CAMERON: 2012 A DIFFICULT YEAR

David Cameron warned today of another "testing year" ahead for British households.

The Prime Minister said he hoped inflation would fall this year to ease the pressure and insisted there were positive signs on private sector employment and exports.

But he said he would not "pull the wool over people's eyes" about the difficulties that remained.

"Looking into 2012, one of the trends I hope to see happen is a fall in the level of inflation, so households feel under less pressure than they did in 2011," he told BBC Radio 4's Today programme.

"But undoubtedly - I don't want to pull the wool over people's eyes - it's a difficult year, it's a testing year, but I think we need to meet these challenges with the sense that we can overcome them."

Mr Cameron acknowledged that the Government's attempts to rebalance the economy away from its reliance on public sector spending and financial services was not going as quickly as he had hoped.

"What we need to have in Britain is a rebalancing of the economy, away from Government spending, excessive borrowing, financial services and consumption and towards business investment, export, manufacturing, making things again, right across the country," he said.

"There is a rebalancing taking place, but it's not going as fast as we'd like it to, we need to do better on that front."

He said private sector employment was growing, exports were improving and there was "some reindustrialisation going on".

"There are some positive signs but my general point is that we want the rebalancing to go further and faster and that's what the Government should help focus on," Mr Cameron said.

PM "not satisfied" with bankers' bonuses

Mr Cameron said he was "not satisfied" with the level of bankers' bonuses, saying they were "completely out of whack".

He indicated that further measures to curb bonuses in the City would be unveiled within days.

"People aren't satisfied, I'm not satisfied. We've seen a level of reward at the top that has just not been commensurate with success."

He said the Government would be introducing greater transparency about remuneration and increasing shareholders' power to restrict pay.

"I think those things can make a difference and I will have more to say about that later this week," he said.

"I think the whole bonus culture has got completely out of whack."

But he said there had already been "a massive reduction" in bonus levels compared with three or four years ago.

PA 2012