LONDON (Reuters) – The coalition government descended into a war of words over immigration policy on Thursday, with the junior Liberal Democrats attacking Conservative Prime Minister David Cameron’s hardline rhetoric.

Coalition tensions have been simmering ahead of council elections in which both parties are expected to suffer, and a Lib Dem-sponsored — and Conservative-opposed — referendum on the electoral system which could spark a deeper rift.

Cameron, in a speech likely to appeal to core Conservative voters, called for “good immigration, not mass immigration” and argued previous policies had nurtured extremism by creating “discomfort and disjointedness” in neighbourhoods.

Lib Dem Business Secretary Vince Cable, who sees immigration as key to securing economic recovery, labelled Cameron’s choice of words as “very unwise,” in comments to the BBC.

“I do understand there is an election coming but talk of mass immigration risks inflaming the extremism to which he and I are both strongly opposed,” Cable said, arguing Cameron’s aim to reduce immigration to tens of thousands per year — from hundreds of thousands — was not a Lib Dem policy.

Defending the coalition’s move to cap the number of skilled workers coming to Britain from outside the EU, Cameron said mass migration had put pressure on housing and front-line services.

Between 1997 and 2009, when the Labour party was in power, 2.2 million more people came to Britain than left, he said.

ISLAMABAD (Reuters) – British Prime Minister David Cameron will call for a new start in relations with Pakistan on Tuesday, eight months after sparking a diplomatic row by saying Pakistan should not be allowed to “look both ways” on terrorism.

Cameron, who made those controversial comments on a trip to India in July 2010, will meet Pakistani President Asif Ali Zardari and Prime Minister Yusuf Raza Gilani in Islamabad, seeking to improve co-operation on counter-terrorism operations and Afghanistan.

“Let’s make today a ‘fresh start’ in our relationship,” Cameron will say in a speech, according to extracts released by his office before he arrived in Islamabad on Tuesday.

To back up his olive branch, Cameron will make a pledge of 6 50 million pounds to help build schools, train teachers and buy textbooks. The package could be Britain’s biggest overseas education project.

The four-year plan, which will have to be matched by Pakistan to reach fruition, is intended to put four million children into school and is seen by British officials as way to reduce extremism.

A healthy relationship with U.S. ally Pakistan is seen as key to bringing an end to the decade-long Afghan campaign, in which Britain has committed about 9,500 troops.

The British government has justified its involvement in the war in Afghanistan by saying the majority of terrorist plots uncovered in Britain have their roots in the lawless Afghan-Pakistan border region.

ISLAMABAD (Reuters) – British Prime Minister David Cameron will call for a new start in relations with Pakistan on Tuesday, eight months after sparking a diplomatic row by saying Pakistan should not be allowed to “look both ways” on terrorism.

Cameron, who made those controversial comments on a trip to India in July 2010, will meet Pakistani President Asif Ali Zardari and Prime Minister Yusuf Raza Gilani in Islamabad, seeking to improve co-operation on counter-terrorism operations and Afghanistan.

“Let’s make today a ‘fresh start’ in our relationship,” Cameron will say in a speech, according to extracts released by his office before he arrived in Islamabad Tuesday.

“Let’s clear up the misunderstandings of the past, work through the tensions of the present and look together to the opportunities of the future.”

A healthy relationship with U.S. ally Pakistan is seen as key to bringing an end to the decade-long Afghan campaign, in which Britain has committed about 9,500 troops.

The British government has justified its involvement in the war in Afghanistan by saying the majority of terrorist plots uncovered in Britain have their roots in the lawless Afghan-Pakistan border region.

Pakistan’s help on tackling extremism is crucial to tackling the threat from terrorism in Britain, officials say.

LONDON, April 1 (Reuters) – Britain’s battle to eliminate a record budget deficit begins in earnest this month, with hefty spending cuts and tax rises pencilled in for the new financial year despite concerns about a weak economic recovery.

British military involvement in Libya’s civil war has raised questions about foreign policy objectives, just months after the government said it wanted to adopt a less interventionist approach.

An interim report on banking reform is due on April 11 and voters will decide whether to change Britain’s electoral system on May 5 — both events which could further exacerbate tensions in the Conservative-Liberal Democrat coalition administration.

There are signs that voters are already starting to get restless. Opinion polls show Labour has overtaken the Conservatives, while support for the smaller Lib Dems has slumped since they entered the coalition.

While there is a small risk that tensions could drive the coalition apart, there is a growing sense that both sides have little choice but to stick it out until the next election, due in 2015, in the hope that the economy picks up in time.

AGE OF AUSTERITY

Critics of the coalition say its plans to cut spending by 81 billion pounds ($130.4 billion) over the next four years go too far, too fast and risk plunging the country back into recession.

and Sarah White LONDON (Reuters) – Fierce lobbying by Britain’s big banks against tougher regulation and swipes at bankers by politicians are set to continue for a while yet, with at least another six months of uncertainty in store.

The Independent Commission on Banking (ICB), reviewing the future shape of Britain’s banks, has fiercely resisted political interference ahead of its interim report next month.

That, analysts say, means any eventual deal agreeable to both politicians and banks may have to wait until the commission’s final report in September.

The government’s Liberal Democrat junior coalition partners have been particularly vocal in attacking the banks in recent weeks, with deputy prime minister Nick Clegg saying he wanted to “wring the neck” of bankers who award themselves big bonuses and that the banking system was “riddled with irresponsible risk taking.”

But even Clegg has hedged his bets, passing the buck back to the ICB and even then not committing the government to abiding by its findings.

“If their (the ICB’s) recommendation unambiguously proves that further regulatory action is required, possibly hiving off high-risk banking activities from low-risk banking activities, of course we’re duty-bound to look at that very closely indeed,” he told Reuters in an interview this month.

Meanwhile, the enduring public anger over the banking crisis means Prime Minister David Cameron’s Conservatives will want to be seen to be doing something tough, making any hint of a cosy early agreement with the banks and commission almost impossible.

NOTTINGHAM, England, March 24 (Reuters) – Britain must wean itself off of a reliance on banks that are too big to fail, Deputy Prime Minister Nick Clegg said on Thursday, just days away from an interim report on the future of the sector. Britain, which spent billions of pounds bailing out stricken banks including Lloyds TSB (LLOY.L: Quote, Profile, Research, Stock Buzz) and Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) during the financial crisis, is keen to reform the industry to protect taxpayers from the costs of any future problems.

An independent banking commission, set up by the Conservative-Liberal Democrat coalition government, is looking in particular at the merits of splitting banks into separate retail and investment operations.

Clegg, the leader of the Liberal Democrats, said making the banking system safer was vital but would not happen overnight.

“We’ve got to move away from this situation where they (banks) were so big and overwhelmingly important that we had no choice but to bail them out,” Clegg said on a visit to an industrial site in northern England.

“We allowed them to become too risky.”

The banking commission will deliver initial findings on April 11, with a final report due by the end of September.

In an interview with Reuters this month, Lib Dem business minister Vince Cable warned the banking industry that heavy lobbying would not affect the government’s zeal to reform the sector. [ID:nLDE72B07L] (Editing by David Holmes)

LONDON (Reuters) – Britain cut its economic growth forecast on Wednesday and said inflation would remain above target this year and next in a budget that stuck to ambitious deficit-busting goals.

Seeking to support a faltering economy, finance minister George Osborne said corporation tax would be cut by two percentage points to 26 percent from April, rather than by just the one point originally planned.

A levy on banks would be increased to pay for it.

Osborne cut his growth forecasts to 1.7 percent in 2011, and 2.5 percent in 2012, citing figures from the government’s independent fiscal watchdog. In November, growth was estimated to be 2.1 percent this year and 2.6 percent in 2012.

Sterling fell to the day’s low versus the dollar in response to the new economic forecasts.

The Conservative-Liberal Democrat coalition government is attempting to eliminate most of a deficit of 10 percent of national output before the 2015 election, while also nurturing a fragile economy back to health.

Public borrowing would fall less steeply over the next four years than previously hoped but the bulk of the budget deficit would still be eliminated by 2015, Osborne said.

LONDON, March 23 (Reuters) – Britain’s budget on Wednesday is likely to show the government’s ambitious deficit-busting goals are still within reach, but an uncertain recovery and stubborn inflation could yet disrupt its austerity plans.

Finance minister George Osborne is expected to admit growth will be weaker than he had forecast when he launched a plan last June to slash a record budget deficit. And while the government may borrow less than thought this year, the future is less rosy.

The Conservative-Liberal Democrat coalition government is attempting to eliminate most of a deficit of 10 percent of national output before the 2015 election, while also nurturing a fragile economy back to health.

However, success is far from certain on either front.

“The numbers are likely to point to a gradual return towards a fiscal position which is sustainable in the medium-term,” said Philip Shaw, an economist at Investec.

“As George Osborne remarked recently, the government has set the right course, but there is so much more to do.”

The independent Office for Budget Responsibility, set up to provide forecasts for fiscal policy, is likely to cut its 2011 growth estimate to around 1.8 percent from 2.1 percent. Last June, the OBR had forecast 2.3 percent growth this year.

LONDON (Reuters) – The budget next week will exempt more workers from income tax and use bank levy money to help young people train for jobs, ministers said on Saturday.

The budget, billed as pro-growth and pro-reform, will stick broadly to deficit reduction plans set out last year under which a record budget deficit running close to 10 percent of national output will fall sharply by the next election in 2015.

However, the independent Office for Budget Responsibility is likely to downgrade its 2.1 percent 2011 growth forecast, which could affect borrowing slightly in coming years and will encourage critics of the government’s planned spending cuts.

Chief Secretary to the Treasury Danny Alexander, in an article for The Observer newspaper, said the Conservative-Liberal Democrat coalition would “set out further real terms progress towards our goal of taking anyone earning less than 10,000 pounds out of tax altogether”.

The coalition has already raised the personal allowance threshold for income tax, up to which no tax is paid, to 7,475 pounds from 6,475 pounds. The budget on Wednesday is expected to lift it to around 8,000 pounds.

Writing in the News Of The World newspaper, Chancellor George Osborne said it would be a “disaster” if he abandoned his austerity plan, but said the budget would still help to create the conditions for recovery and support those in need.

“I’ll be using some of the money our new government has raised from taxing the banks to create the most apprenticeships this country has ever seen, and a big expansion of work experience places,” Osborne said.

LONDON (Reuters) – Britain’s budget next week will exempt more workers from income tax and use bank levy money to help young people train for jobs, ministers said on Saturday.

The budget, billed as pro-growth and pro-reform, will stick broadly to deficit reduction plans set out last year under which a record budget deficit running close to 10 percent of national output will fall sharply by the next election in 2015. However, the independent Office for Budget Responsibility is likely to downgrade its 2.1 percent 2011 growth forecast, which could affect borrowing slightly in coming years and will encourage critics of the government’s planned spending cuts.

Chief Secretary to the Treasury Danny Alexander, in an article for The Observer newspaper, said the Conservative-Liberal Democrat coalition would “set out further real terms progress towards our goal of taking anyone earning less than 10,000 pounds out of tax altogether.”

The coalition has already raised the personal allowance threshold for income tax, up to which no tax is paid, to 7,475 pounds from 6,475 pounds. The budget on Wednesday is expected to lift it to around 8,000 pounds.

Writing in the News Of The World newspaper, finance minister George Osborne said it would be a “disaster” if he abandoned his austerity plan, but said the budget would still help to create the conditions for recovery and support those in need.

“I’ll be using some of the money our new government has raised from taxing the banks to create the most apprenticeships this country has ever seen, and a big expansion of work experience places,” Osborne said.

The youth package is expected to total 300 million pounds, divided between 50,000 new apprenticeships and 100,000 work experience places. The bank tax will yield 2.5 billion pounds per year.