Douglas Alexander visited Glasgow this weekend in an attempt to drum-up support for Labour in a clear sign that the government are concerned about a critical by-election in the city this month.

Mr Alexander – brother of Wendy, who just last month stepped down as Labour’s leader in Scotland – is among 39 Scottish MPs who have been urged by the prime minister to travel north to help the campaign.

The moves come amid fears that the Scottish National party will claim Glasgow East in the July 24th by-election – prompted when David Marshall, who had a majority of about 13,500, was forced to step down due to health reasons.

However, the prospect of defeat at the hands of the SNP appeared to strengthen on Sunday night after a weekend of chaos surrounding the selection of a Labour standard bearer.

Favourite candidate George Ryan, a local councillor, withdrew citing the “pressures” on his family if he became an MP.

Labour will be hoping to restore some momentum by selecting Margaret Curran, at present a member of the Scottish Parliament for Glasgow, as its candidate.

Ms Curran said that she hoped for a “spirited” campaign. “I am putting my name forward because I’m deeply committed to the communities of the east end of Glasgow,” she said.

Internal polling by Labour shows that the party’s majority in the seat has fallen to as little as 5,500, according to a Scotland on Sunday report. Labour is concerned about a catastrophic defeat in the city – once an impregnable party stronghold – since the loss of Crewe and Nantwich, and the waning poll ratings.

No candidate for Glasgow East and any leader in Scotland Alex Salmond, first minister and SNP leader suggested that Labour was in “complete meltdown”.

According to Trade Union Congress research published on Wednesday by YouGov, the general public believe large companies and wealthy individuals dodge taxes too easily, which has sparked an angry response from business leaders.

In the poll, three out of four people agreed it was too easy for very rich people to get out of paying a fair level of tax, while seven out of 10 said companies get off too lightly. Only 7 percent of people said the tax system struck the right balance between rich and poor.

“Creating a fairer tax system does not mean a higher tax bill for ordinary workers,” said Brendan Barber, TUC general secretary. “Instead, clamping down on tax avoidance and closing the loopholes enjoyed by the super-rich will put extra revenue into ordinary peoples’ pockets or pay for our hard-pressed public services.”

The CBI, the employers’ organisation, responded by saying that UK businesses paid almost £150bn in taxes last year, with an additional £4bnof taxes introduced in the Budget. John Cridland, deputy director-general said, “let’s dispel the notion once and for all that business is ‘getting out of’ paying its way on tax.”

“What’s more, with businesses becoming increasingly mobile, there’s a real risk that firms will simply vote with their feet if they see the UK becoming any less competitive – costing more jobs and hurting the economy at a time when it doesn’t need it.

“As a nation, we can choose whether or not we welcome high earners who generate wealth, make investments and create jobs. In a global economy, they too can vote with their feet.”

Often hotly debated amongst economists, is the question of how far the burden of corporation tax is ultimately passed on to investors.

The CBI cited research by Michael Devereux of the Oxford University Centre for Business Taxation which suggested that 92 percent of any increase in corporation tax is passed on to workers with a lower income, and hits the economy through less investment and reduced productivity.

Following a review by its general staff, the British army is considering reductions in the number of heavy artillery pieces and battle tanks, in favour of boosting soldier numbers.

The review looks forward 10 years, and is designed to shape army priorities as the Ministry of Defence examines its equipment procurement programme in the face of a defence funding crisis – one of the worst for decades. The results of the review will also lead to big changes in organisation that could see an end to specialised units such as tank brigades and the development of identical brigades across the army.

General Sir Richard Dannatt, the army chief signalled the changes this month in a speech, and Major General Simon Mayall, assistant chief of the general staff, elaborated on his comments in an interview with the Financial Times.

The proposals are part of the army’s efforts to adjust to the conflicts in Iraq and Afghanistan - the likes of which are expected to form a greater part of its role than in the past. This does mean however, that because of budget pressures, the army will have to take risks with its other main task of being able to launch combat operations involving 30,000 troops o more.

Gen Mayall said this approach would “probably mean an army with fewer Challenger tanks and less self-propelled heavy artillery such as the AS90 mobile 150mm gun. It might also cut the number of Warrior tracked armoured vehicles.”

Gen Dannatt said that the “budget constraints meant equipment purchases had to be orientated to today’s tasks: We must get away from blue-skies thinking and from programmes that take a generation to produce.”

According to new MOD figures, since 2001, all three services have made 1,500 urgent operational requests, costing a total of £3.5bn. Although these have been paid for by the Treasury, they have increased budget pressures on the forces because new equipment has to be maintained.

Gen Dannatt said last year that the army would be “operating sub-optimally until the deployment of the Future Rapid Effects System (FRES)” - a medium-weight armoured vehicle which is aimed at replacing a large range of fighting vehicles across the army.

“FRES is still the army’s biggest procurement objective, offering,” Gen Mayall said, “a once in a lifetime chance to create a common frame for land vehicles.” These new vehicles would sharply reduce the numbers of spare parts and soldiers needed to support vehicles on operations.

Other priorities included a helicopter and a replacement for the Land Rover that would give occupants better protection from roadside bombs, he said. The MoD placed an order in 2006 for 70 Future Lynx helicopters with AgustaWestland, a Finmeccanica subsidiary. Of these, 40 would be for use as a battlefield reconnaissance aircraft, but media reports are to be believed the order could be cancelled. The army is also seeking more unmanned aerial vehicles.

The shift could see, tank crews trained to use medium-weight vehicles, heavy-artillery operators trained to use tactical UAVs and light guns, and air defence groups trained to use small UAVs, for example.

Gen Dannatt suggested that “efforts to keep troop numbers down on operations in the past five years had prolonged engagements and had proved a false economy. He said the army could not get any smaller,” adding that “I would certainly argue that we need to be bigger”.

Gen Mayall said one reason army size was an issue was attrition rates on operations: more than 280 UK soldiers have been killed In Iraq and Afghanistan, and many more wounded.

“Current operations are showing us that the demand for boots on the ground on an enduring basis is only likely to grow,” he said. But he added that “we are not talking about large numbers” of extra troops.

The web of Whitehall bodies created to close the UK’s skills gap with competitors is of “mind blowing” complexity, changes to frequently, and is becoming too difficulty to understand, senior executives charged with delivering the policy told MPs on Wednesday.

Chris Humphries, chief executive of the Commission for Employment and Skills suggested the latest shake-up had made the system impenetrable. “I don’t think there’s an employer in the land who understands what the new systems are,” he said

The maze of government skills bodies has changed with alarming frequency, with critics claiming organisations do not have enough time to establish credibility and competence.

The most recent change was announced in March, and includes the 2010 dismantling of the Learning and Skills Council, the £11bn ($22bn) quango responsible for vocational learning in England. Its functions are to be assumed by local authorities and three new national groups.

Tom Bewick, chief executive of Creative and Cultural Skills – one of 25 “sector skills councils” – commented on the constant appearance and disappearance of organisations and the consequent merry-go-round of job changes. He said, “The talk around town is: what job have you got, where are you going to be?”

Teresa Sayers, chief executive of the Financial Services Skills Council said international employers were “not just confused but extremely frustrated. Understanding the UK context is absolutely mind-blowing for them.”

Speaking before the Commons committee on innovation, universities, science and skills Mr Humpries told MPs that “we’re going backwards, not forwards” in the international skills league table compared with other rich countries.

Mr Bewick suggested other countries were better at concentrating on getting the right results out of their skills systems, because their attention was not diverted on tinkering with the apparatus of government. “When you look abroad, you see far more cross-party consensus that it isn’t the institutions that need to change, it’s the outcomes,” he said.

When quizzed about how many skills bodies there were in Britain, Mr Humphries said: “Honestly, I haven’t got the foggiest idea,” but estimated there were “many hundreds”.

The Department for Innovation, Universities and Skills said the latest shake-up created a “streamlined” system of more specialised agencies.

Expected for a while now, Barclays launched its cash call to raise £4.5bn and bring in new investors.  The issue is in two tranches, priced at 296p and 282p, with existing shareholders able to participate at the lower price in an effort to assuage concerns from investors over pre-emptive rights.

The move is designed to lift Barclay’s core equity Tier One capital ratio from about 5 percent, one of the lowest among European banks, to 6.3 percent, well above its 5.25 percent target.

The new investors are the Qatar Investment Authority, Challenger – a family company for Qatari prime minister Sheikh Hamad Bin Jassim Bin Jabr Al-Thani - and Japan’s Sumitomo Mitsui Banking Corporation.

Existing shareholders will also be buying extra shares, including China Development Bank and Temasek, the Singapore investment group – both bought shares in the bank last summer. These investors can buy on the basis of three shares for every 14 held, and at 282p the shares come at a discount of 9.3 percent to Tuesday’s closing price of 310¾p.

Representing 2.6 per cent of Barclays’ share capital, SMBC will take the whole firm placing of 169m shares at the higher 296p price, raising £500m for the bank.

The remaining £4bn will come from a placing and open offer of 1.407bn shares at 282p, which will be available to existing shareholders to purchase. Of this, QIA and Challenger have agreed to invest £1.764bn and £533m, respectively, as conditional placees.

China Development Bank has agreed to put up £136m, representing its full entitlement in the open offer to existing shareholders. Also as a conditional placee, Temasek is investing up to £200m, and could increase its stake as a result of the issue.

In a trading update last week, Barclays said its intention was to maintain its dividend at the 2007 level, and pay it in cash, until dividends are covered twice by earnings. The ll.5p interim paid last year is expected to be maintained.

Barclay’s shares opened 5.3 percent higher at 327p, with rival banks Lloyds TSB, HBOS and Royal Bank of Scotland also rising on the back of the news.

In a statement John Varley, Barclays’ chief executive, said: “Through our capital raising today we strengthen our capital base and give ourselves additional resources to pursue our strategy of growth through earnings diversification. We position ourselves to capture opportunities for new business at attractive margins in our retail and commercial banking businesses and in investment banking and investment management. Our ability to capture the opportunities is reinforced by the new and strengthened relationships we have announced today.”

Mr Varley said that as well as strengthening capital ratios, the fresh capital would enable the bank to take advantage of opportunities thrown up because “the ability of some participants [in the banking market] to compete has changed” as a result of the credit squeeze.

He said that Barclays had signed an agreement with SMBC and aimed to develop wealth management an private banking business together. There had already been “benefits from a similar agreement with China Development Bank, signed when it took its stake last year”, he added.

Mr Varley said the issue, which will increase the group’s share capital by 24 percent, was structured as a placing and open offer rather than a rights issue because it gave speed and certainty, allowed existing shareholders to participate, and ensured that shares not taken up by them would end in the hands of “anchor investors of very high quality”.

Shareholders who wish to subscribe must do so by July 17 and the new shares are due to start trading on July 22.

Head of Barclays’ investment banking and investment management business Bob Diamond, said that the market turmoil had presented “terrific opportunities” to increase market share and margins.

”In the US six or seven big players are pulling back, creating an opportunity for us. For instance, Barclays was now one of the top three foreign exchange traders in the world, overtaking Citibank,” he said

Mr Varley added that Barclays had opened 600 branches outside the UK so far this year, and aimed to open a further 300 this year. The bank opened a new business in Pakistan, acquired Expo Bank in Russia and bought the Goldfish credit card in the UK.

The bank had also achieved a “substantial increase” in its share of the UK mortgage market, but without accepting higher risks.

Sir Fred Goodwin, Royal Bank of Scotland kingpin warned today that the turmoil in the credit markets is likely to continue for at least another year, and said the Bank’s “risk appetite is tempered”.

Discussing an “adjustment” in financial markets, Sir Fred said: “It is difficult to see it would take less than 12 months to work its way through.”

He added that “there’s clearly more bad news than good news, there’s almost exclusively bad news, but I don’t think we’re looking at the end of the world.” He saw “chinks of light” in some areas of capital markets and repeatedly reiterated that the bank “remains very much open for business”.

Sir Fred’s comments came as RBS, which raised £12bn from the biggest ever rights issue earlier this week, reassured investors in a trading update that its performance and writedowns on risky assets remain in line with previous guidance. RBS said in April that it expects a hit of £5.9bn before tax from its credit market exposures this year.

Banking shares rose on the news and were the top performers on the FTSE 100 in early trading as traders were relieved that there had not been a further deterioration in the RBS loan book. The bank’s shares climbed 4.75p to 238.5p but were down later, by 3p to 230.25p. HBOS was up 4.5p to 296.5p and Lloyds TSB rose 3.75p to 355.25p.

“The coming months I look to with caution but with a degree of optimism. It’s ’steady as she goes’ at this point. The business continues to perform satisfactorily on an underlying basis. There is business to be done and we’re doing it,” Sir Fred said, while acknowledging that the credit crunch is holding back the performance of many of RBS’s businesses.

ABN Amro, the Dutch bank acquired by RBS last year, is performing better than expected in terms of revenues and costs, it said.

Sir Fred said the bank is confident of selling its insurance arm for the price it had in mind at the start of the auction despite continued market turbulence. The operations, which include Direct Line and Churchill, were put up for sale in April with an expected price tag of up to £7bn.

“There are a number of people who would all ostensibly be good owners and capable of paying the price that we’re looking for,” he said. “We had a price in our minds that we were looking for at the start of the process and that hasn’t changed. We’re determined not to sell this for an undervalue, but at this point that doesn’t look like an option that’s going to come to pass.”

Sir Fred refused to give a forecast for UK house prices falls in the coming months but said it would “not be nearly as bad as in the US”.

Commenting on the £12bn rights issue, Sir Fred said “It was a good opportunity to be interacting with our shareholders but it won’t go down as an enjoyable experience,” referring to the “gyrations” which he said weren’t surprising given the size of the cash call and the “very exceptional market circumstances”.

In an effort to ensure there is no repeat of the Northern Rock fiasco, the Bank of England will have to draft in a panel of eminent City figures to ensure it is more alert to looming financial trouble, revealed chancellor Alistair Darling on yesterday.

Mt Darling has instructed City insiders to sit on the shoulder of the Bank’s governor Mervyn King, as part of an overhaul designed to put financial stability “right at the front” of its operations.

It is expected that, while Mr King may not welcome such oversight, there were signs that it could be a quid pro quo for him winning a related tussle with the treasury over the choice of a new deputy governor for monetary policy to replace Rachel Lomax.

Mr King has argued strongly that she should be replaced by Charles Bean, the Banks chief economist, on the grounds he needs a deputy with a strong monetary policy background to lead the fight against inflation. Mindful of the Banks weakness on financial stability issues, some Treasury officials have been promoting the claim of Paul Tucker, the head of markets.

Although Mr Darling has made it a priority to boost the Banks financial stability expertise, Treasury officials said the now expect the chancellor to back Mr Bean for the job. For this to be acceptable, the chancellor will demand that the bank accepts more external advice on city issues and formal oversight of its decisions on financial stability.

This reflects a considerable departure from the Treasury’s initially limited plans for reform of the Banks role in financial stability, set out in January.

Mr Darling told the Commons on Thursday “we should learn from the example of the monetary policy committee”, where outside experts were drawn in to help in making interest rate decisions.

He said there should be “a similar approach in relation to financial stability so that we can bring in outside expertise to advise the governor and of course the appropriate deputy governor”.

This reflects the Treasury view that the Bank is underpowered in the financial stability area; however Mr Darling’s team denies this because, after Gordon Browns shake up in 1997, much of the expertise in that area was transferred to the FSA.

The full details of the new system have not yet been finalised, though Treasury and Bank officials said the new financial stability advisers would not acquire the decision-making powers of the MPC.

“It would not be a hard operational role, it might involve scrutinising decisions but potentially it’s more than that,” said one Darling ally.

At this point it is unclear how the Treasury intend to find panel members who were both credible yet had no conflicts of interest.

Mr Darling’s aides say giving the Banks enhanced City expertise would not mean he is ditching his plan to give the FSA controversial new powers to intervene in failing banks, which is the centrepiece of new banking legislation.

The bank is concerned however, that it will have responsibility to foster financial stability but few powers. Mr King has proposed having the power to intervene progressively in the supervision of banks as their financial positions weaken.

On Wednesday, the Organisation for Economic Cooperation and Development said that a fall in of around 10 per cent by the end of 2009 will slow Britain’s growth rate significantly and make the economy more vulnerable than most to the global credit crisis.

The organisation expects the economy to grow by 1.8 percent in 2008 and 1.4 percent in 2009, a projection that falls in line with the Bank of England’s latest central forecasts, but far more pessimistic than the Treasury.

The OECD continues to support the Bank’s generalised strategy of allowing the economy to suffer a protracted slowdown to squeeze inflation out of the system and advised the bank to keep interest rates on hold for the remainder of 2008.

However, it disagrees strongly the Bank of England on the effect of house prices on the economic outlook. The OECD believes that the UK is one economy apart from the US where a large fall in house prices would severely curtail economic growth.

OECD’s acting chief economist, Jørgen Elmeskov, said that the OECD had looked very closely at the underlying forces influencing consumptions and always found house prices and mortgage equity withdrawal to be significant.

“This could just be a coincident, but at the end of the day there have been too many such coincidences,” Mr Elmeskov said.

The OECD expects the economy to recover more slowly than the bank in 2009, and believe this creates the need for three interest rate cuts next year once it is clear that inflation is falling and that economic activity has slowed appreciably.

The OECD said the projected weakness in the economy also put the government’s fiscal rules in jeopardy. It forecasts in the twice-yearly Economic Outlook suggest that the government’s sustainable investment rule could be breached in 2009.

The organisation puts the blame for the weakness in the budget firmly at the government’s door. . “While ongoing economic weakness in 2009 would argue against fiscal restraint, the government’s options have been limited by excessively loose fiscal policy in past years when economic growth was strong,” it said.

Royal Bank of Scotland and Barclays London offices have been raided by the Office of Fair Trading, seizing documents and phone records, in the latest example of the competition watchdog’s hard-line approach to possible price-fixing.

The documents were taken as part of an investigation in to alleged anti-competitive behaviour over the pricing of loans to professional services firms, people involved in the probe said.

The probe was said to have been triggered by Barclays and comes amid high-profile investigations into price-fixing allegations involving supermarkets, consumer goods companies and tobacco groups. The OFT has confirmed they are in the early stages of the investigation and have a “narrow focus” into allegations of anti-competitive conduct in the financial sector.

RBS confirmed that its office at 280 Bishopgate had been raided and that it was fully co-operating with the authorities. Neither bank would comment, however, on the scale or scope of the material seized by the watchdog.

Barclays claim that members of its professional services team had been approached from outside the bank “in a manner which we regard as inappropriate”. The bank reported the incident on March 17, applying for leniency under rules that allow whistle-blowing companies to escape fines potentially amounting to as much of a tenth of global sales.

Barclays said: “The [OFT] investigation is operating within the confines of the professional services banking area and we believe that, if there is any issue, it starts and stops there.”

The OFT, in the past, used a more aggressive approach to tackling price-fixing, imposing heavier fines and using tough legal powers that allow it to target executives with the threat of up to five years in jail.

Only last year British Airways were fined a record £121.5m by the OFT for fixing the prices of passenger fuel surcharges. BA’s co-conspirator, Virgin Atlantic, applied for leniency and escaped a fine.

Banks are under increasing pressure from competition authorities in areas such as overdraft fees. The competition Commission is expected to publish a report later this week that will accuse leading banks of profiteering in the provision of loan insurance.

According to the latest Nationwide house price index, UK house prices fell 2.5 percent in May, which is the largest single monthly decline is the index’s history.

Due to the price drop, of the Bank of England’s monetary policy committee even more complex as it struggles to set an interest rate policy which is consistent both with surging inflation and a deep slowdown in economic activity.

The seventh consecutive price drop in the past 12 months makes this decline the longest single period of housing declines since 1992.

House prices, year on year, are now 4.4 percent their levels of May 2007. This is a the biggest fall since December 1992, when UK house prices were falling at a much steeper annual rate of 6.3 percent, in the midst of a severe housing downturn.

“The pace of house price falls accelerated in May as more weak economic news added to the gathering momentum of negative sentiment about the housing market,” said Fionnuala Earley, chief economist at Nationwide.

Ms Earley said that the average price for a house is £8,000 less than this time last year at around £173,583. However, house prices are still 5 percent higher than two years ago and 10 percent higher than three years ago.

Michael Saunders, an economist at Citi, noted that the drop in the price index was consistent with other data, such as that of surveyors’ and housebuilders’ groups which also show a sharp slowing in housing demand.

”Housing demand is likely to suffer a further blow in coming weeks as fixed rate mortgages rise in response to the recent surge in interest rates,” Mr Saunders said in a note.

With data showing inflation is rising faster than expected, traders have scaled back their expectations that the MPC will cut interest rates further.

Mr Saunders pointed out that a key interest rate used to set prices for two-year fixed rate mortgages had risen by nearly half a percentage point since mid-April, and large lenders are already announcing increased rates on their home mortgages.

He noted that historically, house prices and consumer spending have been highly correlated and show a closer link in the UK than in many other countries.

The drop in house prices was not entirely unexpected as Nationwide noted. The Bank of England, in March, reported an 11 percent drop in approvals for new home purchases to 64,000, which is the lowest level of demand since the records began in 1993.