Miliband Offers Answer To 'Decade Of Decline'

Ed Miliband is to accuse David Cameron of condemning the UK to a "decade of decline" by sticking to austerity plans.

In a speech this afternoon, the Labour leader will insist public anger with the coalition is growing in the wake of a no-change Budget - but he will also concede that his party still has work to do to convince voters there is a real alternative.

Mr Miliband will present a list of policies that he claims would kick-start growth and make the economy fairer, including bank reform, infrastructure investment and a 10p tax rate.

He will contrast the platform he is fleshing out with George Osborne's financial package this week.

"We are five years on from the financial crisis of 2008," he will tell a 'people's policy forum' in Birmingham, which is billed as representing political opinion from across the West Midlands.

"We are in the slowest recovery for 100 years. And it is you who are suffering. Wages are frozen. Prices are rising. Living standards falling.

"Yet the Chancellor offered no change in the Budget. He offered more of the same. Can you imagine another five years of this?

"Low growth. Living standards squeezed further. You paying the price. A lost decade Britain cannot afford. A decade of national decline."

Mr Miliband will accuse the Government of "shrugging their shoulders", saying ministers have "run out of ideas", and he will urge voters to give him a chance to change the way the country is run.

"Over the last two and a half years since I became Labour leader, I have sought to understand why people left Labour," Mr Miliband will say.

"From banking regulation to immigration to Iraq, I have been clear about what we got wrong. But as I listen to people around Britain I also know they are increasingly disappointed with this Government.

"People all over Britain have lost confidence in David Cameron's ability to turn Britain around. But let me clear with you. I know that however discredited, divided and damaging this Government is, I will not assume that their unpopularity will mean people turn to Labour.

"Indeed, many people will believe that the failure of this Government means they should give up on politics altogether."

Mr Miliband will say he cannot offer "overnight answers" or that things will be easy, but he will pledge to seek an economic recovery "made by the many, not just a few at the top".

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Cyprus Leaders Head To Brussels For Talks

Cyprus Bailout: Threat To Savings

Updated: 7:36am UK, Saturday 23 March 2013

By Ashish Joshi, Sky News Correspondent

Finally late into Friday night - an agreement on Plan B, meaning Cyprus has moved one giant step towards securing a Brussels bailout.

It includes a solidarity fund pooling together state assets and the granting of power to the Government to control bank capital.

The latter move is to prevent a run on the banks when their doors finally open on Tuesday.

There will also be a restructuring of the country's banks and a savings tax on Cypriot savers.

The details of the tax have still to be finalised, but the framework is in place.

It could mean savings over 100,000 euros held in Bank of Cyprus accounts being taxed up to 20%, according to one source close to the negotiations.

The same source said if that proposal is rejected there will be a plan to impose a tax of around 10% on all Cypriot bank accounts over 100,000 euros.

The threat of savers being hit hangs over the heads of people like Loizos Michael.

The 60-year-old tailor worked hard for 35 years, building up a good business.

He was looking forward to a wealthy retirement. Not anymore. Times are hard.

Speaking from his small tailor's shop in central Nicosia, Mr Michael said: "With the banks being closed, it is hard because I don't have a credit card and so cash flow is a problem.

"Even filling your car with petrol needs thinking about.

"Cypriots have always been workers by nature and nobody could have imagined that unemployment would be so high.

"This has hit us hard in the pockets."

Cyprus is weathering a storm - the likes of which this Mediterranean island has never faced in her young history.

Mr Michael said he knew things were getting bad, but expected solutions to be found to avoid ordinary people having to suffer.

"I expected something better. But now, it looks like the problem has been brewing for some time," he said.

"There used to be some people talking about the crisis, but now everyone's talking about it.

"I think things are harder now than just after the war. After the war of '74 people could still find work. Now, there is just no work so people have no money. What can we do?"

In the 1990s, Cyprus boasted a dynamic, booming economy, but it grew and unchecked.

An overbloated banking sector exposed to Greek debt has crippled the country's economy.

Now people like Loizos Michael must pay the price. He and the rest of Cyprus will soon find out exactly how much that is going to be.

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Weather: Snow And Rain Continues To Batter UK

Britain is continuing to endure extreme winter storms as snow, rain, high winds and freezing temperatures affect large swathes of the country.

The severe weather, which has already claimed the life of one woman, has been extending south, hitting areas around London and Kent, where there could be 2cm-5cm of snow on higher ground, forecasters said.

The Met Office has issued a yellow warning for the public to be aware as a slow-moving band of rain, sleet and snow makes its way across many central and northern parts, and the south and east.

There may be 5-10cm of snow at lower levels and further significant snow accumulations are likely on hills, with continued drifting and blizzard conditions in strong southeasterly winds. 

A yellow warning has been issued for the pubic to be alert

Tens of thousands of homes in Northern Ireland, Scotland and Cumbria remain without power, while many roads are impassable and runways have been forced to close.

In Northern Ireland, 6ft snow drifts left emergency crews struggling to get through but electricity returned to 5,000 homes overnight.

But about 35,000 customers were still cut off and teams were out again from first light to continue with network repairs, Northern Ireland Electricity said.

Birmingham Airport earlier suspended all arrivals and departures due to heavy snowfall but later resumed flights and added some may be subject to delay or cancellation.

Leeds Bradford Airport said flights were not currently operating due to the adverse weather conditions. There was also disruption at East Midlands Airport.

The AA has warned motorists that even short journeys may be difficult, and there could be a repeat of the scenes in southern England last week when hundreds of drivers were stranded in their cars overnight.

The South West, which was hit by heavy rain and floods on Friday, is expected to have a relatively dry day, with only one flood warning, meaning flooding is expected, in place.

A further 88 flood alerts, where flooding is possible, remain for that region as well as the South East, the Midlands and Anglia.

A woman died when this house in Looe collapsed

Sky weather presenter Isobel Lang said: "Southeast England, East Anglia, the Midlands, north Wales, northern England, Northern Ireland and much of Scotland can expect snow today.

"High ground will be worst affected with some heavy snow at times with drifting in the strong winds and also blizzards.

"Low levels could see 5-10cm, two to four inches, of snowfall today although amounts will probably be lower across London."

She added: "Southwest England, south Wales and southern Ireland looks largely dry and relatively mild with some brighter spells.

"A few showers may nudge into the extreme southwest later. Tonight will stay dry with a frost forming in places."

The bad weather has also hit the sporting calendar, with racing at Doncaster and Newbury called off and some football games in England and Scotland postponed.

The rain was a particular problem on Friday in Cornwall, where a landslide, thought to have been triggered by torrential rain, smashed through a block of flats, partially collapsing the building.

Emergency crews found a woman's body after picking through debris at the Veronica flats in Looe on Friday night.

The body is believed to be that of Susan Norman, who was in her 60s and had been unaccounted for, according to the police.

Meanwhile, Electricity North West said about 1,500 properties in Cumbria remain without power but repair work was being held back by road closures, preventing access to some communities.

The company said it was considering using a helicopter to transport engineers to the areas to which power could not immediately be restored.

A complete blackout was reported for between 15 and 30 minutes across Belfast on Friday evening.

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Gas Stockpile Drain Prompts Price Rise Fears

Britain has drained its gas reserves so much after weeks of bad weather that fears have been raised of a looming spike in energy prices.

Households have been forced to increase their heating usage as the freezing weather continues, pushing the demand for gas to 20% higher than normal in March.

According to The Times Britain's gas stocks were just 10% full on Thursday night, compared to 49% this time last year.

County Durham after the latest batch of snow

Energy prices will soar if Britain is forced to make up the shortfall by importing more liquefied natural gas from elsewhere, an energy expert has warned.

He added Britain would struggle to cope if a technical problem caused an unscheduled North Sea gas field to shut down.

Andrew Horstead, of the energy consultancy Utilyx. told the newspaper: "There is immense pressure on the existing infrastructure.

"We are almost maxed out from imports through pipelines. The big concern is that there is very little flexibility left in the system."

It was so warm last March people flocked to beaches and parks

Britain is more vulnerable than other countries to gas shortages because of its limited storage capacity, which holds just 15 days' worth of energy supplies.

A Department of Environment and Climate Change (DECC) spokesperson told Sky News: "Storage levels are low at the moment - as you'd expect towards the end of winter - and the UK gas market is tight.

"But the market is responding as it is designed to do - gas prices are rising and supply is being maintained accordingly.

"Gas storage would never be the sole source of gas meeting our needs, so it is misleading to talk purely about how many days' supply is in storage.

Scrub fires near Newport in Wales last March

The gas fears come as the head of the energy giant SSE warned of the "very real risk" of the lights going out in Britain.

Ian Marchant said the Government was underestimating the problem, as he announced plans to cut back on power generation at five sites because the stations are either uneconomic or coming to the end of their lives.

He said: "It appears the Government is significantly underestimating the scale of the capacity crunch facing the UK in the next three years and there is a very real risk of the lights going out as a result."

He said the energy watchdog Ofgem had recently expressed real concern about the reduction of the UK's generation capacity margin that would follow expected plant closures in the next few years, predicting a 1-in-12 chance of the lights going out.

Mr Marchant added: "It is unlikely that the majority of the reductions in generation capacity and the delays to new investment we have announced today will have been included in this analysis.

"(This) highlights that the situation is likely to be even more critical than even they have predicted."

The DECC spokesperson added: "We are in close contact with National Grid, who are able to step into the market to source gas and increase incentives on gas suppliers if they think there is a risk of a supply shortfall."

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Bruce Springsteen Shares Stage With Young Boy

Bruce Springsteen invited a young fan on stage to help him sing at a recent concert in Australia.

The 11-year-old sent the crowd wild as he confidently stood his ground next to The Boss and belted out the lyrics to Waiting On A Sunny Day.

The fan even had a red cap tucked in the back of his pants as an ode to his idol.

After impressing Springsteen, he was invited to do a stage slide with the veteran rocker.

The boy went on stage at  Springsteen's second concert in Brisbane, part of his first tour of Australia in 10 years.

Music journalist Sean Sennett said on the official Springsteen website: "One lucky boy ... mimicked Bruce's look from the cover of [Born In The USA] - with a red cap in his back pocket.

"It earned him a spot on the microphone during Waiting On A Sunny Day, which was only bettered by Bruce suggesting the pair embark on a knee slide in the song's final bars."

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Snow And Floods: Major Disruption Across UK

Severe weather warnings have been issued across much of the country with large amounts of snow expected in many parts after a night of rain caused major flooding.

Up to 40cm (16ins) of snow was expected over high ground in the Midlands, north and east Wales and northwest England, with 10-15cm (four to six ins) in lower lying areas.

Up to 30cm (12ins) of snow was predicted for Northern Ireland across the hills of counties Antrim and Down, with high winds leading to blizzard conditions.

The snow was expected to continue into Saturday with the Met Office saying another 5-10cm (4-6ins) was possible in some areas of central Britain.

It prompted the Met Office to issue two amber warnings for snow, meaning that the public in some places should be prepared for "severe disruption, particularly to transport and power supplies".

Police are investigating whether a woman is trapped inside a house in Looe, Cornwall, after part of the property collapsed during heavy rainfall overnight.

Amber alerts have been issued for snow and rain

Devon and Cornwall Police say Susan Norman, who is in her 60s, has not been seen or heard of since 6pm yesterday.

Neighbours said they heard "windows popping" at the three-storey property under the pressure of a torrent of surface water which had been washed down the road behind the building, which is split into three flats.

Devon and Cornwall Police duty inspector Graham Claybourn said: "The property and adjoining properties were evacuated this morning, everybody was accounted for.

"However, one lady has not been accounted for. She lives in the ground flat."

Police this morning used a sniffer dog in the search for Ms Norman.

Up to 50,000 homes and businesses in Northern Ireland are without power because of storm force winds and snow. Around 60 schools have also been closed.

George Best City Airport closed its runway for a while but later announced it had reopened and flights from Belfast International Airport were disrupted.

Leeds Bradford International Airport has suspended all flights due to "adverse weather conditions".

Snow in Derwen (Pic: Geraint Evans)

The airport has told passengers: "We advise you contact your airline or tour operator and check the status of your flight before arriving at the airport."

Heavy overnight snow has caused severe traffic problems and school closures across West Yorkshire.

Among the main roads affected in the region are the A1(M) between the end of the M1 and the A62 junction, between Leeds and York, where snow has closed a lane, the M62 near Brighouse, where another lane has been closed due to the weather and the A66 across the Pennines which has been closed in both directions between the A685 and the A1.

Dozens of schools also closed across Yorkshire, Derbyshire and Nottinghamshire.

Shops and homes were flooded in Cornwall overnight, as the AA warned motorists even short journeys "can quickly turn bad".

In addition, there were 96 flood warnings in place across the country, with southwest England the worst affected.

Seventeen flood warnings, meaning flooding is expected, were in place, affecting Devon and Dorset.

And 79 flood alerts, where flooding is possible, were in place across the South East and Midlands, but the South West is likely to be the hardest hit.

Sgt Dave Opara, based in Plymouth, said: "There has been a considerable amount of rainfall across the force area."

Cornwall opened its dedicated control centre to deal with the volume of calls about flooding.

The worst flooding was reported to be around Newlyn in Cornwall

Newlyn, in the southwest of the county, was reported to be the worst affected area.

Newlyn resident Adam Gibbard said the river through the town had burst its banks and swept into the main street.

"This is the second time it has happened in three months and a lot of these properties are businesses who were just getting back on their feet," he told Sky News.

Sky's weather presenter Nazaneen Ghaffar said: "The snow will turn to sleety rain over north Wales and the north Midlands for a time, reverting to snow again later. Southern Britain and south-east Ireland meanwhile will see more heavy rain, bringing local flooding in the west where another 5cm, (2ins) are possible.

"There'll be more snow tonight, from around the M4 up into central Scotland and across the north of Ireland, while southern counties will have yet more rain. Saturday will see snow over central parts slowly fading, but there'll be a raw wind and it will stay near freezing away from the south-west.

"The average temperature for the month so far, combining day and night, has been around 3C, well below the long term average of 6C. It's highly unlikely to be record breaking (the coldest March on record was in 1962, at 1.9C), but it could well be the coldest for over 25 years."

Environment Agency spokesperson Pete Fox said the public can sign up for flood warnings and check the latest information on the Environment Agency's website, or follow us on Twitter at @EnvAgency.

Darron Burness, head of the AA's Special Operations Response Team, said: "It's going to be a real witch's brew of driving wind, rain and snow, which will inevitably cause disruption on the roads.

"Drivers should be well prepared as even short journeys can quickly turn bad."

The Local Government Association said council gritting and ploughing teams would be out in force to try to ensure main roads remained passable.

:: Send in your photos of the weather here

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Budget: George Osborne Defends Economic Plans

George Osborne has defended his Budget as he pointed to Cyprus and warned Britain's problems "could be a lot worse".

In an interview on Sky News, the Chancellor insisted the public understood he had to take tough decisions to secure the country's future.

"People know that it is a difficult situation out there but it is a situation that could be very much worse for Britain if we didn't take these decisions," he said.

New figures showing public borrowing down to £2.8bn in February - the lowest for the month since 2008 - provided a chink of light for Mr Osborne on Thursday.

But Labour continued to attack his "aspiration nation" Budget, warning it does not do enough to boost growth and questioning its central plan for a major new mortgage scheme.

Shadow chancellor Ed Balls said: "You could have people on very high incomes going into buy-to-let or buying a second home and getting a taxpayers' guarantee up to £600,000. The devil is in the detail there."

Appearing on Sky News, Mr Balls added: "The Chancellor said 'I will secure the recovery, I will keep the AAA credit rating'. It's all gone. It's a long hard road to nowhere with this Chancellor at the moment."

George Osborne on Sky News on Thursday

But Mr Osborne accused the Opposition of having no "serious economic alternative" and resorting to "personal abuse" instead of setting out its own plans.

He said: "It is a tough economic situation and of course if it is a difficult job dealing with that situation but it is a job the whole British people is facing at the moment.

"I think the British public understand there is not a simple or easy answer to our country's problems but just the painstaking work of putting right what went wrong."

MPs are debating the details of the Budget in the House of Commons today.

Central to Mr Osborne's plans are the moves to stimulate the housing market but his measures have sparked fears of a new debt-fuelled boom.

The Government is set to plough billions into boosting home ownership by underwriting the mortgages of hundreds of thousands of people.

Interest-free loans lasting five years and worth up to 20% of the value of new build homes under £600,000 will be available.

And from next January, taxpayers' money will be used as a guarantee for home buyers who can only pull together small deposits.

Mr Osborne claimed on Thursday that the measures would help boost the flat housing market and provide jobs in construction as new homes were built.

He insisted: "It doesn't mean a return to five or six years ago when you had those big 125% Northern Rock mortgages.

"It is just saying to people if you can get together a decent deposit, we are going to help you buy a home. People are being robbed of that at the moment because of the problems in our financial markets."

In his Budget, there were further tax breaks for drinkers, drivers and working parents.

There was a 1p cut in the price of beer as the beer duty escalator was also scrapped, and a planned fuel duty hike was cancelled.

Ed Miliband and Ed Balls condemned the Budget as "more of the same"

Small businesses will be boosted by a new employment allowance which will save employers £2,000 on their National Insurance bills.

And plans to raise the income tax threshold have been brought forward to 2014, meaning earnings up to £10,000 will be tax free.

But those announcements could not disguise the dismal economic figures and forecasts that showed the austerity era will last a decade.

Official growth forecasts for this year have been cut in half to 0.6% because the recovery is so weak, and next year's figure has also been downgraded.

The independent watchdog the Office for Budget Responsibility (OBR) also warned that the decline in borrowing seen in the first years of the coalition "no appears to have stalled".

Public borrowing predictions for every year to 2017/18 have been revised upwards, putting the total £55.7bn higher than it was just three months ago.

The OBR expects Britain to narrowly escape an unprecedented triple-dip recession, predicting a small increase in GDP in the first quarter of this year.

But debt is not set to fall as share of national income until two years after Mr Osborne's original 2014 target.

It is due to peak at 85.6% of GDP - equal to a massive £1.58tn - in 2016/17 - an increase of 6.4% on previous forecasts.

Labour condemned Mr Osborne as a "downgraded Chancellor" who was simply offering "more of the same" and some experts criticised him for not going far enough to boost growth.

Research for consumer group Which? carried out immediately after the Budget found 89% of voters backed the rise in the personal tax allowance and 87% supported the fuel duty move.

But it also suggested that a third of the public now feel less confident about the prospects of the economy this year, and 28% feel less confident about their own finances.

Some 59% said the Government should rethink its economic plan and 44% expect their personal finances to worsen over the coming year.

In another blow to Mr Osborne, hours after his Budget was delivered peers inflicted a major defeat on the Government over its "shares for rights" plan.

Former Civil Service chief Lord O'Donnell linked the plans to slavery and ex-Tory minister Lord Forsyth of Drumlean said they were "ill-thought through, confused and muddled".

:: Shadow chancellor Ed Balls will be among the guests on Jeff Randall Live on Sky News tonight at 7pm.

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North Korea Issues Fresh Threat To America

By Mark Stone, Asia Correspondent

North Korea has threatened to attack American airbases on the Japanese island of Okinawa and the Pacific island of Guam.

A statement by Kim Yong Chul, the spokesman of the Supreme Command of the Korean People's Army warned of "military actions".

"The US should not forget that the Anderson Air Force Base on Guam where B-52 bombers take off and naval bases in Japan and Okinawa where nuclear-powered submarines are launched are within the striking range of the Democratic People's Republic of Korea (DPRK) precision strike means," the statement read.

"Now that the US started open nuclear blackmail and threat, the DPRK, too, will move to take corresponding military actions."

The words mark the latest escalation in a lengthy stand-off as North Korea defies calls from the rest of the world to halt its dual nuclear and ballistic missile programmes.

North Korea has threatened an attack over B-52 drills

The American government has not yet responded to the threat.

British diplomatic sources speaking to Sky News from Seoul have said the UK Government "takes any threats seriously and there is some concern over the more harsh rhetoric coming from the DPRK".

However, the source insisted that there was no panic or alarm among diplomatic circles and that UK travel advice to South Korea remains unchanged.

The latest threat from North Korea is a direct response to a series of joint military exercises involving the US and South Korea.

On Tuesday, the US Air Force deployed its giant B-52 bombers from their base on Guam. The planes, which are capable of carrying and deploying nuclear bombs, flew sorties over the Korean peninsula as part of the military exercise.

The Pentagon in Washington confirmed the B-52 deployment. Spokesman George Little said the US wanted to underline its commitment and capacity to defend South Korea against an attack from the North.

Military guard posts of South Korea (front) and North Korea (far)

However, the flights were condemned by Pyongyang as "an unpardonable provocation".

"The US is introducing a strategic nuclear strike means to the Korean peninsula at a time when its situation is inching close to the brink of war," the North Korean statement added.

The North Korean military does have rockets capable of reaching both Okinawa and Guam.

The surprisingly successful rocket launch in December followed a trajectory similar to that which any strike against Okinawa would take.

The Pentagon has confirmed the B-52 deployment

Okinawa is 600 miles due south of the Korean peninsula. Guam is further away, to the east of the Philippines.

While Pyongyang has proved it has the range capability, it is not clear whether or not their missiles are accurate enough to hit a specific target. And the country does not yet have the ability to carry out a nuclear strike at this range.

Earlier this month, the UN imposed the toughest sanctions yet on North Korea.

Kim Jong-Un reacted with anger, threatening to attack America, South Korea and Japan. The young and unpredictable leader toured military units calling for them to prepare for 'all out war'.

Computers are seen down at the main office of broadcaster YTN in Seoul

Meanwhile, Wednesday's unusually large cyberattack in South Korea, which brought down banks and broadcasters for one hour, has been traced to China.

Experts in Seoul claim the simultaneous attacks all bore the same IP address which was traced to the Chinese mainland.

Many of North Korea's internet and computing operations are tied to China. There is no suggestion that the Chinese government had any involvement.

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Berlin: Helicopters Crash In Police Exercise

Two helicopters have crashed near Berlin's Olympic Stadium during a police exercise to thwart hooliganism, according to German media reports.

It is believed one person has died in the accident.

N-tv television and Bild newspaper said the helicopters crashed in snowy weather on Thursday morning.

According to AP, some 400 federal police officers were conducting a training exercise on dealing with football violence.

Federal Police spokesman Frank Brochert confirmed there "was an incident during an exercise" and that emergency crews were on the scene.

He had no details about the accident or whether there were any injuries or fatalities.

It is believed the collision occurred as the two aircraft approached a pre-arranged landing zone.

More follows...

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David Hockney Aide Death Cause Unknown

A post-mortem has shown "no obvious natural causes" for the death of David Hockney's personal assistant, police have said.

Dominic Elliott died in hospital on Sunday morning after he was taken ill at the world-famous artist's house in Bridlington, East Yorkshire, on Saturday.

A Humberside Police spokesman said: "A post-mortem was carried out on the body of 23-year-old Dominic Elliott yesterday at Hull Royal Infirmary mortuary and it showed no obvious natural causes for his death.

"Further tests will now be carried out, the results of which will not be known for some weeks.

"Mr Elliott's family has been fully updated by Humberside Police."

Mr Hockney's home in Bridlington, East Yorkshire

Officers are continuing to investigate how Mr Elliott became ill before he was taken to Scarborough Hospital by a friend.

Keen sportsman Mr Elliott worked as a personal assistant to the 75-year-old artist, setting up equipment and helping in his studio.

He was the subject of more than one Hockney portrait.

Humberside Police said earlier this week that the circumstances of his death were "not clear" but there was no sign of violence.

Hockney, who is not thought to be the friend who drove Mr Elliott to hospital, is said to be extremely upset by the death.

The Bradford-born painter is sometimes referred to as Britain's greatest living artist and is one of the most influential cultural figures of the last 50 years.

His famous works include A Bigger Splash and the portrait Mr And Mrs Clark And Percy.

As well as his detached house near the seafront in Bridlington, Hockney has homes in London and Los Angeles.

Mr Elliott was a well-known local sportsman and tributes have been paid to him by team-mates at Bridlington Rugby Club and Driffield Hockey Club.

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Budget: George Osborne Leaves Downing Street

By Jon Craig, Chief Political Correspondent

George Osborne has vowed to help people "work hard and get on" as he prepares to deliver the most important Budget of his career.

The Chancellor joined Twitter hours before the financial statement, which comes as he is under intense pressure over the lack of growth.

Posting a picture of himself at work with his red box, he wrote: "Today I'll present a Budget that tackles the economy's problems head on helping those who want to work hard & get on."

A Twitpic shows George Osborne at work

But he was dealt a blow this morning as new figures showed unemployment rose 7,000 between November and January - the first rise in the jobless rate for a year.

Meanwhile, public sector workers have mounted a 24-hour strike to coincide with Budget day as they continue a bitter row over pay, pensions and working conditions.

Mr Osborne's statement at lunchtime will have the twin aims of trying to rescue the British economy and the political fortunes of the Conservative Party.

He will announce a raft of measures he hopes will not only kick-start economic growth but also reverse a Tory slump that began with his Budget a year ago.

Many Tories blame 2012's "omnishambles" statement containing a series of blunders that required embarrassing U-turns for the collapse in the party's support.

Further questions have been raised about the Chancellor since Britain lost its AAA credit rating and slipped into a double dip recession, with the risk of a triple drip still alive.

Labour leader Ed Miliband warned on Wednesday that Britain did not want "more of the same". "What we don't need is him saying I'm going to stick to my failed plan," he said.

But despite lower growth forecasts and a rise in borrowing set to be confirmed in the statement, Mr Osborne is expected to insist there can be no shift from austerity.

He has already promised help for pensioners, working couples and homebuyers but will also need to tackle fuel duty and encourage businesses to invest to avoid another onslaught from critics.

On tax, the Chancellor is tipped to help the low paid by accelerating raising the income tax threshold to £10,000, a move championed by the Tories' Lib Dem Coalition partners.

And after the furore in the Conservative Party over gay marriage, the Chancellor may boost the married couples' allowance to cheer up disgruntled Tory backbenchers.

A cut in corporation tax from 21p to 20p would also delight business leaders.

Mr Osborne is also expected to agree to unlock £4.8bn in child trust funds and allow parents to transfer their investments into more generous Junior ISAs. This move could leave some children up to £34,000 richer.

And he will announce that thousands of elderly people who lost up to half of their life savings when Equitable Life came close to collapse a decade ago will receive compensation.

But in a bleak message to MPs and voters on the state of the economy, there will be no U-turn on spending cuts or unfunded tax cuts and some grim economic forecasts.

Mr Osborne has defied calls from Lib Dem Cabinet colleague Vince Cable and former Tory defence secretary Liam Fox to change course and abandon his so-called "Plan A".

Warning that economic recovery would be a slow process, he said: "There is no easy answer to Britain's problems. There is no miracle cure, because of course if there was a miracle cure it would have been deployed."

Most government departments have in fact been ordered to cut another 2% from their budgets over the next two years so that the money can be spent on capital projects.

Health, schools, overseas aid and HM Revenue and Customs will be shielded from the latest round of savings, which will give a £2.5bn capital boost.

The Budget comes as a new poll confirmed Mr Osborne's unpopularity.

The survey suggested that more than four out of 10 voters (44%) think he should be sacked as Chancellor.

Fewer than one in five (18%) of those questioned said Mr Osborne should keep his job, while 38% did not know.

Favourite to replace him is Mr Cable, favoured by 12%, followed by Foreign Secretary William Hague (5%) and Home Secretary Theresa May (3%).

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Obama Arrives In Israel On Three-Day Tour

American President Barack Obama has arrived on Air Force One for a three-day tour of Israel and the Palestinian Territories.

Making his first overseas tour since the start of his second term in office, Obama is due to continue on to neighbouring Jordan on Friday.

The President is on a mission to ease past tensions with his hosts and to overcome scepticism about his plans to thwart Iran's nuclear threat.

Air Force One landed at Ben Gurion airport near Tel Aviv to kick off the three-day trip during which Obama will meet Israeli leaders and make a short visit to the West Bank, before heading to Jordan to consult with King Abdullah II.

The plane rolled to a stop to the peal of trumpets from a military band and Mr Obama smiled broadly as he embraced Israeli Prime Minister Benjamin Netanyahu and then President Shimon Peres, saying: "How are you, my friend?"

They then stood to attention for the US and Israeli national anthems.

Mr Peres thanked Mr Obama for his "unshakeable" support adding: "A world without your friendship would invite aggression against Israel.

"In times of peace, in times of war, your support for Israel is unshakeable," he said.

Analysts believe Mr Obama's long-awaited visit may be marked more by symbolism than serious diplomatic substance and will expose diminished US ambitions of forging peace between Israelis and Palestinians.

The President says he is carrying no new peace plans and instead plans to listen to the new Israeli government and Palestinians disaffected with his approach, leading some experts to question why he is coming at all.

Mr Obama will come face-to-face with Israel's security challenge at the airport by viewing a mobile battery of Israel's US-funded Iron Dome anti-missile system.

Then he will head to Jerusalem for talks with Mr Peres before sitting down with Mr Netanyahu, with whom he has had an at times difficult relationship.

Mr Obama and Mr Netanyahu will have to smooth over an often difficult personal chemistry following previous spats, but the visit is unlikely to narrow differences over how soon Iran will have a nuclear weapons capability.

Mr Obama told Israeli television that Iran would not be able to build a nuclear weapon for "over a year or so."

Mr Netanyahu warned last year that Iran would have the capacity to produce a bomb much earlier, within months from the current date, and questions whether sanctions will change Tehran's calculations.

Palestinian president Mahmoud Abbas hopes Mr Obama will help broker the release of more than 1,000 Palestinian prisoners from Israeli jails and wants $700m (£470m) in blocked US aid freed up.

Mr Obama is expected to tell the Palestinians that initiatives like seeking statehood recognition at the UN are counterproductive, while warning Israel that settlement building undercuts the chances of resuming peace talks.

More follows...

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Roache: Abuse Victims 'Punished For Past Sins'

The actor who plays Coronation Street's Ken Barlow has seemingly claimed victims of sexual abuse are being punished for their behaviour in "previous lives".

Bill Roache made the comments in a television interview, during which he said famous men can be "caught in this trap" by young female fans who follow their movements.

Speaking to New Zealand's TVNZ, he said of the victims: "If you accept that you are pure love ... and therefore live that pure love, these things won't happen to you."

He was then pressed by reporter Garth Bray, who asked: "To some people that sounds perhaps like you're saying victims bring things on themselves. Is that what you're saying?"

Michael Le Vell arrives at court

The 80-year-old replied: "No, not quite, but then yes I am. Everything that happens to us is the result of what we have been in previous lives."

Roache's co-star of 30 years, Michael Le Vell, has been suspended from the ITV soap after he was charged with 19 child sex offences.

Le Vell, whose real name is Michael Turner, appeared in court last month and was bailed until his next appearance in the dock at Manchester Crown Court.

During his interview with TVNZ, Roache insisted: "Everyone's innocent until they're proven guilty."

He described paedophilia as "absolutely horrendous" but added: "There's a fringe here ... particularly pop stars who have these groupies, these girls, who are sexually active and sexually mature.

"They don't ask for their birth certificate and they don't know what age they may be.

"They're certainly not grooming them and exploiting them but they can be caught in this trap."

He added: "These people are instantly stigmatised. Some will be innocent and some will not, but until such time as (any offence) is proven, there should be anonymity for both.

"If someone has done something wrong, the law should take its course. But whether they're proven guilty or not, we should never be judgemental about anyone.

"We shouldn't go round condemning. We should be forgiving about everything."

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Brit Injured 'Escaping Sex Assault' In India

By Alex Rossi, Sky News Asia Correspondent

A British woman is recovering from injuries to her legs after jumping out of her hotel window to escape an alleged sex attack in Agra in India - the home of the iconic Taj Mahal.

According to police, the incident happened in the Cantonment area of the city in the early hours of Tuesday morning.

Deputy Superintendent Simranjit Kaur told Sky News that the 31-year-old woman escaped out of the second floor window of her room after the owner of the hotel attempted to enter "demanding" a massage at about four o'clock in the morning.

"The woman became scared and leapt from the balcony - we have arrested the owner and may cancel the licence of the hotel depending on our investigations," she said.

The victim was taken to hospital by a rickshaw driver and was treated for muscle damage to her legs.

She has also given a statement to officers and is now "safely" in another hotel under police protection.

The police said she will be flying home to the UK shortly, even though she was planning to visit China after touring India.

The Foreign Office said it was "urgently" investigating the reports.

A spokesman said: "We are aware of the reports and we are urgently looking into it.

"We are in contact with our colleagues in India."

The FCO has changed its advice to female travellers visiting India in the last forty eight hours following the gang rape of a Swiss cycle tourist in Madhya Pradesh on Friday night.

The woman was camping in a forested area with her husband when they were attacked by men brandishing sticks.

The woman was repeatedly raped according to local police.

British female tourists are now being advised to be "extra vigilant" when travelling in India.

That attack came just a few days after the man accused of leading the fatal gang rape of a student on a New Delhi bus was found hanged in his prison cell.

India has seen anger and public protests against rapes and sexual attacks on women since the gang-rape in New Delhi in December.

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Pope Francis Officially Starts His Papacy

Pope Francis has vowed to embrace the world's "weakest and poorest" and called on world leaders to shun "destruction" at his inaugural mass in St Peter's Square.

Francis was interrupted by applause several times during his homily, including when he spoke of the need to serve one another with love and tenderness and not allow " hatred, envy and pride to defile our lives".

The Pope must "open his arms to protect all of God's people and embrace with tender affection the whole of humanity, especially the poorest, the weakest, the least important," Francis, the first Jesuit pope, said.

Francis is the world's first Jesuit pope

"He must be inspired by lowly, concrete and faithful service," said Francis, who as a Jesuit has taken a vow of poverty.

"I would like to ask all those who have positions of responsibility in economic, political and social life ... Let us not allow omens of destruction and death to accompany the advance of this world.

"It means respecting each of God's creatures and respecting the environment in which we live.

"It means protecting people, showing loving concern for each and every person, especially children, the elderly, those in need, who are often the last we think about."

The Fisherman's Ring

The new pontiff officially began his ministry as the 266th pope and leader of the world's 1.2bn Roman Catholics when he earlier received the ring and pallium symbolising his new papal powers at the Vatican.

The pallium is a strip of lambswool that represents the Pope's role as a shepherd and the Fisherman's Ring is named in honour of the first pope St Peter, a fisherman by trade.

The grand ceremony started at 8.30am GMT in a sun-drenched St Peter's Square before about 200,000 people, including royalty, political and religious leaders.

The biggest delegation came from Argentina, led by President Cristina Kirchner, who held a private meeting with Pope Francis on Monday.

Britain was represented by the Duke of Gloucester, Kenneth Clarke MP and Baroness Warsi. The Queen and Prime Minister David Cameron did not attend.

The Pope kissed several babies as he toured the square

Controversial Zimbabwean President Robert Mugabe also made the journey to Rome in defiance of an EU travel ban, which does allow him to attend events within the Vatican state boundary. 

Before the proceedings began, Francis toured a crammed St Peter's Square, kissing babies and blessing a disabled man.

In another sign of the informality that is already a mark of his papacy, Francis abandoned the bullet-proof popemobile frequently used by his more formal predecessor Benedict, to tour the square.

Francis wore a plain white papal cassock and black shoes in contrast to the luxurious red loafers that attracted attention under Benedict.

"Go Francis! We Will Be With You Wherever You Go!" read a sign held up by a group of Brazilian nuns in St Peter's Square.

Sister Rosa, an elderly Italian nun, said she expected the pope would be "another St Francis on Earth for love, goodness, poverty and humility".

Crowds had been pouring into the square and surrounding streets since before dawn.

The crowds had begun gathering from the early morning

The former archbishop of Buenos Aires, Jorge Mario Bergoglio was the surprise choice at a conclave of cardinals to find a successor to 85-year-old Benedict, who last month brought a sudden end to a papacy, saying he was too old to carry on.

After the Mass, Pope Francis met many of the world leaders before having lunch.

Leaders of the Eastern Catholic Rite were also at the ceremony, including Bartholomew I, the Ecumenical Patriarch of Constantinople.

Bartholomew I became the first patriarch from the Istanbul-based church to attend a papal investiture since the two branches of Christianity split nearly 1,000 years ago.

Also attending for the first time was the chief rabbi of Rome.

Francis abandoned the bullet-proof popemobile

Their presence underscores the hopes for ecumenical and interfaith dialogue in this new papacy given Francis' own work for improved relations and his namesake St Francis of Assisi.

In a gesture to Christians in the East, the pope prayed with Eastern rite Catholic patriarchs and archbishops before the tomb of St Peter and the Gospel was chanted in Greek rather than the traditional Latin.

On Wednesday and Thursday, Francis will hold meetings at the Vatican before he holds a face-to-face meeting with Benedict at Castel Gandolfo, just outside Rome, on Saturday.

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Cyprus Bailout: Stock Markets Take Tumble

Cyprus Bailout Will Leave A Lasting Scar

Updated: 10:57am UK, Monday 18 March 2013

By Ed Conway, Economics Editor

Banking is a confidence trick.

The modern financial system – fractional reserve banking as it's technically called – relies on the public putting faith in their banks.

After all, the nature of the system is that at any one time there's never enough cash in bank vaults to give everyone their deposits back - which is why bank runs are so fatal.

That's why in financial crises the cardinal rule is always to attempt to reassure savers that their deposits will be safe. It's why we have things like deposit insurance; it's why all Northern Rock, RBS, etc savers were made good during the crisis in the UK.

Yes, everyone ended up having to pay the eventual price anyway through austerity and higher taxes but people are accustomed to having money confiscated through income and consumption taxes: their savings, on the other hand, are considered inviolable.*

And that is, when push comes to shove, the problem with the way the Cyprus bailout and bank deposit tax has been handled.

If you have money in a bank account - any bank account - in the country, you are being hit with an instant and unavoidable tax. This instantly undermines public faith in banks - not just the rotten ones but every single branch in the country, including branches of perfectly healthy foreign banks.

This is worth reiterating because there are some analysts who, in economic terms at least, can't see that much of a problem with the bank deposit tax.

After all, the country is in need of a bail-out; the money has to come from somewhere; the banking system is full of dirty Russian money, so why not start there?

And in economic terms, this is quite right: plus you avoid all the messy legal complications of defaulting on bondholders. Moreover, technically speaking depositors are just another lender to banks, alongside creditors.

But looking at this through an economic prism misses the point, which comes back to that fragile confidence trick.

There are of course certain circumstances under which a bank's depositor should lose out: basically when that bank collapses. Indeed, that's precisely the kind of system we need in future to prevent bail-outs and too-big-to-fail.

However, in those circumstances 1) other senior creditors should lose out, 2) depositors whose savings are below the deposit insurance scheme limit should be protected and 3) the deposits affected should, logically, be in the bank that's going under.

None of these three criteria were observed in the Cyprus case, where even deposits in Barclays in Nicosia are subject to the tax, in the plan's initial form.

It doesn't take a genius to figure out that such a capricious attitude to principles savers might have reasonably considered inviolable will catastrophically undermine Cypriots' faith in banks - not just Cypriot ones but any within their country.

There is a chance I'm wrong about this - after all, as I've said above, in blunt economic terms it doesn't really matter where Cyprus gets its bailout cash - whether from taxpayers, depositors, fiscal cuts or the Germans - it still needs money to pay the bills.

But the experience of the 1930s showed that when a government intervenes to confiscate deposits, it critically undermines that faith in the banking system.

And, for better or worse, that faith is a key bedrock of the modern capitalist economy.

Would that it weren't the case: but it is. And what's happening in Cyprus begs profound questions about whether there really is a safe place to put one's cash, questions which can now legitimately be asked about all banking systems, not just in Spain, Italy and so on, but also in the UK and the US.

That is why the initial plan being passed around Brussels spared deposits below 100,000 euros. The eventual scheme, involving a tax on all savers, came as a complete surprise to anyone who wasn't in the room when it was being hammered out.

What, after all, is sacred? We used to assume insured deposits were. Now we can no longer be sure.

* I'm talking, of course, about the savings themselves rather than the interest on the savings – there's less of a cultural resistance to taxing that.

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Leveson: Parties Reach Press Regulation Deal

The three main political parties have reached a deal on how to regulate the press after months of talks.

The details are expected to be revealed in the House of Commons later, but it appears a Royal Charter will be used to create an independent regulator which will have more powers to deal with the press if it breaks the rules.

But the main point of contention - whether or not it should be underpinned by law - seems to be a matter of interpretation.

Labour claims the deal is based on their plans for a Royal Charter underpinned by law, so that it cannot be watered down or changed - suggesting the Tories have given most ground.

"What we have agreed is essentially the Royal Charter that Nick Clegg and I published on Friday. It will be underpinned by statute. Why is that important? - because it stops ministers or the press meddling with it, watering it down in the future," Labour leader Ed Miliband said.

"It will be a regulator, a system of complaints where the regulator has teeth, can direct apologies ... and it is independent of the press.

"For too long we have had a system where the press have been marking their own homework.

"There has been a lot of tough negotiation in this process, but I genuinely believe this upholds the freedom of the press ... at the same time as protecting the victims.

"People who revealed MPs' expenses, people who revealed phone hacking have nothing to fear from what has been agreed."

But Culture Secretary Maria Miller insisted there would be no statutory underpinning for the new regulatory system.

She told Sky News: "It isn't really statutory underpinning, but the important part of today is that we do have a clear way forward - three months on of intensive discussions ... a really workable solution.

"The Royal Charter is the right approach. I am really please that all three parties now are supporting the Prime Minister's recommendations, and I do hope that as a result of the discussions in Parliament today we can see this quickly swing into action."

The Conservatives, Labour and the Liberal Democrats are understood to have held talks for more than five hours.

David Cameron - faced with a possible defeat in a House of Commons vote on the issue - was not present but was represented by Oliver Letwin, who has been the key figure for the party in recent negotiations.

Mr Miliband, Deputy Prime Minister Nick Clegg and Ms Harman also attended the talks.

Mr Clegg told Sky News that in his opinion "everybody" was a winner.

"We have secured the cherished principle of the freedom of the press, but also given innocent people reassurance that they won't be unjustifiably bullied or intimidated by powerful interests in the press without having proper recourse when that happens."

Mr Cameron has been clear that he is very uncomfortable with the idea of setting anything down in law because it could be seen as politicians meddling with the press.

However, it is understood a compromise has been reached to include three lines of statute - a clause in the legislation to ensure that any Royal Charter can not be amended in the future without two-thirds majorities in both Houses of Parliament.

There will be no industry veto of who sits on the regulator, and there will be a specific rule to ensure apologies are proportionate.

It has been welcomed by Hacked Off, the group campaigning for victims of phone hacking. London bombing hero Paul Dadge told Sky News: "This isn't to stop stories in the newspapers in the future. This is to ensure that things that happened to me, the Dowler family, the McCanns, don't happen again in the future."

But Neil Wallis, former executive editor of the News Of The World, disagreed. "What these people want to do is to control what the public is told. And if you give the State legislation, what you have not got any longer is a free press." he said.

"You can't put those words in the same sentence - 'state regulation' and 'free press'. It simply stops."

Trevor Kavanagh, former political editor of The Sun, added: "Until we've examined the fine print we will have to hold our fire, but it's a little worrying when the three political parties get together and their final verdict is welcomed so enthusiastically by Hacked Off, which is definitely seeking to shackle and gag the free press."

Mr Cameron, who last week pulled out of talks about implementing Lord Justice Leveson's recommendations, previously warned that legislation would endanger press freedom.

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David Hockney: Artist's Assistant Dead

A man has died in hospital after being taken there from the home of artist David Hockney in Bridlington, say Sky sources.

It is understood that the man was 23-year old Dominic Elliott, a close friend and studio assistant to Hockney.

He was taken to Scarborough General Hospital at 6am on Sunday.

Humberside Police said they were contacted by the hospital shortly after a man arrived in a serious condition.

Curtains drawn at Hockney's house in Bridlington

"The 23-year-old man was sadly pronounced dead at hospital and the police notified," a police spokesman said.

"The circumstances of the man's death are not clear and officers are currently undertaking enquiries to establish events leading to his death.

"There were no signs of violence and a post-mortem examination is due to take place tomorrow which is hoped may provide further information."

Sky's North of England Correspondent Gerard Tubb said Mr Elliott was in Hockney's inner circle and helped the artist set up equipment.

In a statement, Bridlington Rugby Club said: "(The club) would like to send their condolences to the family of Dom Elliott.

"He played for the club at both second team and first team level. He will be sadly missed by all the players and club members."

David Hockney, 75, is one of the most famous British artists of his generation, and was celebrated at the Royal Academy of Arts last year with an exhibition of his large scale landscapes, called A Bigger Picture.

Born in Bradford, he is famous for artworks such as A Bigger Splash, a vivid depiction of a Los Angeles swimming pool, and the portrait Mr And Mrs Clark And Percy.

In recent years he has been exploring the possibilities of using an iPad for his artworks.

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Five 'Confess' To Tourist Gang-Rape In India

Five villagers in India have confessed to the gang-rape of a Swiss tourist, according to police.

The woman was on a cycling holiday with her husband in Madhya Pradesh state when they were attacked.

Investigators said as many as eight men were involved in the assault on Friday night.

"We have detained five men and they have confessed to gang-raping the woman and attacking her husband," local police official M S Dhodee told the AFP news agency.

A sixth man allegedly involved in the crime is also being hunted by police, Mr Dhodee added.

The alleged rapists live in a village near the forested area where the couple had stopped to camp for the night.

They were en route to the popular tourist destination of Agra in northern India.

"They were passing by, noticed the couple putting up their tent and saw an opportunity to attack and rape the woman," Mr Dhodee said.

He added that the five detainees would be arrested shortly, pending formalities.

The woman, who is thought to be around 39, was treated in hospital but released on Saturday and the couple are now in Delhi.

The Swiss embassy said it was in touch with local authorities in Madhya Pradesh and has urged a "swift investigation and for justice to be done".

The attack comes just a few days after the man accused of leading the fatal gang rape of a student on a New Delhi bus was found hanged in his prison cell.

Police say Ram Singh took his own life in the high-security Tihar jail, where he had been on suicide watch in an isolated cell.

The case made headlines around the world and raised the issue of sexual violence against women in India.

The student's internal injuries were so horrific she died two weeks later in a hospital in Singapore despite surgery to try to save her.

Four other men and a juvenile are on trial for that attack.

One woman is raped every 20 minutes in India, according to the National Crime Records Bureau.

But police estimate only four out of 10 rapes are reported, largely due to victims' fear of being shamed by their families and communities.

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Father And Son Die Hiking In The Alps

A British father and his 12-year-old son who went missing while hiking in the Alps have been found dead, French police have confirmed.

Rescue services in Chamonix said they received a phone call from a 48-year-old man at 2pm local time on Saturday who said they were lost on Mont Blanc.

Captain Patrice Ribes told Sky News emergency services tried to trace the mobile phone call and launched a rescue mission.

The pair's bodies were found on Sunday morning and it is believed they may have fallen into a crevasse.

The father and son have not yet been named but the Foreign Office has been informed of their deaths.

More follows ...

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Cyprus Postpones Vote On Savings Raid Bailout

Cyprus's parliament has postponed its decision on whether savers must pay a levy on bank deposits under terms for an international bailout to avert bankruptcy.

The vote which was due to take place later this afternoon has been pushed back to Monday.

The delay came as Chancellor George Osborne announced that any UK Government and military personnel would be compensated - if their personal savings accounts were subject to the levy.

"For people serving in our military, for people serving our Government out in Cyprus - because we have military bases there - we are going to compensate anyone who is affected by this bank tax," he told the BBC's Andrew Marr Show.

"People who are doing their duty for our country in Cyprus will be protected from this Cypriot bank tax."

Chancellor George Osborne on The Andrew Marr Show this morning

Around 3,500 British military personnel are based in Cyprus. However, those among the 59,000 British residents of Cyprus who do not fall into that category could still be out of pocket.

The eurozone demand that savers pay up to 10% of deposits as a condition for the 10bn euro (£8.6bn) bailout has drawn criticism and anger in the eastern Mediterranean island.

Queues of people gathered at its cash machines on Saturday as they tried to withdraw their money ahead of the move.

And the country's cooperative banks had to shut their doors after seeing a rush of savers keen to protect their money.

Savers could apparently withdraw money but were not able to carry out electronic transfers.

The move marks the first time the 17 eurozone countries and the IMF have dipped into people's savings to finance a bailout.

An informal meeting earlier this morning for parties in the 56-member chamber to discuss the bank levy was also postponed by newly-elected Cypriot President Nicos Anastasiades.

He has said refusing the bailout would lead to the collapse of the island's two largest banks, badly burnt by their exposure to bailed out neighbour Greece.

The tax on deposits in Cyprus, which accounts for only 0.2% of the eurozone's economy, is expected to raise up to 6bn euros (£5bn) as a condition for the bailout, mainly needed to recapitalise banks.

Nicos Anastasiades with Angela Merkel in Brussels

Those affected will include rich Russians with deposits in Cyprus and Europeans who have retired to the island as well as Cypriots themselves.

The size of foreign deposits in Cyprus - estimated at 37% of the total - was one reason the eurozone agreed to the tax on savings, to take effect when banks reopen on Tuesday.

The tax will apply to all deposits held in banks within Cyprus, including an estimated 2bn euros (£1.75bn) of British money, according to the European Central Bank.

It will not affect deposits held in the UK branches of Cypriot banks, such as Bank of Cyprus, whose UK subsidiary is regulated by the Financial Services Authority.

However, Laiki Bank UK said on its website: "Your eligible deposits with Laiki Bank UK are protected up to a total of 100,000 euro (£87.000) by the Cyprus Deposit Protection Scheme and are not protected by the UK Financial Services Compensation Scheme.

"Any deposits you hold above the 100,000 euro limit are not covered."

The country has a large British expatriot community, among them David Symonds who lives in Limassol.

He told Sky News: "Everybody was surprised. We were assured only a few days ago that the haircut on the deposits was a red line for the government.

"When we learned that it might become a possibility we were told it would only be on deposits above 100,000 euros. Now of course we know it affects everybody."

Cyprus was badly hit by the Greek financial crisis because of its close links to the country.

Its two largest banks saw combined losses of 4.5bn euros (£3.8bn) - equal to a quarter of the island's gross domestic product.

The rescue package was agreed after 10 hours of talks in Brussels and was significantly less than the 17bn euros (£14.7bn) asked for.

As part of the deal, the government will also have to hike corporate tax to 12.5% from 10% and sell off state assets to help balance the public finances.

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