight adequately the cost to consumers of the policies they have pursued".

But Energy Secretary Ed Davey said: "Half of an average energy bill is made up of the wholesale cost of energy.

"This far outweighs the proportion of a bill that goes to help vulnerable households with their bills and to cut energy waste, and to encourage investment in the new low-carbon energy generation we need to keep the lights on.

David Cameron and Ed Miliband rowed about energy at PMQs on Wednesday

"SSE's own figures show that wholesale price rises have contributed more than policy costs to this price increase, as a share of the bill."

The row comes after Labour leader Ed Miliband pledged to freeze energy prices for 20 months if he wins power in 2015.

The Tories continue to dismiss the vow as a "gimmick" and insist it is not possible, given international fluctuations in wholesale prices.

Coalition ministers also stress they have already taken action to simplify the system with fewer tariffs and make it easier to switch supplier.

But Mr Miliband used the SSE hike to justify his position and claim only Labour would "get a grip" and reform the "broken energy market".

Accusing energy firms of "ripping off customers", he said: "The Government is letting the energy companies get away with it and letting down the British people ...

"The companies are trying to blame everyone else, the Government is trying to blame everyone else. They're responsible, they're not getting a grip."

The Prime Minister's official spokesman insisted he "really, really" understood the pressure on family budgets.

"Hard-working families are seeing budgets squeezed," he said. "I think, in terms of what we are doing, there is legislation so that people are automatically put on to the lowest tariff.

"Of course you would expect the Government to always be looking at what more can be done to help hard-working families."

Labour has been forced to reframe its economic attacks around the cost of living as Britain's recovery continues to gather pace.

Energy prices have become the centre of the argument in recent weeks following Mr Miliband's surprise freeze pledge at his party conference.

Mr Cameron accused the party leader of wanting to live in a "Marxist universe" when the pair clashed about the move at PMQs this week.

Mr Miliband claimed the Prime Minister was ignoring a cost-of-living "crisis" and had chosen to back energy companies instead of consumers.

In an attempt to regain the initiative, the Government has announced action to stop large rail ticket price hikes and is expected to unveil further plans in the coming weeks.

:: A special edition of Jeff Randall Live on Sky News at 7pm tonight will be largely devoted to energy pricing.

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MI5 Boss Warns Of Growing UK Terror Threat

By Tim Marshall, Foreign Affairs Editor

Britain will face at least one attempted major terror attack every year for the next few years, the head of MI5 has warned.

In his first speech since taking over the Security Service in April, Andrew Parker told a private audience at the Royal United Services Institute: "Since 2000, we have seen serious attempts at major acts of terrorism in this country typically once or twice a year.

"That feels to me, for the moment, unlikely to change."

Among the reasons for this are the increasing numbers of Britons going to Syria to try to become jihadists.

In his off-camera speech, Mr Parker said: "A growing proportion of our casework now has some link to Syria, mostly concerning individuals from the UK who have travelled to fight there or who aspire to do so.

"Al Nusrah and other extremist Sunni groups there aligned with al Qaeda aspire to attack Western countries."

Hundreds of Britons are thought to have joined fighting in Syria

More than any recent conflict, Syria has attracted would-be fighters from the UK.

Sky News understands that the number of individuals involved over the last three years is in the low hundreds.

The fear is some could return to the UK even more radicalised.

Mr Parker repeated a warning made by his predecessor, Jonathan Evans, saying: "It remains the case that there are several thousand Islamist extremists here who see the British people as a legitimate target."

He also mentioned the growing fears about terrorism in Northern Ireland after several incidents and the threat of more.

"Rejecting the political process in Northern Ireland, these ragged remnants of a bygone age are in a cul-de-sac of pointless violence and crime with little community support," he said.

"We will continue to work with the police to put these thugs and killers in front of the courts."

He then turned to the subject of how to combat these threats and the use of technology.

Mr Parker alluded to information leaked by Edward Snowden

When former CIA contractor Edward Snowden leaked details about surveillance tactics, it is thought he inflicted massive damage on several spy agencies, including Britain's Government Communications Headquarters (GCHQ).

One source said some of the things leaked by Snowden amounted to "an instruction booklet on how to evade surveillance".

This explains why Mr Parker appears to have entered the debate about The Guardian newspaper's publication of some of Snowden's material.

The Guardian was not mentioned by name, but in his speech Mr Parker said: "It causes enormous damage to make public the reach and limits of GCHQ techniques.

"Such information hands the advantage to the terrorists. It is the gift they need to evade us and strike at will."

There are also passages explaining the thinking of MI5.

He accepts there are choices to be made about how and whether communications data is retained, but concludes: "We cannot work without tools."

The language used is temperate, but behind it you sense a passionate argument by a man who understands that there are sections of public opinion which deeply mistrust the security services. 

He asks if it should be accepted "that terrorists should have means of communication that they can be confident are beyond the sight of MI5 or GCHQ acting with proper legal warrant. Does anyone actually believe that?"

It is for Parliament to decide the powers that MI5, MI6, and GCHQ should have, including access to the email of people they suspect of wrongdoing.

That is an ongoing debate which will be revisited when the heads of the three services give evidence to the Intelligence Select Committee next month.

In a statement a Guardian News & Media spokesperson said: "A huge number of people - from President Obama to the US Director of National Intelligence, James Clapper - have now conceded that the Snowden revelations have prompted a debate which was both necessary and overdue.

"The President has even set up a review panel and there have been vigorous discussions in the US Congress and throughout Europe. Such a debate is only worthwhile if it is informed. That is what journalism should do."

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Mid Staffs Trust Admits Failings Over Death

Mid Staffordshire NHS Foundation Trust has admitted breaching health and safety law over the death of a diabetic in-patient.

The scandal-plagued hospital trust pleaded guilty to failing to ensure the safety of Gillian Astbury, who lapsed into a fatal diabetic coma while being treated at Stafford Hospital in April 2007.

She died after staff failed to give her the insulin she needed.

The Trust admitted breaching the Health and Safety at Work Act by failing to properly manage and organise hospital services, including its systems for record-keeping, patient information and communication between staff members.

The prosecution at Stafford Magistrates' Court was brought by the Health and Safety Executive.

It came three years after an inquest jury ruled that Mrs Astbury's death was contributed to by low staffing levels and a systemic failure to provide adequate nursing facilities.

The inquest also concluded the failure to administer insulin to the 66-year-old amounted to a gross failure to provide basic care.

Mrs Astbury, from Hednesford, Staffordshire, died in the early hours of April 11, 2007, while being treated for fractures to her arm and pelvis.

Stafford Hospital has previously been the subject of several highly critical reports, including a full public inquiry, which identified "routine" neglect of patients between 2005 and 2009.

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Madeleine McCann Police Probe Possible Suspect

By Martin Brunt, Crime Correspondent

Scotland Yard is to appeal for information about a new suspect in the disappearance of Madeleine McCann.

Detectives are to issue an e-fit image of a man seen near the holiday apartment from where the then three-year-old vanished in 2007.

Her parents Kate and Gerry McCann have been shown the image and say they are "greatly encouraged" by the progress of the Metropolitan Police, who have effectively taken over the hunt for the missing girl.

The officer in charge of the case, Detective Chief Inspector Andy Redwood, is expected next week to give details of the suspect's movements around the resort of Praia da Luz, Portugal, on the day Madeleine disappeared.

But sources said police will not know how significant the suspect is until he is identified, traced and interviewed.

Kate and Gerry McCann believe their daughter is still alive

He is one of 41 individuals police believe are "people of interest" they need to talk to.

The image of the possible new suspect is expected to form a crucial part of fresh appeals at the beginning of next week.

Police will give some idea of what witnesses have said about his behaviour on Monday.

They will be making an appeal for new witnesses to come forward if they recall seeing him around the apartment six years ago, or recognise him now, from the detailed image.

The Metropolitan Police now has a team of six Portuguese detectives based in Faro who are carrying out inquiries on its behalf.

The Portuguese investigation is officially closed but authorities there are backing the Scotland Yard inquiry and officers from both countries will work together in pursuing new leads.

Madeleine's parents have said they remain "optimistic" of finding their daughter and will not accept she is dead until they are presented with clear evidence.

Her disappearance is to be the subject of a Crimewatch appeal on Monday to try to produce new witnesses in the case.

It will also be aired in Holland and Germany - where many tourists in the Algarve come from.

There appears to be some doubt as to whether it will be shown in Portugal.

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Passenger Lands Plane After Pilot Falls Ill

The pilot of a light aircraft who fell ill forcing his passenger to perform an emergency landing at Humberside Airport has died overnight.

During the flight on Tuesday evening, the pilot made a distress call when he became so sick he was unable to continuing flying the light aircraft.

Humberside Police confirmed the pilot died later that night but do not yet know his cause of death.

Two flight instructors were called in to talk to the passenger from the ground while he took control of the plane, an airport spokesman said.

The man had very limited flying experience and had never landed an aircraft before.

The plane took off from Sandtoft Airfield

Despite this, he managed to successfully land at the North Lincolnshire airport just after 7.30pm.

Roy Murray, one of the instructors who helped coach the passenger down, said the man completed the landing with no lighting inside the cabin.

"I didn't want to upset him and tell him to move all round the cockpit (trying to locate the light switches), all I was interested in was keeping him flying the aeroplane straight and level."

Mr Murray, who has taught flying for 30 years, said he's never come across a situation like this before.

"When I think about it now that lad did extremely well, no lights, in the dark, no experience, flying a strange aeroplane in a strange area, he must have been nerve-wracked as well as us."

The man took three passes over the runway before landing on the fourth approach.

Mr Murray says the man – who he knows only as John – kept his composure and was able to land the plane safely.

"He was very calm and he followed all our instructions and he did a beautiful landing," he said.

"I've never met him, I'd like to meet him, obviously just to say 'Well done, lad. Together we did it'."

Police have not yet released the name or age of the pilot who died. His family has been informed of his death.

The light aircraft took off from Sandtoft Airfield, near Doncaster, for training with one passenger.

The man and pilot were the only two people on board the aircraft.

Humberside Airport praised the response of emergency services in a tweet: "We are pleased to say that the incident that started a few hours ago has been successfully dealt with. Great response from emergency svs!" the airport said.

Flights coming into the airport were delayed while the plane was moved from the runway.

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Muslim Free School Threatened With Closure

A Muslim free school could be closed if it does not take "swift action" about how it is being run, the Government has warned.

The Department of Education has written to the Al-Madinah Free School in Derby, demanding that it address concerns about its practices.

According to the letter sent by Schools Minister Lord Nash, it has failed to keep pupils safe, provide a good education and has discriminated against female staff.

He said the school had "manifestly breached" its conditions and could expect to be closed down if it does not make immediate changes.

The letter comes after claims that female teachers at the school were forced to wear hijabs even if they were not Muslim. Other reports alleged female pupils were made to sit at the back of classrooms and boys at the front.

The school has been given a week to prove it has stopped any activities that could lead to women and girls being treated "less favourably" than men and boys.

It will have to show that it is meeting equality laws in any case where it proposes separating boys and girls or treating them differently.

It has also been ordered to tell staff they are not required to cover their hair if it is against their religion or beliefs.

Lord Nash told head of governors Shazia Parveen: "I will not tolerate breaches of the commitments you gave when entering into the funding agreement."

Further action that the school must take in the next few weeks includes showing it has a "broad and balanced" curriculum and welcomes children of all faiths and none.

The Department of Education has also demanded a full list of all staff, including their references and evidence of criminal record checks.

Lord Nash said: "Unless swift action is taken to address these concerns in a comprehensive way, I will be compelled to terminate the school's funding agreement."

This effectively means that the school will face closure if it fails to deal with the Government's concerns.

Al-Madinah, which is one of the Government's flagship free schools, opened in September last year.

On its website, it describes a "strong Muslim ethos" with shorter holidays and longer school days "to maximise opportunities for pupil achievement and success".

It adds: "At the centre of our school is a community of pupils, able to enjoy learning in a caring Islamic environment which promotes a culture of high expectations and outstanding performance."

Interim principal Stuart Wilson told the BBC last week that he had not received any complaints from colleagues over the school's dress code and denied pupils had been split up.

There is speculation the school will be branded inadequate by watchdog Ofsted in findings due out soon.

Al-Madinah was already forced to close last week after inspectors raised concerns about its records on staff checks.

It reopened to pupils on Monday after a return Ofsted visit to ensure the right measures were in place.

Ofsted chief inspector Sir Michael Wilshaw said: "Inspectors are now engaged in finalising the inspection report for Al-Madinah School, which we expect to be able to publish in the next few days."

Al-Madinah declined to comment on the letter.

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Help To Buy Scheme: First Rates Are Revealed

The first mortgage rates on offer under the latest phase of the Government's Help to Buy scheme have been described by the lender as "fair and competitive."

The second phase of the controversial scheme - aimed at helping more people get on the property ladder - sees Help to Buy extended to cover old homes too instead of just new-build properties.

It will see 15% of a property's value guaranteed by taxpayers, in return for a fee from the lender, to help homebuyers obtain mortgages worth up to 95% of a property's value.

RBS and its Natwest subsidiary said they would be offering two and five-year fixed rate deals at 4.99% and 5.49% interest rates respectively with no fee. The brands expect a rush of interest - signing up 25,500 first and next time buyers over three years.

Virgin Money is among the lenders taking part

The banks confirmed 740 of their branches would extend opening hours for two weeks to cope with expected demand but Lloyd Cochrane - their head of mortgages - told Sky News there would be no reckless lending with potential customers facing tough affordability checks.

He said: "We ensure based on what they earn and what they spend that they can afford the mortgage now but really importantly we ensure they can afford the mortgage at a rate of 7% so that gives us and our customers the confidence that they can afford the mortgage into the long term."

Halifax - owned by Lloyds Banking Group - later confirmed its offering: A two-year fixed rate at 5.19% with a £995 product fee and said customers would be able to apply for the mortgages from Friday.

HSBC said it would be taking part later in the year, making it the first major player with no taxpayer support to sign up.

Virgin Money and the start-up Aldermore Bank will join from January while Barclays and Santander UK are still considering whether to participate.

The scheme had initially not been expected to start until the new year but was brought forward by three months.

The PM wants mortgages to be affordable for many

It will offer £12bn in mortgage guarantees over three years and some estimates suggest 180,000 loans could be taken out under the initiative.

Lenders can start offering the mortgages from today, and they will be guaranteed by the Government from January 2014.

Prime Minister David Cameron said: "Help to Buy is going to make the dream of home ownership a reality for many who would otherwise have been shut out."

Chancellor George Osborne said: "Too many people are still being denied the dream of owning their own home, which is why we have brought forward the launch of this scheme, so as of today borrowers can start applying for a mortgage with a 5% deposit."

The new scheme means homebuyers will only have to find as little as 5% on homes worth up to £600,000. Depending on the size of the deposit, the Government will then guarantee up to 15% of the property value in return for a fee from the lender.

An earlier phase of the scheme, offering 20% loans on new-build properties, has already helped more than 15,000 people buy a new home since it was launched six months ago.

Help to Buy is controversial because critics fear it could fuel further rises in a housing market where prices are already going up.

But the Treasury said that while house price inflation stands at 3.3%, it is only 0.8% when the property hotspots of London and the South East are removed.

The latest report on the market from the Royal Institution of Chartered Surveyors (Rics) suggested prices were likely to surge further ahead in London and the South East because the supply of homes was lagging behind burgeoning demand.

It measured home sales at a four-year high last month but remaining historically low.

Commenting on the launch of phase two of Help to Buy, shadow chief secretary to the Treasury Chris Leslie said: "If ministers are serious about helping first-time buyers, they should bring forward investment to build more affordable homes.

"Rising demand for housing must be matched with rising supply, but under this Government house-building is at its lowest level since the 1920s."

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Diane Abbott Is Sacked By Ed Miliband

Diane Abbott has been sacked by Labour leader Ed Miliband as he continues to reshuffle his team ahead of the next election.

Ms Abbott, who ran for the party leadership against Mr Miliband in 2010, lost her job as shadow public health minister.

The move follows high profile sackings by the party leader on Monday, in what was dubbed a "cull of the Blairites" by critics.

Shadow work and pensions secretary Liam Byrne and shadow education secretary Stephen Twigg both lost their frontbench jobs.

Ms Abbott reportedly said "I'll live, these things happen" after being told she was out, adding: "I think Ed wanted more message discipline."

She was the first black woman MP when she joined Parliament in 1987 and is considered a potential future candidate for Mayor of London.

Norman Baker: No rift with Theresa May

A prominent figure on Labour's left wing, the politician is regarded as one of the most independent-minded MPs in the House of Commons.

She recently questioned the party's approach on immigration and also suggested Mr Miliband was being swayed by opinion polls.

In the summer, she caused controversy by declaring she would quit if the party backed military action in Syria in a Commons vote.

Labour ultimately decided to vote against the Government, inflicting a humiliating defeat on David Cameron, so Ms Abbott stayed put.

On the coalition side, new Home Office Minister Norman Baker has scotched reports of a clash between him and his new boss Theresa May.

The Home Secretary was said to be "spitting tacks" after Mr Baker was moved to her department to replace Jeremy Browne.

But the Lib Dem insisted they had had a "very friendly chat" following his appointment and would be able to work well together despite coming "from different places".

Mr Baker, who wrote a book linking the security services to a cover-up over the death of David Kelly, also insisted he "entirely respects" the work of British spies.

Senior Lib Dem Danny Alexander predicted Mr Baker would be an "excellent" Home Office minister and would allow the party to "sharpen our campaigning edge" in that area.

Meanwhile, Tory Robert Syms' estranged wife Fiona has attracted attention after reacting with fury to him losing his post in the Whips' Office.

She wrote on Twitter: "PM just fired father of my kids over the phone. Gave up chairmanship of a cttee to be a whip, worked hard and was widely acknowledged to be a good whip.

"He was utterly gracious and took it like a man, I am beyond furious. Loyalty counted for nothing."

She joked her children had "defected to Labour" and that in her husband's position she would be "fixing up drinks" with rebels, but said the Poole MP would remain "super loyal".

She later updated her Twitter profile to describe herself as an "ex-wife with big mouth" who was "prone to extraordinary outbursts", although this has now been removed.

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Economy: IMF Makes UK Growth Forecast U-Turn

By Ed Conway, Economics Editor, In Washington

The International Monetary Fund (IMF) has upgraded its forecast for UK economic growth by more than any other major economy, in a boost to the Chancellor's fortunes.

It comes only six months after the IMF downgraded its expectations for the British economy and warned that George Osborne's policies were the economic equivalent of "playing with fire".

In its six-monthly World Economic Outlook, the IMF predicted that the UK's gross domestic product - the broadest measure of economic growth - would increase by 1.4% this year and 1.9% in 2014.

That compares to a forecast of just 0.9% and 1.5% respectively when it last updated its projections in July.

It came as the IMF downgraded its forecast for global GDP this year by 0.3 percentage points to 2.9%.

The rapid change in attitude will be welcomed by the Chancellor, who is due to attend the IMF's annual meeting in Washington later this week.

In April, IMF chief economist Olivier Blanchard warned that austerity policies of the kind Mr Osborne was carrying out were "playing with fire" and urged him to change course.

However, over the following months, the IMF appeared to water down its prescription.

Olivier Blanchard had urged the UK to 'change course'

Treasury insiders see today's forecast revision as a tacit acknowledgement that Mr Osborne's original course was the right one.

A spokesman said: "The IMF has confirmed that the UK economy is turning a corner, by revising up its forecast for growth over the next two years by more than for any other G7 economy.

"But risks to the global economy remain high, and the recovery cannot be taken for granted. That is why the government will not let up in implementing its economic plan which has already cut the deficit by a third, kept interest rates near record lows and created over a million and a quarter jobs."

However, the text of the IMF report itself did not offer a ringing endorsement of the UK economy.

"In the United Kingdom, recent data have shown welcome signs of an improving economy, consistent with increasing consumer and business confidence, but output remains well below its pre-crisis peak … output levels will remain below potential for many years," it said.

Labour Shadow Chancellor Ed Balls said: "After three wasted years of flatlining it's good that we finally have some growth. But this is the slowest recovery for 100 years and working people are worse off as prices continue rising faster than wages.

"Despite these welcome changes to its forecasts the IMF rightly warns that the UK economy will remain below potential for many years.

"That's why the IMF has repeated its view that the Government should bring forward infrastructure investment now, which could be used to build thousands of affordable homes.

"Instead of more complacency from George Osborne we need action to secure a strong and sustained recovery, catch up all the lost ground and tackle the cost of living crisis," he concluded.

The report said that the global economy was now beginning to recover from the Great Recession, but warned that central banks would find it difficult to bring the unprecedented series of emergency crisis measures to an end.

George Osborne (R) will see the U-turn as a vindication of his policies

The Federal Reserve has signalled that it will soon begin tapering the amount of assets it is buying each month under its quantitative easing programme, but stopped short of doing so at its meeting last month.

It said that the world would have to adapt to a slower potential growth rate from China - for the past five years the powerhouse for global growth.

However, the IMF reserved its most serious warning for the US Congress, which is currently deadlocked on talks over the budget, causing a part-shutdown of federal services.

It has also been unable to pass legislation to increase the US debt ceiling, something which could potentially cause the first US default in history.

The IMF said that its forecasts assumed the shutdown would be brief, that extra public spending would be agreed and that the debt ceiling would be raised.

"There is uncertainty on all three accounts," it added.

"While the damage to the US economy from a short shutdown is likely to be limited, a longer shutdown could be quite harmful. And, even more importantly, a failure to promptly raise the debt ceiling, leading to a US selective default, could seriously damage the global economy."

An added worry is that across the world, the recovery could be more tepid than normal.

Long-term average growth across the world is usually close to 4%. However, the IMF said that in the medium term it might only be realistic to expect something closer to 3%, given the serious impact of the Fed and other central banks reversing their quantitative easing programmes.

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Taliban Vows New Malala Murder Attempt

Pakistani schoolgirl Malala Yousafzai was shot last year by the Taliban for campaigning for defying a ban on female education - and now the group is threatening to kill her again.

Pakistani Taliban spokesman Shahidullah Shahid said the group stands by its decision to target 16-year-old Malala who he said has "targeted and criticised Islam".

"She accepted that she attacked Islam so we we tried to kill her, and if we get another chance we will definitely kill her and that will make us feel proud. Islam prohibits killing women, but except those that support the infidels in their war against our religion," he added.

The new death threat came as Malala was named among the favourites to win the Nobel Peace Prize, which will be revealed on Friday.

The announcement is the latest in a series of impressive accolades for Malala's campaign for girls' schooling.

During an interview with the BBC's Panorama, Malala said that winning the prize would be "a great opportunity" but that universal education remained her true goal.

Malala addressed the United Nations in July on her 16th birthday

"If I win Nobel Peace Prize, it would be a great opportunity for me, but if I don't get it, it's not important because my goal is not to get Nobel Peace Prize, my goal is to get peace and my goal is to see the education of every child," she said.

Malala now lives in the UK with her family but told of her plans to return to Pakistan when she had received a full education and was "fully empowered".

She described the Taliban's rule of fear which had led her to speak out in the first place.

"The Taliban's punishments were like slaughtering people on the Green Chowk (the main square in Malala's home town of Mingora), throwing acid on women's faces or abusing them or killing them.

"I was afraid of my future. And at that time there was fear all around us, in every street and in every square of Mingora."

On Tuesday, Malala will publish her autobiography entitled I Am Malala: The Girl Who Stood Up For Education And Was Shot By The Taliban.

Malala was treated at the Queen Elizabeth Hospital in Birmingham

Malala's first thought was "Thank God I'm not dead" as she woke up terrified in a UK hospital after a Taliban gunman shot her in the head, according to extracts from the book published in the Sunday Times.

The schoolgirl added that she was unable to talk, had no idea where she was and was unsure even of her own name when she emerged from a coma after six days.

The last thing she recalled on October 9, 2012, the day she was shot, was sitting with her friends on a bus as it rounded an army checkpoint on the way to school in the Swat Valley in northwest Pakistan.

Friends told her that a masked gunman boarded the bus asked "Who is Malala?" and then lifted a gun to her head and fired.

Seriously wounded, Malala was flown to the Queen Elizabeth Hospital in Birmingham for surgery on her skull and ear. She returned to school last March in the UK after recovering from her injuries.

Malala attracted the anger of the Taliban by writing a blog for the BBC Urdu service chronicling the challenges of daily life under the Islamists.

After the shooting and her move to Britain that she gained widespread adulation in the West, but remained the subject of suspicion among many conservatives in Swat.

Maulana Gul Naseeb, a prominent figure in the JUI-F, one of Pakistan's leading religious political parties, said: "America created Malala in order to promote their own culture of nudity and to defame Pakistan around the world."

Meanwhile, a Buckingham Palace spokesperson said Malala has been invited to a palace reception promoting education in Commonwealth hosted by the Queen and Duke of Edinburgh on Friday, October 18.

It is thought the Queen was impressed by the teenager's bravery.

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