Didn't get an invite to this year's Oscars? Neither did Xan Brooks, but you can watch the 84th Academy Awards along with him here. The action began at 11.15pm GMT with the red carpet; we move indoors at 1.30am

4.36am: Reeling, staggering, all reason gone, the Academy Awards have now reached the finish line; the treasure in the jungle. There is barely time for Tom Cruise to run us through the nine films nominated for the crowning best picture Oscar but here they are all the same. Will the voters go for the bittersweet drama of The Descendants or the southern-fried homilies of The Help? Might they opt for the sunny digressions of Midnight in Paris, the smart-talking antics of Moneyball, or the transcendental splendour of The Tree of Life? Maybe they'll go for the gallumphing War Horse, the oily Extremely Loud and Incredibly Close or the pristine Hugo? Or might they even go right out on a limb, tear up the form guide and bestow this year's best film Oscar on that obscure silent French movie about the man and his dog?

By this stage of the night, I think the question is rhetorical.

And the Oscar goes to ... The Artist!

4.33am: And the Oscar goes to ... Meryl Streep for her performance as Thatcher in The Iron Lady. It is her third Oscar win from an astounding 17 nominations.

Streep's speech begins on a disarmingly self-deprecating note. "When they called my name I imagined half of America going 'Aw, no! Her! Again!". But after that, the emotion of the moment gets to her and she croaks and wells and "sees my life before my eyes. My old friends and my new friends. Her friends, she says, are what she clings to, more than the films themselves or the prizes they bring. "So thank-you to my friends. The ones that are departed and the ones that are here. Thank-you."

4.28am: Colin Firth has never been one to stand on ceremony, nor to milk a moment beyond its reasonable capacity. He hastens to the stage like a man who has a dirty job to perform and must get on with it quickly, before it starts to make him ill. He is here to eulogise this year's candidates for the best actress award.

Make way for the nominees. The frontrunners are Meryl Streep for her pitch-perfect mimicry of The Iron Lady and Viola Davis, who played the stoic, wary housemaid in The Help. As for the long-shots, Michelle Williams made a vibrant Monroe in My Week With Marilyn, Glenn Close rustled up a small tour-de-force in Albert Nobbs and Roonie Mara ran Daniel Craig ragged in The Girl With the Dragon Tattoo. Say hello and wave goodbye. Four of these performers are but seconds from the exit door.

4.22am: And the Oscar goes to ... Jean Dujardin for The Artist. He bounds to the stage as though he has springs in his shoes. He is shaking his fist and grinning ear-to-ear. "I love your country," he declares and then goes on to thank Hazanavicius, Berenice Bejo, and his wife in the audience. Dujardin, remember, has won this title for a performance that included just two spoken words - "thank" and "you" - so it is fitting that he uses them again tonight, and several times over.

"If George Valentin could speak, he would say: Merci! Formidable!" shouts Dujardin.

4.17am: We roar clean out of Hades and, hey-presto, with one fell swoop we're back in the light; the land of the living; a little shaken but still intact. The first face we see is that of Natalie Portman and it seems that she has some immediate business to attend to. It is time to name this year's best actor.

Just time for one last look at the candidates. George Clooney flip-flops around Hawaii in The Descendants, while Gary Oldman hides out in smoke-filled rooms in Tinker Tailor Soldier Spy. Demian Bichir tends to the gardens of LA in A Better Life, and Brad Pitt harries a baseball team towards glory on Moneyball. And then there is Jean Dujardin as the grinning superstar laid low in The Artist; killed off by the coming of sound and chasing his shadow along the living-room wall. This one, I think, comes down to a straight fight between Dujardin and Clooney.

4.09am: Billy Crystal steps out to centre-stage and arranges his features into a serious face. He is here to invite us to dim the lights and bow our heads and wave farewell to the film legends who took their leave over the past 12-months. This is our cue for the traditional Oscar obituary montage, a sad, soulful trip along the stills of Ben Gazzara, Elizabeth Taylor, Bert Schneider and the like. It takes a moment to realise that Crystal is not joking here. He is not about to go bounding into the clips as is usually his wont, merrily goosing Jane Russell, singing with Whitney or playing criss-cross with Farley Granger. He has come to pay his respects and is merely here to send them off.

3.59am: Looming out of the Oscar jungle, we catch sight of one of the big beasts of tonight's event. It is the Oscar for best director and it is guarded by the lupine form of Michael Douglas. He has the podium, he has the envelope and damned if he's going to tell us the winner until he's good and ready. Mr Douglas will not be rushed.

So here are the names in the frame, the ones they've been yacking about. Alexander Payne cooked up a tart family drama with The Descendants, while Martin Scorsese made a monument to the movies on Hugo. Woody Allen tripped back to the past on Midnight in Paris, and Terrence Malick told us about life, death, God and the dinosaurs on the rapturous The Tree of Life. But the firm favourite remains Michel Hazanavicius, the French director who dreamed big on The Artist and then saw his labour-of-love picture bloom from niche novelty to Weinstein-backed world-beater.

And the winner is .... Michel Hazanavicius for The Artist. "I am the happiest director in the world right now," he says, before going on to thank everyone he can think of. "I want to thank Uggie the dog," he says at last, and then gives a very Gallic shrug. "Uggie doesn't care. He doesn't understand maybe. He's not that good."

He's not that good? Is this a rare instance of a director slamming one of his principal cast members, live on air, before an audience of millions. Was there, perhaps, some bad blood between them on the set of The Artist. Did Hazanavicius perhaps step in one of Uggie's leavings? Does Uggie bite? All will be resolved at the press conference that follows the telecast. So far Uggie isn't saying.

3.47am: The Oscar ceremony toils still further up-river. We chug and chunter past the wilds of the best live-action short (which is won by The Shore, from Ireland), veer off to take in the documentary short (which goes to Saving Face, a heartfelt salute to the surgeons working in Pakistan) and dock briefly to see the animated short (The Fantastic Flying Books of Mr Morris Lessmore).

Meanwhile the redoubtable Hadley Freeman mails with some thoughts on the ceremony, where she is running native with the stars; the closest thing this misbegotten publication has to a genuine celebrity.

Wow, Billy Crystal has turned out to be disappointingly awful and interestingly offensive. Now, I have happy memories of Crystal's hosting duties in the 80s, particularly his song montage about how pissed off Barbra Streisand was that she didn't get a Best Director nomination for The Prince of Tides ("Seven nominations on the shelf / Did this movie direct itself?" And yes, I did that from memory) But when he was hired to replace Eddie Murphy, it looked like the Academy was taking a predictable recourse to bland, tried and tested safety that was a little dismaying. And that is doubtless what they were hoping for.

But at barely halfway through, Billy "safe pair of hands" Crystal has donned black face, made a fat joke about a (very unamused) Jonah Hill, made an old joke at Christopher Plummer and Max von Sydow's expense, fantasised about a threesome with Cameron Diaz and Jennifer Lopez and claimed that watching The Help made him want to "hug a black woman." The opening song was surprisingly terrible and the jokes have been uniformly unmemorable. Not as bad as Franco and Hathaway, of course, but that's small consolation.
All in all, I bet Brian Grazer is missing Eddie Murphy right now.

In other news, we learn that "Angelina Jolie's Right Leg" now has its very own Twitter account. The lipstick, no doubt, will not be far behind.

3.33am: "Please welcome the original girl with the dragon tattoo," says Billy Crystal, waving one arm to introduce Angelina Jolie. And on she strides, the "It Girl" of the moment, with her lips painted as red as Satan's rump and the leg of her dress slit clean up to ya-ya. She has come to grace The Descendants with the prize for best adapted screenplay. Director and co-writer Alexander Payne has brought his mum to the ceremony and, on her insistence, he dedicates the prize to her.

Next it's time for the best original screenplay, which goes to Woody Allen for Midnight in Paris. Or at least it would go to Woody if he were here, but he's not; he's back in New York, he doesn't like LA, where they turn their dead bodies into bad TV shows. "The Academy accepts this award on his behalf," smiles Jolie. I like the idea of her giving it to him person; perhaps showing up at his apartment, with her bare leg and her lipstick blazing. She'd scare him half to death and his heart might explode.

3.21am: Billy Crystal is making these Oscars go by with a loose, easy swing. He speculates as to what various guests are thinking and pokes gentle fun at Academy president Tom Sherak and ushers us imperceptibly towards the best score Oscar, which duly falls to Ludovic Bource for The Artist.

"Ludovic Bource has no formal training," announces the voice on the PA as the composer walks up to collect his statue, which sounds a little harsh. Way to ruin the greatest moment of his career. You might as well say, "Ludovic Bource could not hold a tune in a bucket" or "Ludovic Bource refers to musical notes as 'little dots'". Still, if Bource is upset, he's too polite to show it.

Seconds later, it's time for the best song Oscar and it goes to Bret McKenzie, stalwart of Flight of the Conchords, for his terrific Man or Muppet, which of course played out on the soundtrack for The Tree of Life, usually when Sean Penn was wandering about that office block. "Bret McKenzie is from New Zealand," the PA tells us helpfully. And OK, Man or Muppet didn't really play out on The Tree of Life. It is at this point of the proceedings that the films start to blur.

3.06am: Up steps Melissa Leo, spouting blather about the craft of acting, clutching an envelope in her fist and all set to announce this year's best supporting actor Oscar.

Let's check the contenders. Nick Nolte tore up the scenery as the raging alcoholic pop in Warrior, while Jonah Hill crunched the numbers in Moneyball. Kenneth Branagh was an exasperated Larry Olivier in My Week With Marilyn, and Christopher Plummer hopped out of the closet in Beginners. And spare a thought for the magnificent Max Von Sydow, tottering around New York in Extremely Loud and Incredibly Close with Yes written on one hand and No on the other. Tonight, I suspect, the answer is no.

And the Oscar goes to ... Christopher Plummer for his lovely turn in Beginners. At the age of 82, the Canadian Sound of Music star is the oldest actor to ever take this prize. "You're only two years older than me, darling" he hollers at the statue. "Where have you been all my life?"

Plummer's speech is smooth, sweet and elegant, heaping praise on the other nominees and paying tribute to his wife "for coming to my rescue every day of my life". Whether it cuts any ice with Nick Nolte, however, is anyone's guess. He's sitting back there, seething and smarting and listening to the crow constantly kaw and yammer in his head.

"They're laughing at you, Nicky," the crow is cackling. "They set you up and played you for a fool. They were never going to give you the Oscar, they just came to laugh. Kill them, Nicky. Kill them all." It will not shut up; it's too much to bear. Any moment now, I fear, Nolte is going to go off like a pressure cooker

2.58am: Presenting Oscars go to Ben Stiller and Emma Stone, who squabble entertainingly at the microphone ahead of announcing the visual effects award. Stone has a whole heap of plans, a head buzzing with show-stopping ideas but Stiller is grumpy and jaded and won't play ball. "I get it, you're new," he snaps. "But perky gets old fast with this crowd."

"What?" she rejoins. "Like you running about in Avatar make-up?"

The actual Oscar arrives almost as an afterthought. It goes to Hugo, to Hugo, always to Hugo. Scorsese's 3D caper is now racing ahead with five awards in total.

2.50am: Make way for Chris Rock, who has rocked up to hand the best animated feature Oscar to Gore Verbinski for Rango. The Johnny Depp western ("like Chinatown," reckons my colleague Henry) triumphs over A Cat in Paris, Chico and Rita, Kung Fu Panda 2 and Puss in Boots and makes some kind of amends for Verbinski's previous misadventures with those Pirates of the Caribbean.

2.45am: Round of applause to the Cirque du Soleil acrobats who pay flamboyant homage to North by Northwest, swooping out over the audience on elastic guy-ropes. "I pulled a ham-string just watching that," cracks Crystal. Maybe they can return later with their homage to Psycho, running through the audience, wearing wigs and waving knives. Time, I guess, will tell.

In the meantime, we are left with puckish Robert Downey Jr and scolding Gwyneth Paltrow, who have come to tell us the winner of this year's documentary Oscar. It goes to the acclaimed football documentary Undefeated, which triumphs over the likes of the highly-fancied Pina and Hell and Back Again. The makers of Undefeated are a genial, enthusiastic, faintly gung-ho bunch. They overrun wildly until the music rises up and the microphone is cut. They carry on barking into it, regardless.

2.31am: We're back on track, ploughing on down the schedule and ticking off the editing Oscar. This goes to the duo behind The Girl With the Dragon Tattoo who also won last year for The Social Network. "We weren't expecting this," they say. "This is unbelievable." They stare at each other, unsure what to say. "Let's get the hell out of here," they say.

Moments later the sound editing Oscar is delivered to Hugo and then the sound mixing prize is sent off in the exact same direction. This brings Hugo's tally up to four. Scorsese's film is dominating the technical categories and comfortably leads the field.

But again, I pity the vanquished nominees in these three categories. In this case, Oscar tradition dictates that the losers must now ride children's tricycles around the parking lot out back of the Hollywood and Highland theatre. This, initially, may not sound so bad, except that the nominees must ride in the cold, in the dark, with nobody watching as they pedal round and round in circles. Only at dawn are they permitted to return the tricycles and return to their hotels.

2.23am: The Academy Awards takes a brief detour with a spry black-and-white short, allegedly showing the results of a test preview of The Wizard of Oz. The sample audience like the "flying monkeys", mistake the Munchkins for little kids and demand the affable Kansas farm-folk be given a bigger role. Playing the producer, Bob Balaban looks suitably harassed.

2.15am: Christian Bale (still struggling to rein in his pesky, wandering accent) steps up to call the winner of this year's race for the best supporting actress Oscar.

Here come the nominees. There's Octavia Spencer, who baked a cake in The Help, and Jessica Chastain as the frazzled southern belle who took her in. Melissa McCarthy soiled her dress in Bridesmaids, and Janet McTeer played a horny-handed house painter in Albert Nobbs. Finally, there's Berenice Bejo, who co-starred as perky Peppy Miller in The Artist, a 1920s "It Girl" to rival Clara Bow.

And the Oscar goes to ... Octavia Spencer, who sparks a jubilant standing ovation as he takes to the stage. She's whooping, she's weeping; she can barely get the words out. She wants to thank her family in Alabama, the state of Alabama, and a whole heap of others. "OK," she yells, "I'm wrapping up! I'm freaking out!". And with that she totters from the stage, treading on her train and clutching her Oscar. Congratulations to Spencer. Just don't ever let her bake you a cake.

2.10am: Time now for the best foreign language film Oscar, which is a battle between Bullhead (from Belgium), Footnote (Israel), In Darkness (Poland) Monsieur Lazhar (Canada) and A Separation (Iran).

And the Oscar goes to .... A Separation, Asgar Farhadi's electrifying portrait of a floundering marriage in modern-day Tehran. Farhadi's speech is gracious and pointed, paying tribute to the people of Iran who respect other cultures and reject the language of violence. He is also, it should be said, a most deserved Oscar winner.

Outside the one-time Kodak theatre, meantime, the parties are already under way. Assuming you can't get into the Vanity Fair bash, do feel free to drop in to the Guardian's very own US Twitter party. Even if you can, we reckon the Twitter thing is probably better. Better conversation and less chance of getting stomped to death by Harvey Weinstein as you stand at the urinal.

2.00am: "Please welcome a recurring dream of mine," quips Billy Crystal, all but tipping a lascivious wink to the camera. "Cameron Diaz and Jennifer Lopez."

But it's bad news for Crystal. Diaz and Lopez are not here to make his nocturnal fantasies a rich (and possibly naked) reality. They have merely come to present the Oscar for best costume to Mark Bridges for The Artist. It is Bridges' first Oscar and he duly introduces himself as "a kid from Niagara Falls who dreamed, ate and slept movies". This, on the face of it, sounds a more wholesome dream than Crystal's, although I suppose it depends on the movies.

Moving on, the Oscar for best make-up is painted and plastered onto Mark Coulier and J Roy Helland for The Iron Lady. They offer thanks to Meryl Streep, the film's star, who "makes our work look good, no matter what."

So that's that. But do spare a thought for the losing nominees. In a long-standing Oscar tradition, they are now ushered through to the kitchens where they must count grains of rice ahead of the after-show dinner. Every diner must have the exact same number of grains in their bowl or there is hell to pay and the dinner is now just a few hours away. So they had better get cracking.

1.47am: The first award of the night is for cinematography and it goes to Robert Richardson for his work on Martin Scorsese's Hugo. I confess that I was hoping that this would go to The Tree of Life (surely the only award it stood a snowball's chance of winning). But it is sadly not to be.

Second later Hugo picks up its second award of the night, for art direction.

Scorsese's 3D spectacular has now converted the first two of its 11 Oscar nominations.

1.44am: "We're here at the beautiful Chapter 11 theatre." announces Billy Crystal, a master of old-style razzle-dazzle who proceeds to regale the audience with a slick blend of jolly singing and tart one-liners; a reliable comedic routine that was honed on the borscht-belt circuit and plays very nicely to the gallery in Hollywood.

The movies have always been there for us. So tonight, enjoy yourself. Because nothing can take the sting out of our economic worries more than millionaires presenting themselves with little gold statues.

Crystal knows what he's doing and the audience, at least so far, loves him for it. In a quick three-minute spell he manages to expunge the memory of Hathaway and Franco, who died here just 12-months ago.

1.37am: Onto the stage steps Morgan Freeman, instantly bringing a little gravitas to the carnival. The 84th annual Academy Awards, he says, are here "to celebrate the present and look back to its glorious past." This, it transpires, is the host's cue to do both, at the same time, via the medium of the traditional Oscar montage.

Get a load of Billy Crystal! He's gatecrashing all the Oscar-nominated movies, making like a silent-screen hero, being kissed by George Clooney on his hospital bed and munching merrily on Minnie's chocolate cake. One second, he's a mo-cap Tintin, the next he's chasing, poignantly after a roll of film that un-spools out of a top floor window. "Ladies and gentlemen," says the voice in the sky (I'm assuming it's not the crow). "It's Billy Crystal." As if we didn't know that already.

1.28am: Finally, finally, we are about to begin. Run for the doors and fight for your seats, the 84th annual Academy Awards are about to begin. Live, live, live from the Hollywood and Highland Centre (formerly the Kodak theatre). Stick with us and don't, for the love of God, listen to anything that Nick Nolte's crow tries to tell you. It means harm, it brings evil, and it must not be allowed to rain on this parade.

1.18am: And still the red carpet circus shows no sign of finding its way into the big top. It is now Penelope Cruz's turn to be grilled in the sun. "Penelope, Penelope, you never disappoint," soothes the compere, thereby proving that he has never sat through Captain Corelli's Mandolin.

Away across the rug, we are introduced to none other than Ms Gwyneth Paltrow. "Your dresses never disappoint," says the compere, thereby suggesting that yes, she may well have sat through Possession, Duets and Country Strong.

What's going on? Hasn't this thing supposed to have begun already. Could it be that they have started handing out the Oscars inside, the ceremony playing out to rows of empty seats as the likes of Brad Pitt and George Clooney still cavort before the cameras? Enough with the carpet! It's high time we went inside.

1.08am: Oh please let there be an Oscar for the formidable Nick Nolte. He's nominated for his fine turn in Warrior but gives what is arguably an even better performance on the carpet, facing off against a jittery TV host, with his shoulders squared and his chin jutting, a monument of Midwestern menace. The host is cooing and flattering and posing her honey-dipped questions while he stands stock still and stares right through her, as though listening to other voices on another frequency. The voices, I suspect, come from demons within.

Finally he speaks. "If I knew what you said, I could probably answer you," he says.

Unnerved, she tries another tack: "Now, I've heard you own a pet crow."

"I do what?" says Nolte. And with that he's back hearing voices. Perhaps it is the crow that speaks to him. Perhaps it is telling him to kill her, to kill them all. To torch the Hollywood and Highland and then run for the hills. Pray God, he does not listen to the crow.

1.01am: Reeling from his altercation with the Admiral General Shabazz Aladeen, TV host Ryan Seacrest opted to beat a hasty retreat, skulking for cover with the ashes of Kim Jong-Il on his shirt, up his nose, in his eyes; a hideous indignity to be meted on a man of his stature.

Now, praise be, he has returned. He looks freshly laundered, bright as a button in a new tuxedo that's fresh off the rack. But his eyes are darting and his hands all a-tremble. The confidence of old has evaporated like smoke. Any second now they will ambush him again. They will find him, catch him and drag him down. Next, he fears, they will steal his trousers and daub him, head to foot, in the blood of Gadaffi.

No such worries for the wonderful Michelle Williams. She's nominated for her turn as Monroe in My Week With Marilyn and is content to idle outside in a fetching red dress that she helpfully explains comes courtesy of Louis Vuitton. No fears either for Jean Dujardin. He loves being here. He loves "the light, and the American faces," he says. "Mercy Buck-oo," chirrups his TV interrogator.

12.49am: Fashionistas take note: Emma Stone is on the carpet and she is wearing "John Batista Volley", although I may have misheard the name. Wasn't he the former Cuban dictator who played tennis while Havana burned?

Stone is here to support The Help, which cast her as the plucky young journalist who helps out the help. "I cried all the way through that movie," confesses the red-carpet compere and believe me, she wasn't the only one.

Talking of tears, the excellent Melissa McCarthy (nominated for Bridesmaids) is already dabbing at her eyes. She's arrived with her mum and the occasion is threatening to get the better of her.

Now up comes Christopher Plummer, 82 last birthday, and set fair to become the oldest actor to win an Oscar. Plummer is nominated for his deft turn as a liberated father in Beginners and looks likely to add to his Globe and Bafta later tonight. But for the moment he is content to stand out in the sun, giving his velvet tuxedo an airing before the real business gets under way.

12.39am: The longer they remain on the carpet, the more these nominees risk repeating themselves. Octavia Spencer has just asked to make another "shout-out to my hometown", while somewhere, across the way, George Clooney is regaling another reporter with his tales of driving an insensible Tony Bennett home along Mulholland Drive.

Nobody seems to care; they are just glorying in the spectacle. The comperes look as though are about to combust at the sheer perfect wonderfulness of it all. Everyone is beautiful, everyone a winner. If these TV hosts had their way, every nominee would wind up winning an award here tonight. They are conducting their own alternative, Prozac Oscars right out in the sun.

Again, this was all so very different back in 1929, when the red-carpet team was made up of hobos and box-car riders whose names had been drawn from a raffle. These days they say "Oh, wow it's Jessica Chastain, you're looking so beautiful, who are you wearing this evening?"

Back then they'd say, "Hey buddy, who the heck are you?" and, "Ooh mercy, get a load of Miss Fancy-Pants."

They'd say, "Miss High-Britches here thinks she's better than me. Hey Miss High-Britches, you ain't better than me. Aw, come back here, don't be shy. You ain't better than me."

The longer this goes on, the more we pine for far-off 1929.

12.26am: A late contender for the title of "Rooney Mara's Most Surreal Moment": Sacha Baron Cohen has just shown up on the carpet, brandishing what he claims are Kim Jong-Il's ashes, which he then proceeds to dump onto Ryan Seacrest.

So this, it seems, is the great dictator's final resting place: smeared all over a grinning American TV host as he makes merry with the debauched and decadent millionaire celebrities of the Great Satan. Rest in peace, Kim Jong-Il.

12.15am: It is now standing room only on the red carpet outside the Hollywood and Highland. Up in the bleachers, the public stand and applaud as Octavia Spencer (nominated for The Help) jostles with Harvey Weinstein and offers a "shout-out to Montogomery, Alabama", Janet McTeer runs the gamut of the TV reporters and P. Diddy says "What up? What up?". Nobody, it seems, is able to provide an answer that satisfies.

"Oh look, it's Viola Davis," coos the reporter from PA. "Look at the body, it's amazing. Look at the skin." Elsewhere, Rooney Mara is asked for her "most surreal moment". She doesn't know, she can't think. Her eyes are full of unnameable horrors.

The evidence suggests that Clooney is bang on the money in tipping The Artist to win big tonight. Assuming it scoops the top prize, it will be the first silent best film winner since Wings emerged victorious way back at the inaugural Academy Awards in 1929. How does one even begin to compare then with now? Back in 1929, the guests arrived in pony-and-traps and "Oscar" was just a humble tin spittoon. The host for the night was Douglas Fairbanks Jr, whose show-stopper was a huge song-and-dance eulogy to all the "favourite housemaids" who used to "polish his bedstead". It was a different and more dodgy America back then, before The Help came along to sort the nation out.

12.00am: Make way, make way for that wily old pro George Clooney, who is nominated for his turn in The Descendants but claims to have come without a speech. Clooney, it transpires, does not think much of his chances. "Go find Jean Dujardin and ask him if he has a speech," he shrugs. "I think it's going to be a very French night.

He adds that he likes these red carpet marathons, because it affords him the chance to hook up with his buddies. "And look, there's Tony Bennett over there," he says. "I used to drive Tony Bennett, back when I was 19-years-old."

"And was he nice?" bleats the red-carpet compere.

"Yeah, he was a lot of fun," says Clooney. "Always drunk in the back seat. Either wetting himself or making out with hookers."

Whoops, sorry, the sound levels are playing tricks. Clooney didn't say that at all. Instead he says that Tony Bennett was "unbelievably nice". There was no mention of hookers.

11.52pm: Out on the carpet, the stars are massing. Look, there's Demien Bichir, nominated out of the blue for his role as a migrant worker in A Better Life. And look, here we have demure Rooney Mara, shortlisted for The Girl With the Dragon Tattoo and resplendent in a dress of full-fat cream. "Rooney is always edgy," the red carpet compere informs us. "She always goes there." But goes where, exactly? Right now she is just standing there, motionless, her eyes fixed on the middle distance. Perhaps they have glued her feet to the rug.

11.43pm: High time to recap the main contenders. This year's awards, it strikes me, can either be regarded as a golden festival of nostalgia or a tragic wake, depending on your point of view. Leading the field with 11 nominations is Martin Scorsese's Hugo, a wistful celebration of the early days of cinema, while the firm favourite to sweep the big prizes is The Artist, a loving homage to the wonders of the silent screen.

Academy mainstay Billy Crystal has been summoned out of mothballs to make his 9th appearance as Oscar host, and even the venue comes a distinct whiff of the antique. The Hollywood and Highland Centre has just been renamed. It was formerly known as the "Kodak Theatre" until the company went bust, forced out of the game by the rise of digital. All of which gives a curiously 20th-century vibe to this year's soiree. The dignitaries have come to revel in their history, exalt in their past. The future, at least for tonight, is being kept firmly on the sidelines.

11.25pm: Roll carpet, roll cameras: it's the 84th annual Academy Awards, live and lurid from Hollywood. The Guardian film team will be covering the event throughout the night, weeping with the winners and wailing with the losers as this season's awards circus clatters exhaustedly towards the finish line. This is where it ends, inside the Hollywood and Highland Centre (reputedly the winner of the 2007 "Ugliest Building in LA" award). Inside, the victors shall be encased in gold, the vanquished shown the door and all manner of movies laid tenderly to rest.

But wait, kick back, and keep the war horses tethered: the actual ceremony does not officially commence until 5pm (Pacific time). Time enough to cast an eye back over some late-breaking Oscar news. Following the storm-in-a-teacup controversy over Sacha Baron Cohen's appearance, it now transpires that the former Borat star is permitted to show up after all (and will be attending in the guise of Admiral General Shabazz Aladeen). For those in the market for a rambling discussion on this year's best picture nominees, feel free to marvel at the sight of Peter Bradshaw, Catherine Shoard and me talking trash in the Guardian office last week. And for those who merely like the thought of food, here's a gallery to fill your bellies.

You can also take part in our Twitter interactive, or swan up to our US Twitter party, or make like an Academy voter and cast your votes for the films you want to win. And yes, our suspicion (as ever) is that your choices will be better than theirs.

10.57pm: .

• Oscars 2012
• Oscars
• George Clooney
• Jean Dujardin
• Meryl Streep
• Michelle Williams
• The Muppets
• Harvey Weinstein
• Christopher Plummer
• Max von Sydow
• Jonah Hill
• Viola Davis
• David Fincher
• Woody Allen
• Martin Scorsese
• Michel Hazanavicius
• Alexander Payne
• Brad Pitt
• Janet McTeer
• Glenn Close
• Billy Crystal
• Rooney Mara
• Sacha Baron Cohen
• Tony Bennett

Xan Brooks
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Website says total cache amounts to millions of emails exposing the global trade in intelligence

WikiLeaks has begun releasing a cache of what it says are 5.5m emails obtained from the servers of Stratfor, a US-based intelligence gathering firm  with about 300,000 subscribers.

The whistleblowing site has released 167 emails in its initial release. WikiLeaks says it has partnered with 25 media organisations around the world, including Rolling Stone, McClatchey, the Hindu and Russia Reporter.

Unlike previous WikiLeaks releases, this latest email cache was apparently obtained through a hacking attack on Stratfor by Anonymous in December 2011 rather than through a whistleblower.

Anonymous published contact and credit card details from Stratfor and said at the time it had also obtained a large volume of emails for which it would arrange publication.

One of the largest Anonymous-linked accounts on Twitter, @AnonymousIRC, put out a series of tweets on Monday morning seemignly confirming it was the source of the WikiLeaks release.

"We promised you those mails and now they'll finally be delivered. Five million (that's 5,000,000) emails at your pleasure," said the Anonymous account.
"There's a treasure trove of nasty details in those emails. We think there's something for everyone."

Stratfor describes itself as a provider of "strategic intelligence on global business, economic, security and geopolitical affairs". Guardian analysis of records published after the original Anonymous attack revealed the email account details of 221 UK military staff and 242 Nato officials (http://www.guardian.co.uk/technology/2012/jan/08/hackers-expose-defence-intelligence-officials)

WikiLeaks said the documents contained details of the inner workings of the private intelligence agency, links between government and private intelligence, and commentary on WikiLeaks itself. "The material contains privileged information about the US government's attacks against Julian Assange and WikiLeaks and Stratfor's own attempts to subvert WikiLeaks.

"There are more than 4,000 emails mentioning WikiLeaks or Julian Assange. The emails also expose the revolving door that operates in private intelligence companies in the United States."

The email cache is said to contain information on measures taken to track activist and NGO activity for large companies, through media monitoring, and information on the financial sector.

The hacking attack on Stratfor is subject to an FBI investigation. Several alleged members of Anonymous have been arrested by authorities in the US and UK as part of investigations.

Stratfor had not at the time of writing commented on the authenticity of the published material.

WikiLeaks and some of its media partners – including the Yes Men activists who target Dow Chemicals among others – are scheduled to hold a press conference discussing the release at noon on Monday at the Frontline Club in London.

• WikiLeaks
• Hacking
• Intellectual property
• Data and computer security

James Ball
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Gillard remains as Australian prime minister after seeing off party room challenge by 71 votes to 31

Julia Gillard will remain as Australia's prime minister after winning the resounding backing of her Labor party colleagues in a leadership ballot against Kevin Rudd.
 
The Labor party room voted 71 to 31 to retain Gillard as its leader and therefore as prime minister. It ends a week of vicious bloodletting by Labor parliamentarians, brought to a head with Kevin Rudd's resignation as foreign minister so he could mount a challenge.
 
"I can assure you that this political drama is over," Gillard told a news conference.
 
She said the Labor party would now unite and focus on winning the next general election, due in 2013.
 
"I absolutely believe that united we can win the next election," she said, adding she was impatient to get on with the job.
 
Gillard's leadership vote was the best result of any Labor leader in a challenge in 30 years.
 
She said Australians should honour the achievements made by Kevin Rudd as prime minster and foreign minister, including his historic apology to the stolen generation of Aboriginal children.
 
Kevin Rudd congratulated Gillard on her win and said he accepted the leadership ballot "without  qualification". He said Labor must now unite to win the next election.
 
"To Julia, I say, I accept fully the verdict of the (Labor) caucus and I dedicated myself to working fully for her re-election."
 
He will return to the backbench and continue to represent his electorate of Griffith in Brisbane, the capital of the state of Queensland.
 
Rudd said he bore no grudges or malice towards ministers who may have spoken out against him in the past week in what has been widely reported as the most vicious leadership spat in Australian political history.
 
"It's well past time that these wounds were healed," he said.
 
Labor members of parliament on both sides of the leadership divide have called for the party to unite behind the prime minister.
 
Speculation over her leadership has dogged Julia Gillard since she ousted Kevin Rudd in an internal party coup in 2010. Their centre-left Labor party scraped through elections later that year, which lead to a minority government in a hung parliament.
 
Gillard faces an uphill battle convincing the electorate to back her. An opinion poll on Monday put Kevin Rudd ahead as preferred prime minister by a margin of 53% to 28%. Labor also trails the opposition in the polls, though its position has improved in the past few weeks.

The opposition has reiterated its call for an election.

• Julia Gillard
• Kevin Rudd
• Australia

Alison Rourke
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Referendum to clear way for multi-party elections derided by critics in Syria and beyond as violent crackdown continues

Syrians have taken part in a referendum to clear the way for multi-party elections that could see Bashar al-Assad entrenched as president until 2028, in a vote widely dismissed by the opposition as a figleaf for reform.

Turnout appeared to be mixed across the country, with voter participation being noticeably higher in areas where Assad still has support, such as Damascus and the commercial hub of Aleppo.

As voters cast their ballots elsewhere, rockets were again fired into Syria's third city of Homs, where civilians in rebel-held areas have been trapped for more than three weeks by shellfire. Nationwide, more than 50 people have been killed each day for at least the past week, according to local activists and civilian journalists.

At least 59 civilians and soldiers were killed on Sunday. At least 12 civilians were killed in bombardment of the Baba Amr and al-Khalidiya districts of Homs, while three people were killed when security forces opened fire on a demonstration in Damascus, according to the Syrian Observatory for Human Rights.

The British-based observatory said 21 other civilians were killed elsewhere, while rebels forces killed 23 members of the security forces.

Officials in Damascus said voting was lower in unstable areas. The result of the referendum, to change the constitution and authorise political parties other than the Ba'ath party, appears to be a foregone conclusion, with most of those who turned out likely to vote yes.

The referendum is held up as a centrepiece of Assad's reforms, which were drafted as a response to what has been a sustained challenge to the totalitarian state that he and his father before him have ruled for more than 40 years.

It would mean the Ba'ath party would no longer have a monopoly on political and social life in Syria. Opposition groups would, in law at least, be free to stand independently in future elections.

But a constitutional change limiting a president's maximum term to 14 years would not be applied retrospectively, meaning Assad could still serve two more terms from the next election, likely to be held in 2014.

The referendum has been roundly dismissed by opposition groups and by the west, which insist Assad has lost all legitimacy. Turkey said the ongoing crackdown on dissent belied talk of reform. The White House described the referendum as meaningless. The German foreign minister, Guido Westerwelle, said it was a farce. "Sham votes cannot contribute to a solution of the crisis. Assad needs to put an end to the violence and clear the way for a political transition," he said.

A Friends of Syria conference, which was attended by more than 70 states in Tunis over the weekend, denounced the vote as designed to create a veneer of change while the lethal assault on opposition groups continued unabated.

US secretary of state Hillary Clinton, who was in Tunis, indicated that the US objection to the arming of those rebels who are in open revolt had not changed, despite the remarks of several congressmen. She said military intervention would be perilous. "I think there's every possibility of a civil war," she told the BBC. "Outside intervention would not prevent that. It would probably expedite it.

"We have a very dangerous set of actors in the region: al-Qaida, Hamas and those who are on our terrorist list claiming to support the opposition. You have many Syrians more worried about what could come next."

Vladimir Putin, Russia's prime minister, also spoke against the idea: "I very much hope the US and other countries ... do not try to set a military scenario in motion without sanction from the UN security council." Russia and China have vetoed such security council approval.

A senior Hamas figure told the Associated Press that its leader, Khaled Mashaal, had moved from Syria to Qatar.

Efforts to evacuate the wounded from Baba Amr, including two western reporters and the bodies of two colleagues, have not succeeded, despite urgent pleas from Europe. The International Committee of the Red Cross has been trying since the deaths last Wednesday of Sunday Times correspondent Marie Colvin and French photographer Rémi Ochlik to get scores of wounded out of Syria to hospitals in Lebanon. Talks broke down several times over the weekend. Some observers said the delay was caused by a lack of trust. The Free Syrian Army was said to have rejected two ambulances sent into Baba Amr, partly because it could not guarantee where the wounded would be taken.

Kate Conroy, wife of injured photographer Paul Conroy, said that, with reluctance, she could appreciate the Foreign Office view that it was too difficult to provide an escort to help with his rescue. Nonetheless, she would like it "if somebody in that embassy was to say: 'Forget protocol, I'm going to get them out.'"

Essential services have collapsed in rebel-held districts of Homs over a four- month siege that has trapped up to 20,000 people. Besieged neighbourhoods claim they are get electricity each day for only a few hours a day, and are desperately low on food and water.

Baba Amr, a hub for the Free Syrian Army, had largely been left to its own devices until an artillery assault began 24 days ago. It has since been reduced to a series of ghettos that regime forces have yet to enter, though local activists expect a ground assault at any time.

• Syria
• Middle East and North Africa
• Arab and Middle East unrest
• Bashar al-Assad

Martin Chulov
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The education secretary has close ties to Rupert Murdoch and would be a key figure if he attempts to move into the UK schools market

On a freezing November day in 2010, the education secretary, Michael Gove, turned out in east London to inspect a desolate stretch of dockside ground near City airport, where Rupert Murdoch had offered to build an academy school.

The cabinet minister was accompanied by Rebekah Brooks, then News International chief executive, and an entourage of other top Murdoch staff, including James Harding and Will Lewis.

Despite the unprepossessing venue there was no mistaking the company's enthusiasm for the project. Murdoch described himself in a speech as the saviour of British education, thanks to his company's "adoption of new academies here in London".

It was a high-water mark of the love-in between Gove, Murdoch and the Conservative government. Gove, a former Times journalist, had previously gone out of his way to flatter his own proprietor, writing that Murdoch "encourages … free-thinking".

Shortly after the Docklands visit, the phone-hacking scandal disrupted these close relations. News International's proposed academy was quietly abandoned. Newham council says nothing was subsequently done to fulfil Murdoch's promises.

But Gove returned to his pro-Murdoch theme last week, publicly attacking the Leveson inquiry, set up in the wake of News International's misdeeds, as a threat to press freedom. "Whenever anyone sets up a new newspaper – as Rupert Murdoch has with the Sun on Sunday – they should be applauded and not criticised," he said.

It was a reminder of the extraordinarily close links that still exist between publishing tycoon and Tory politician. One of Murdoch's long-term projects is what he calls a "revolutionary and profitable" move by his media companies into online education. Gove would be a key figure in any attempt to penetrate the British schools market.

The education secretary meets Murdoch frequently and is an enthusiastic backer of the ideas of Joel Klein, the head of Murdoch's new education division. Within a week of his promotion in 2010, the minister was at dinner with Murdoch, according to officially released details of meetings.

The atmosphere could only have been warm. Gove once sang Murdoch's praises in a 1999 Times column as "the greatest godfather of mischief in print" who possesses "18th-century pamphleteering vigour". He wrote that Murdoch "encourages … free thinking. His newspapers … are driven by public demand and the creativity of chaotic, cock-snooking, individuals."

Murdoch in turn was kind to his former employee. When Gove first arrived at Westminster in 2005 as a backbench MP, the Times topped up his salary with a £60,000-a-year column. His wife still works for the paper.

Murdoch's publishing arm, HarperCollins, also gave Gove a book advance in 2004, when he was first selected for the safe Conservative seat of Surrey Heath. It was for a history of an obscure 18th-century politician, Viscount Bolingbroke.

Puzzlingly, the book was never delivered. HarperCollins refuses to disclose the size of the advance and its size is not specified in Gove's register of financial interests. Asked if his advance should be returned eight years later, HarperCollins says Gove "is still committed to writing a book on Bolingbroke but obviously his ministerial duties come first for now". Gove will not comment.

At the Gove dinner on 19 May 2010, Murdoch was accompanied by his then right-hand aide in Britain, Rebekah Brooks. Brooks was also with the education secretary at a second dinner three weeks later, on 10 June, for what his department terms "general discussion".

In a subsequent speech to the National College for School Leadership, Gove singled Joel Klein out for praise. Klein was a US lawyer then running the New York school system. But Klein was also Murdoch's own favourite US educator. His clashes with the teachers' unions and his enthusiasm for academy-style "charter schools" had caught the tycoon's interest. Murdoch planned to hire Klein himself.

Gove told his British audience on 16 June that US reformers such as Klein were insisting on "more great charter schools … free from government bureaucracy" because they were "amazing engines of social mobility".

Within 24 hours of that speech, the minister was once more at the lunch table with Murdoch himself, again with Brooks in attendance and, according to the department, other "News International executives and senior editors", for "general discussion".

At the end of summer 2010, Murdoch formally hired Klein for $2m (£1.3m) a year, plus a $1m signing bonus, to launch what he called a "revolutionary, and profitable, education division". Murdoch bought Wireless Generation, a US educational technology firm, for $360m, and gave it to Klein to run. Murdoch's vision was that he would digitise the world's so far unexploited classrooms. He told investors: "We see a $500bn sector in the US alone that is waiting desperately to be transformed by big breakthroughs." He envisaged some of News Corporation's large library of media content being beamed to pupils' terminals.

Gove seemed to be an enthusiast. He met Klein on 30 September 2010, before the announcement of his link-up with Murdoch. The Department for Education does not explain the circumstances, other than saying "more than 10 others" were present for a "general discussion".

The following month, Murdoch flew to London again, to deliver the Margaret Thatcher lecture at the Centre for Policy Studies. He called for a revolutionised education system in the UK "that really teaches … In the last decades, I'm afraid, most of the English-speaking world has spent more and more on education with worse and worse results".

He boasted: "That is why so many of my company's donations are devoted to the cause of education – including the adoption of new academies here in London. There is no excuse for the way British children are being failed" .

Gove was with Murdoch for the celebratory dinner afterwards, along with Murdoch's son James and all his editors. And in the new year, Klein flew to England along with Murdoch himself for three days spent at Gove's department. He was "visiting UK as guest of DfE to explain and discuss US education policy and success", say officials. Gove was photographed visiting the King Solomon academy with Klein, who addressed a free schools conference. Gove dined with Murdoch, and with Brooks yet again, at a dinner hosted by businessman Charles Dunstone, an academy sponsor.

On 19 May, Gove breakfasted with Murdoch in London. The tycoon flew on from that meeting to address a Paris conference of internet entrepreneurs. This time, he went into some detail about News Corp's plans for educational technology. He and Klein had been touring educational projects around the world, in South Korea, Sweden and California. Schools were the "last holdout from the digital revolution" he said. "Today's classroom looks almost exactly the same as it did in the Victorian age …The key is the software."

"I'd expect in the next [few] months we'd be making some acquisitions," Klein told the Financial Times. "There's the willingness to put in significant capital."

He cited the Khan Academy, a not-for-profit producer of educational videos through YouTube, as an example of how technology could add value.

On 16 June, Gove addressed the teachers' college in Birmingham on strikingly similar lines, calling for "technical innovation" in the classroom. He cited the "amazing revolution" of iTunes U in publishing lessons online. The same night, he dined with Rupert Murdoch yet again.

Four days later, Gove returned to the theme in another speech, praising News Corp's new hiring, Joel Klein, and urging his audience to read an "excellent article" Klein had written promoting charter schools.

Murdoch himself, returning to London, spoke at a conference of chief executives. The Times recorded: "Mr Murdoch detailed a vision whereby almost all children would be provided with technology such as specially designed tablet computers. He said that through such advances, 'You can get the very, very finest teachers in every course, in every subject, at every grade, and make them available to every child in the school – or if necessary, in some cases – in the world.'

"Mr Murdoch said that News Corporation, parent company of the Times, would help to spearhead this change by growing its business in providing educational material. He said he would be "thrilled" if 10% of News Corporation's business was made up of its education revenues in the next five years."

On 26 June, Gove was at yet another dinner with Murdoch. He followed it up with the most explicit endorsement to date of News Corp's education project in an address to the Royal Society entitled Technology in the Classroom. He even held up for praise Klein's favourite model, the Khan Academy, which was "putting high-quality lessons on the web".

He said: "We need to change curricula, tests and teaching to keep up with technology … Whitehall must enable these innovations but not seek to micromanage them. The new environment of teaching schools will be a fertile ecosystem for experimenting and spreading successful ideas rapidly through the system."

Murdoch's education project now began to falter, however, because of the looming British phone-hacking scandal. In the US, voices began to question the links between Klein and contracts awarded by the New York education department to Wireless Generation, the technology firm acquired by Murdoch. Klein and Murdoch's education division lost a hoped-for new $27m contract with the New York authorities.

Klein himself was catapulted into a central role in the company's attempts to firefight the scandal. He flew over to London to the parliamentary committee hearings in July. While all eyes were on Wendi Deng as she landed a punch on the foam-pie thrower who attacked her 80-year-old husband during the televised session, few noticed the dry legal figure sitting just behind her.

He now plays a key role in controlling the controversial management and standards committee (MSC) that is house-cleaning at News International by handing over journalists' incriminating emails to the police.

Until Murdoch's UK operation has been fully cleansed of its hacking toxicity, the way will not be open for Klein to resume his education projects, and his formerly close political links with Gove. But the end of the process of "draining the swamp", as one MSC source put it, may now be in sight.

Invited to respond to these issues, a Gove spokesman declined to comment.

• Michael Gove
• Rupert Murdoch
• Schools
• Academies

David Leigh
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Nick Harvey's leaked letter highlights concerns over funding and fears that private sector will 'cherry pick' charities

A funding crisis has developed in the government's main welfare-to-work initiative which demands an urgent review of its organisation and supply chain, the defence minister Nick Harvey has written in a leaked letter to the employment minister Chris Grayling.

The letter reveals ministerial unease about whether the flagship work programme has been structured properly for a deteriorating labour market.

Harvey, a Liberal Democrat, expresses concerns that large private-sector firms working on the scheme, which is directed mainly at finding work for anyone unemployed for more than 12 months, will be able to take advantage of small local charities struggling with cash flow.

"Clearly the funding model is in deep trouble," Harvey wrote in the letter to Grayling on 7 February after hearing the concerns of small providers in his North Devon constituency.

He added: "The real concern is that the private sector will cherry pick the ruins of the charities concerned."

Harvey's criticism of large providers is directed at the likes of A4e, the company established by Downing Street's former family tsar, Emma Harrison, which is paid millions of pounds a year by the government for finding work for long-term unemployed people. Harrison resigned from her No 10 role and as chairman of A4e after it emerged that her business was the subject of a series of fraud investigations. There is no suggestion that Harrison has done anything wrong.

Harvey's stark criticism, in a private letter that was copied to the Lib Dem pensions minister, Steve Webb, follows meetings with some of the local providers of the work programme in his constituency who are having to shut offices.

Westward Pathfinder, which finds work for the long-term unemployed in the south-west, has warned Harvey that it faces potential bankruptcy because it is only paid by the government if it secures employment for an individual for at least six months.

In the letter to Grayling, Harvey writes that the funding mechanism should be reviewed: "In low-income rural areas such as Devon which will be the last to pick their way out of the economic crisis, only the locally focused third sector such as Pathfinder can really deliver.

"I would urge a review of the supply chain and reconsideration of the tail-end funding model."

Harvey told the Guardian that small companies and voluntary groups cannot wait to be paid, unlike large companies such as A4e.

"The small guys can't possibly carry the risk," Harvey said. "Round here they are usually not-for-profit social enterprises who don't have access to big pools of capital. They need paying as they go because they just haven't got the cash flow to cope otherwise."

"It is in everybody's interests that the Work Programme should succeed. But they risk undermining the delivery of it if making the payments after the event causes the small frontline providers to go out of business. The prime contractors are chosen on the basis that they are big enough to have access to capital and have a viable business model. They wouldn't be able to deliver it, certainly in rural areas, themselves. So they need the locally based frontline providers and risk driving them out of business if they don't carry this risk instead of passing it onto the small providers."

Liam Byrne, the shadow work and pensions secretary, who will seek to raise the state of the work programme in the Commons on Monday, released figures showing the proportion of people coming off welfare and into work has halved in the last year.

He said: "The Work Programme is now in serious trouble. It is getting just half as many long-term unemployed people into work as last year. There are now allegations of fraud and now we learn there are concerns about the contracts at the highest levels of government.

"The DWP [Department for Work and Pensions] cannot keep its information about its contractors' performance secret any longer. These contracts are worth billions of pounds of public money and worries about what is going on are now widespread."

Byrne said the figures also suggested that unemployed people designated as difficult to place are not being referred by the Work Programme as much as expected. Employment and support allowance and ex-incapacity benefit referrals are at 6.5% of the total as opposed to 34 % expected under the government's estimates.

He said he will be asking the government to publish information on the contractor's performance, and ask the public accounts committee to investigate the nature of the Work Programme contracts. He also said he would be convening a meeting of charities and businesses to get to the bottom of what is going on with the programme.

The DWP has persistently said the work programme funding model is effective and will not disadvantage smaller welfare-to-work providers – often charities – that are given contracts by the large prime contractors.

The scheme has seen the DWP engage a group of 30 prime contractors to find work for the unemployed. They are paid under a system of payments by results with the government handing over fees when the unemployed person has been in work for six months or more. The fee is gradated according to how long the person has been unemployed, or if they have a disability, making them more difficult to find work for. The prime contractors are also expected by the DWP to subcontract some of the work to smaller social enterprises or charities.

The work programme is separate from the much smaller work experience programme that has attracted controversy over whether it is compulsory. Grayling is mounting a sustained counterattack against the work experience programme's critics, including against the leftwing activists leading the criticism of the scheme.

• Welfare
• Liberal-Conservative coalition
• Chris Grayling
• Unemployment
• Charities
• Voluntary sector

Patrick WintourNicholas Watt
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Wind power firms express concern over future policy and reveal how investment in the UK's energy infrastructure is on hold

Billions of pounds' worth of investment in Britain's energy infrastructure is on hold or uncertain because of concerns over the government's commitment to wind energy.

In an exclusive survey, the heads of some of the world's biggest wind companies, which have been considering setting up factories, research facilities and other developments in the UK, have told the Guardian they are reviewing their investments or seeking clarification and reassurances from ministers on future energy policy in the wake of growing political opposition to wind energy that culminated in this month's unprecedented attack on the government's policies in a letter signed by more than 100 Tory MPs.

General Electric (GE) Energy's managing director, Magued Eldaief, told the Guardian his company's proposed wind manufacturing investment – amounting to at least £100m directly but worth much more in its knock-on effect to the economy – was "on hold" pending ministers' decisions on future reforms to the energy market.

"Our investment is on hold until we have certainty and clarity regarding the policy environment that we are in," Eldaief said. "One of the most important things for us is political certainty, so we can justify the business and investment case for a facility in the UK. But we think there are some [political] headwinds which do not help, especially in terms of the subsidies discussion."

He added that the recent anti-wind activity was "certainly a concern". He said: "It's something we're watching very closely. We would like clarity and we would like it as quickly as possible."

Vestas, the world's biggest wind turbine maker, said it was waiting to see whether its customers were able to sign orders before committing itself to build a proposed turbine factory in Kent that would create about 2,000 jobs. Mitsubishi, Gamesa and Siemens – all potential investors in offshore wind to the tune of hundreds of millions of pounds – also expressed concerns that an anti-wind power backlash was building up in UK politics, after the MPs' letter to the prime minister called for subsidies to be slashed and cast doubt on the value of wind energy.

Ditlev Engel, chief executive of Vestas, warned that if the political mood shifted against wind, the company would be forced to rethink its UK proposals. He said: "If things should change, my customers will not be able to sign orders – and that is a prerequisite. We will only go ahead if we have firm, unconditional orders – we will only get orders from our customers if they are sure that the development [of windfarms] can go ahead.

"The most important issue that our customers have is a long-term policy framework – that is required to put in these investments, which are huge … [But] we have not had reassurance from the government."

Matthew Chinn, managing director of Siemens Energy for the UK and north-west Europe, whose company is planning a £210m factory that would employ 700 people in Hull, on top of its £500m in existing investments, said the firm saw a perceived lack of enthusiasm for wind power as "very significant", although it wanted to push ahead with its plans.

Akio Fukui, chief executive of Mitsubishi Power Systems Europe, which is mulling an investment of more than £30m in research and development in Britain, said: "Commitment from the government to proceed is vital. If the government commits, then investors will come."

Jorge Calvet, chief executive of turbine company Gamesa, also a potential large investor, called for the industry to rally round in public support of wind projects. Calvet said: "Supporters of wind should be a bit more vocal. The regulatory framework is the most important thing [for wind investors]."

Jim Smith, chief executive of SSE Renewables, said the political furore surrounding wind was unhelpful at a time when billions in foreign funds were needed to build clean technology schemes. "Clearly what the industry needs is clear, consistent government policy and anything that potentially upsets that is not good for the industry," he said.

While most companies said they wanted to push ahead with their investment plans, some investment bankers also expressed concerns. Simon Brooks, vice-president of the European Investment Bank, which provides backing for some UK wind farms, said the letter to Cameron "injects a bit of uncertainty", which was bad for investment.

Matthew Clayton, a fund manager at Triodos Investment Management, added: "It worries me from the level of understanding of MPs who are running the country. The arguments [put forward] about costs never seem to factor in an expected rising price of oil and gas and the fact that wind, once installed, provides almost free electricity."

Clayton said that, under some measurements, onshore wind was within 7% of oil and gas costs – even taking into account subsidies for turbines but not taking into account the tax breaks given to the fossil fuels industry. "I don't really think this [opposition] is about economics. It is largely about the aesthetics of wind and its impact on the countryside," he said. "We need to have a more honest debate about this."

Keith Anderson, chief corporate officer at Scottish Power, contrasted the situation with that in Scotland, where top politicians, the media and the public tend to advocate more wind power. Much of the company's planned £1bn investment will go to Scotland.

He warned politicians that massive new investment would be needed in the UK's energy infrastructure "despite the political noise" against wind. "We've been living off [energy generation] assets that are 40, 50 or 60 years old," he said. "We need £150bn to £100bn investment in the next 10 years. That is a serious issue."

Several potential investors also pointed to particular problems with the UK's infrastructure that must be resolved, such as the ageing electricity grid, which must be upgraded to cope with a massive influx of intermittent wind energy. Engel said: "A long-term grid plan is very important."

Ports are another key issue. While the government has promised £60m for a port upgrade on the east coast, the potential boost has not yet been detailed. Eldaief said: "From an industry perspective, that [funding] may not be adequate." Fukui added that the UK's east coast ports needed "more space than under the current plan" to cope with offshore wind.

The government should also look to skills, said Chinn. "There is a huge lack of basic engineering resources and skills in the UK," he warned.

The energy secretary, Ed Davey, said yesterday: "A responsible energy policy for this country is one that rules in all of the key low carbon technologies to help us keep the lights on and emissions down. Ruling any of them out would be folly."

• Wind power
• Energy
• Renewable energy
• Vestas
• Energy industry
• Conservatives
• Energy

Fiona HarveyTerry Macalister
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Coalition changes 'unneccesary', says Lord Crisp, former head of NHS who helped drive through Tony Blair's health reforms

The government's controversial health reforms are a "mess" and unnecessary, according to the former NHS chief executive who helped drive through reforms under Tony Blair.

As the health secretary Andrew Lansley prepares to make a series of concessions to Liberal Democrat peers this week, Lord Crisp launched one of the strongest attacks on the health and social care bill by a former NHS grandee.

Crisp, a crossbench peer who was chief executive of the NHS between 2000 and 2006, told Radio 4's The World This Weekend: "I think it's a mess, is my straightforward view of it. I think it's unnecessary in many ways and I think it misses the point. I think it's confused and confusing, and I think it's unfortunately setting the NHS back."

The remarks by Crisp, who also served as permanent secretary at the Department of Health, will come as a blow to Lansley who claims that his plans to devolve commissioning powers to GPs are a continuation of the Blair reforms. Most of these were introduced in the latter period of the Blair premiership when Crisp ran the NHS.

As the health and social care bill reaches its final stages in the House of Lords, Lord Clement-Jones, the Lib Dem peer, is tabling a series of amendments in the contentious area of competition in the NHS with the blessing of Nick Clegg. This has prompted concerns among some senior Tories that the deputy prime minister is planning to abandon a deal with David Cameron to ensure the bill is passed.

Senior Lib Dem sources say they do not expect to "emasculate" the contentious third section of the bill which deals with competition in the NHS. But they do expect Lansley to give some ground.

It is understood that Lansley is currently not minded to accept any Lib Dem amendments or to sanction any fresh government amendments. He feels that two of the Lib Dem's concerns have already been dealt with. These are the call for foundation trusts to co-operate rather than compete and for trusts to be placed under a duty to achieve greater equality of outcomes.

A third Lib Dem demand – that EU competition law should not apply to the NHS – is more problematic. DoH lawyers have advised that the NHS has been covered by this since the Blair reforms. Lansley does not see this as a political problem. But he believes that the legal advice makes it difficult to move on this area.

Lansley is prepared to give ground in two areas. These are that:

• Monitor, the NHS trusts regulator which is charged with improving efficiency, would retain its role in overseeing oversight of free-standing trusts beyond 2014.

• The Competition Commission would not have the main role in reviewing the devlopment of competition. This would rest with Monitor.

Simon Hughes, the Lib Dem deputy leader, told the Sunday Politics Show on BBC1: "Watch this space. You will see a bill that will protect and defend the NHS which was a Liberal idea in the first place."

• Health policy
• Public services policy
• Andrew Lansley
• Liberal-Conservative coalition
• Liberal Democrats
• Tony Blair
• NHS
• Health

Nicholas Watt
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Opponent confident mass protests and demands for more open democracy will thwart Russian PM's attempts to remain in power

The Arab spring has inspired Russians to stand up to Vladimir Putin, and sweeping political change is possible if voters reject him at the ballot box in next weekend's presidential elections, according to Putin's jailed opponent Mikhail Khodorkovsky.

Writing for the Guardian from his prison cell in the far north of Russia, Khodorkovsky says the leadership around Putin is already quietly caving in to demands for a more open, democratic politics in the wake of the mass protest movement that welled up after questionable elections in early December. He adds that the burgeoning middle class – which will constitute a majority within 10 years – will no longer accept Putin's "managed democracy" as suitable for governing their country.

Khodorkovsky's intervention comes as thousands of protesters turned out in Moscow on Sunday wearing white scarves and ribbons and carrying white balloons and flowers, the colour and symbols of the protest movement calling for Putin's removal from power.

For an hour, they lined the city's Garden Ring, a circular road that encloses the city centre, and held hands to form a human chain. The protesters were joined by thousands of motorists who decorated their cars and honked their horns in support as they circled the eight-lane, 10-mile road.

"They will continue to demand a real seat at the table in a system of democracy and pluralism and they will not take no for an answer," says Khodorkovsky.

A business tycoon who amassed formidable energy assets during the chaotic lurch towards capitalism in the 1990s, Khodorkovsky fell foul of Putin after openly defying his leadership with calls for greater accountability and openness in Russia's increasingly authoritarian body politic. He was arrested in 2003 and jailed two years later for fraud. He has since emerged as a siren voice of freedom and democratic change, though he is still a divisive figure among ordinary Russians who remember him as a billionaire oligarch.

Khodorkovsky said it was clear that the authorities were scrambling to respond to the protests of the past three months, which initially wrong-footed the Kremlin. "The authorities also responded – quietly – with reform, permitting the registration of new political parties for future Duma elections, and election rather than appointment of regional governors. These steps are capable of changing much in Russia, a catalyst, perhaps unintended, for a more fundamental transformation."

Of the presidential elections on 4 March, he said he hoped his compatriots would take "a long hard look" at the alternative candidates. "The last time Putin stood for president he won resoundingly in the first round. We will have to wait to see what happens this time. But let's be clear, if Mr Putin is forced into a run-off, it would be an altogether different situation.

"We have only to reflect on the events in countries swept up in the Arab Spring to recognise the transformation taking place in the compact between the rulers and the ruled." While there are certainly many differences between those countries and Russia, there are some fundamental similarities," the prisoner added.

Khodorkovsky said he hoped a substantial vote against Putin would accelerate the changes that Russia needs: a modernised economy, a genuine civil society, a proper legal code and a more credible assault on corruption.

"Nobody expects this to happen overnight – but next Sunday's vote holds out the chance to end the would-be president's monopoly of power. We should not be afraid. By forcing a second round we will push our country down the path of positive change," he writes.

• Vladimir Putin
• Russian presidential election 2012
• Russia
• Europe
• Mikhail Khodorkovsky

Luke HardingMark Rice-Oxley
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Chancellor indicates he also wants to close off loophole that allows millionaires to pay a reduced rate of stamp duty

George Osborne gave his strongest hint on Sunday that he has ruled out further cuts in fuel duty for motorists in the budget.

The chancellor told the Murnaghan programme on Sky News that that fuel duty is six pence lower today than it would have been, due to the action he had taken in his autumn statement in November and in his budget last year.

"I have taken action already this year to avoid increases in fuel duty which were planned by the last Labour government. That involved committing several billion pounds of resources, it has involved putting a tax on oil companies instead of families and motorists and businesses, precisely to ameliorate the impact of these high world oil prices on the British public."

The chancellor faced pressure from Liam Fox, the former defence secretary, to stand up to the Lib Dems on tax. The junior coalition partners are calling for a "mansions tax" on properties worth more than £2m, and to speed up plans to remove low earners from the income tax bracket by raising the income tax threshold to £10,000.

Fox told the Sunday Politics programme on BBC1 that the chancellor should ease the burden on employers, adding: "Some of the arguments put forward by our coalition partners ... need to be taken on and in my view overridden, otherwise we become about managed decline for Britain and not international competition for Britain."

Osborne indicated he was keen to close off a loophole which allows millionaires to pay a reduced rate of stamp duty by purchasing properties through companies registered overseas. It is estimated that this will raise no more than a few hundred million pounds.

The chancellor said: "These are wealthy people who just avoid stamp duty when they buy and sell a home, that's something I've made very clear is unacceptable."

Osborne indicated that he would adopt a cautious approach in meeting the Lib Dem call for the tax threshold to be raised to £10,000. He said that any tax cut has to be met by other tax rises or spending cuts and not by increasing borrowing.

"We are committed in the coalition agreement to a real increase in the personal allowance each and every year. We are taking over a million people out of tax altogether with the action we've already taken, those on low incomes. I listen very carefully to what [Nick Clegg] says. He knows as I do, as the country knows, that any tax cut would have to be paid for. In other words there would have to be a tax rise somewhere else or a spending reduction – what we are not going to do in this budget is borrow more money to either increase spending or cut taxes."

The remarks by the chancellor came as Lord Oakeshott of Seagrove Bay, an outspoken Lib Dem peer, warned that his party was prepared to block moves to reduce the size of the House of Commons if Tory MPs stand in the way of reforming the upper house. "I think we will not be wanting to put that through if they welch on the other half of the deal," he told Sunday Politics.

• Tax and spending
• George Osborne
• Liam Fox
• Nick Clegg
• Liberal-Conservative coalition
• Conservatives
• Liberal Democrats
• Petrol prices
• Stamp duty
• Tax
• Oil and gas companies

Nicholas Watt
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British academic urges government to obtain and open up archive documenting 10,000 possible second world war crimes

A British academic is calling on the government to obtain and make public a vast but little known United Nations archive documenting 10,000 cases of possible second world war crimes.

The cases range from a Japanese commander accused of incitement to rape – which would not be recognised as a war crime for another half century – to a Gestapo officer who drowned hundreds of Jewish prisoners in a sewage pond in the gardens of the Buchenwald concentration camp.

The documents include reports of 2,000 prosecutions and thousands more of individuals suspected of war crimes that have never been made public.

Dan Plesch, director of the Centre for International Studies and Diplomacy at the School of Oriental and African Studies in London, said the United Nations War Crimes Commission archive, held at the UN headquarters in New York, was not just of interest to historians but could be invaluable in prosecuting contemporary crimes.

"The importance of this archive could lie in prosecuting today for crimes of aggression, rape, cultural crimes, environmental crimes, because there's a wealth of precedent far beyond Nuremberg," he said. "In fact, these trials are 100 times greater in extent than the Nuremberg trials.

"We've asked the British government to obtain a copy, which it is entitled to do, for the use of researchers here, and that the British government should support the publication at a minimum of these 2,000 trials, the records of which are in New York."

The archive includes the crimes of a Gestapo officer at Buchenwald, described as "a particularly bloodthirsty torturer" and cases of mass rape and murder in Greece and Poland. The conviction of a Japanese commander for permitting or inciting his troops to rape is recorded in a document signed by General Douglas MacArthur.

It was not until 1998 that a UN tribunal, prosecuting leaders of the 1994 genocide in Rwanda, cited rape along with torture and murder in a trial for crimes against humanity. The international criminal court added rape as a crime against humanity in 2001 in a prosecution against Bosnian Serb troops.

Plesch believes almost all those named as suspects in the archive are now dead, but tracking down Nazi war criminals is not ancient history. Last year, John Demjanjuk was wheeled into a Munich court to be convicted at the age of 91 as an accomplice in the murder of 27,900 Jews at Sobibor in Poland. He spent decades fighting deportation orders from Cleveland, Ohio, and had already won a reprieve from a death sentence passed by an Israeli court in 1986.

The archive has been accessed by only a handful of historians under tightly controlled conditions. Until Plesch complained, they were forbidden to take any notes.

Plesch's demand for the archive to be opened is backed by Ben Barkow, director of the Wiener Library in London, the world's oldest Holocaust memorial institution. The library would be prepared to house a copy of the archive under closed conditions while the question of public access was decided.

Paul Shapiro, director of the Centre for Advanced Holocaust Studies at the Holocaust Memorial Museum in Washington, which has also applied for wider access, said the archive held "a significant amount of unique material".

The archive, held in 400 boxes, includes almost 400,000 pages of documents, mainly transferred to 184 reels of microfilm but not digitally stored or indexed. It contains the records of tThe United Nations War Crimes Commission was established in October 1943 by 17 allied nations to list and compile evidence and court records on alleged war criminals.

Only a few of the cases were prosecuted at the Nuremberg trials in 1945-46, but thousands of now almost forgotten trials were held in 15 different countries.

Historians were given access to the archive after demands in 1986 from Binyamin Netanyahu, then Israel's ambassador to the UN. Permission is needed from a historian's own government and the UN and only a handful of academics have obtained it.

Payton Knopf, the US deputy spokesman at the UN, told Associated Press: "We are aware of requests to open the archives to the public and are reviewing the issue."

Plesch said: "This is just of academic interest only if you think prosecution for environmental crimes is no longer relevant, if you think a note about prosecuting for rape as a war crime under the signature of General MacArthur is no longer relevant, if you think the potential to mine 100 times more cases than were ever considered at the Nuremberg trials has no contemporary relevance."

• War crimes
• Second world war
• United Nations

Maev Kennedy
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Revolutionary Armed Forces of Colombia to release 'prisoners of war' and give up practice of kidnapping

Colombia's main rebel group has said it will free the last of the government captives it has held for years and abandon the practice of kidnapping.

The Revolutionary Armed Forces of Colombia (Farc) said on its website on Sunday that it would release 10 "prisoners of war", who were the last in its control, although it did not say it was abandoning hostilities. The government says the rebel group holds at least 12 captives and all must be freed before talks to end the long civil conflict can start.

The rebels announced on 27 December they would free six captives, but said a month later that they were delaying the release because of a government "militarisation" of the area where the release was planned. It did not specify the location or set a date.

That announcement prompted President Juan Manuel Santos to tweet: "My God, no more tricks and deception. We don't even know where the hostages are. They haven't provided the co-ordinates. Free them now!"

The Farc, Latin America's last major rebel movement, was founded in 1964. It has been releasing captives piecemeal since early 2008.

• Colombia
• Americas

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Multibillion-dollar corporate trial is put back to allow oil giant more time to discuss possible compensation deals with plaintiffs

The multibillion-dollar trial of BP over its part in the worst oil spill ever in the US, which had been due to begin on Monday, has been postponed.

BP is accused of ultimate responsibility for the 2010 Deepwater Horizon rig disaster, when an explosion in a well led to the deaths of 11 workers and hundreds of millions of gallons of oil leaking across the Gulf of Mexico.

The case, which could last two years, will begin on March 5, BP said on Sunday night.

BP and the Plaintiffs' Steering Committee confirmed that the US District Court in New Orleans had adjourned the start of the trial by a week to allow them to continue discussing a possible settlement agreement.

BP potentially faces fines and liabilities of up to $52bn (£32bn) from the case, according to some analysts. The corporation has set aside $40bn to deal with the fallout from the spill, and has paid out around $7bn in compensation to families of victims and others whose livelihoods were affected.

Transocean and Halliburton are also on trial. Bob Dudley, BP's chief executive, who replaced Tony Hayward after the disaster, told the Sunday Telegraph: "We have to remember we are a business that invests in decade-long cycles.

"If [the trial] goes to 2013 or 2014, in the history of BP and the way the energy industry works we just have to think much longer term. Hopefully we will reach some agreements and we will be able to reduce the uncertainty and move forward. But the appeals process has various different branches it could go down in terms of time so it could be a lot longer than that [2014]."

Whether BP settles or not, the case is virtually guaranteed to prove the most expensive environmental disaster in history, far surpassing the Exxon Valdez spill off the coast of Alaska, and any payoff would dwarf previous deals the US government has reached with corporate offenders in any industry (a record that currently stands at $2.3bn for Pfizer over painkillers).

The blowout on 20 April 2010 of the Macondo well killed 11 and injured 17 workers, setting fire to the Deepwater Horizon rig which toppled and sank. Engineers took 85 days to permanently cap the well, by which time leaking oil had spread, endangering fisheries, killing marine life, closing beaches and contaminating more than 900 miles of shoreline.

However, BP denies gross negligence, and says responsibility should be shared with their co-defendants: Transocean, the rig's owners, and Halliburton, the firm contracted to seal the well. Mike Brock, a BP trial lawyer, said BP was ready to prove "that no single action, person or party was the sole cause of the blowout".

The plaintiffs include the federal government, the governments of Louisiana and Alabama, and more than 110,000 people and businesses, including large fishing and hotel operations, with claims against the company. There are 340 lawyers from 90 different firms working for the plaintiffs.

A key first witness will be Robert Bea, a Berkeley professor specialising in investigating industrial accidents, who was consulted by the White House commission investigating the explosion and has produced four reports faulting BP and its partners for their attitude towards safety, stating that the disaster was preventable.

Dudley said that BP had changed procedures since the accident and now adhered to "the toughest standards". He said that the new, smaller BP had "turned the corner" after making $23.9bn annual profits in 2011.

The Sunday Times has reported that BP's one-time boss Lord Browne may end up controlling some of the North Sea oil fields that Dudley is planning to sell off in the wake of the Deepwater disaster. The paper claims Browne plans to create a new company via Riverstone, the American investment company, with a view to buying BP's North Sea assets.

• BP
• United States
• BP oil spill
• Pollution
• Oil spills
• Oil
• Oil

Gwyn Topham
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Abdul Saboor Salangi, 25, wanted in connection with killings that prompted mass pullout of Nato advisers from Kabul ministries

Afghan police are searching for a 25-year-old police sergeant suspected of shooting two US military officers in the ministry in Kabul where he worked, killings that have raised questions about the future of the foreign mission in their country.

The shooting, after days of bloody protests over the burning of copies of the Qur'an at a US base, prompted the Nato-led coalition fighting in Afghanistan to pull all its hundreds of advisers out of ministries across the capital, with no timeframe given for their return.

The relationship between Afghan and foreign security forces had already been strained by a steady stream of what the military calls "green on blue" attacks – when the Afghan police or soldiers turn their guns on the men and women they are fighting beside.

But Saturday's shooting, which took place inside a heavily secured room in the interior ministry, suggested foreigners might not be safe even in the fortified heart of the Afghan government, at a time when the west faces key decisions about how fast to pull out combat troops and what shape a smaller, longer-term military presence might take.

The officers were shot as a fifth day of violence over the Qur'an burning convulsed the country, and barely 48 hours after an Afghan soldier shot two other US troops dead then joined demonstrators outside a base in the east of the country.

The anger showed little sign of dimming on Sunday;. A grenade thrown at a Nato base in the northern city of Kunduz, where protesters attacked a UN compound the day before, wounded seven US soldiers, Afghan officials said.

Two Afghan protesters were also killed in Kunduz, one by foreign troops and one by Afghan police, news agencies reported. The death toll from nearly a week of violence now exceeds 30, and dozens more have been injured.

The suspect in Saturday's killing is from the north, and an ethnic Tajik, a worrying sign of how hatred of foreign forces is spreading beyond traditional insurgent heartlands.

Afghanistan's ethnic allegiances are complicated, but Tajik leaders fought the Taliban during the country's civil war, and Tajiks have been less sympathetic to the insurgency than Pashtuns, who make up most of the movement and dominate southern and eastern Afghanistan.

Abdul Saboor Salangi had been an ordinary policeman with a history of absenteeism who dropped out of the force and spent some time in Pakistan before returning to another police job with the ministry, said a security source who asked not to be named.

Police raided his home in a small village in the southern part of Salang district, where he lived with his mother, wife and two children.

"When the police first sent a delegation into his house for the investigation, they didn't tell her why, so she thought her son had died and couldn't stop crying," said the Salang district governor, Abdulshakur Qudosi.

The two officers, reported to be a colonel and a major, were found dead in a room inside the interior ministry that was used only by foreigners and secured with combination locks. They had been shot in the back of the head, the Associated Press reported.

A tired-looking Hamid Karzai called for calm and offered his condolences to the families of the dead in a press conference on Sunday, but the Afghan president said the shooter might have been western or Afghan and he did not discuss the withdrawal of advisers.

Mokhtar Amiri contributed to this report

• Afghanistan
• Nato
• Hamid Karzai
• United States

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Sales of coach and train discount cards surge as driving becomes a minority pursuit among cash-strapped students

A generation of students facing higher tuition fees and lower job prospects appears to be embracing the mixed joys of budget travel in rising numbers – with the teenage dream of passing the test and driving a car now an increasingly unaffordable, minority pursuit.

Operators report that the traditional staples of budget travel, the young person's rail and coach cards, are being purchased in record numbers.

National Express, Britain's largest coach operator, reported a surge in sales of coach and regional bus discount cards last year, with 36% more being sold year on year.

Train companies said that record numbers of young people now have a railcard: over 1.2m were sold or renewed last year, almost a third higher than the 950,000 who had a discount railcard in 2005. The Association of Train Operating Companies (Atoc) said that 18-25 year-olds made over 50m journeys by rail last year, 60% up on five years ago.

Atoc spokesman Edward Welsh said: "We know a lot of under 25-year-olds are struggling to afford the costs of buying, running and insuring a car – and that's on top of paying for driving lessons."

The number of 17-year-olds taking the driving test has continued to fall year on year, as many of them deal with the loss of their education maintenance allowance coupled with a steep rise in university tuition fees. Nearly half of British 17-20 year-olds had driving licences two decades ago, but only 35% do now. Although the long-term slump in young people learning to drive eased slightly last year, the number of under-25s taking their driving test has fallen by over 20% in five years, according to Driving Standards Agency.

Rising fuel prices are dwarfed by rocketing car insurance premiums, which according to AA figures mean young men receive average insurance quotes of over £3,100.

At Victoria coach station in central London, student Lucy Hamer, 19, rolled her eyes when asked about driving. "I haven't learned to drive because it is far too expensive. I have to take the coach up to Liverpool and it's such a long journey, over five hours. The government really should be looking to cut the cost of driving but also public transport too. Every time I get on the bus it feels like the price has gone up."

Motoring organisations believe the economic conditions, rather than the emergence of a generation wilfully opposed to driving, are behind the rise in public transport use by young people. Edmund King, president of the AA, said: "You've got more young people going to university with tuition fees, and they basically don't have money to take lessons or insurance."

He maintained the dream of driving had not died. "There's still that desire, but financial circumstances have blunted the uptake. Despite the environmental talk and all else, I don't think the aspirations have changed that much."

The steep costs may have alarming effects. A recent survey for insurance firm Ingenie found that 89% of young drivers now take less than the recommended 40 hours of driving lessons before passing their test.

King warned of a vicious cycle for the non-driving young: "In times of high unemployment, it's quite useful for people to have a driving licence. For quite a few jobs, that's a prerequisite. And like learning to swim, it's easier the earlier you start. You'll end up paying even more."

If the coach has been the big winner from the age of travel austerity, not all passengers seem entirely enthusiastic, despite the promise of mod cons such as wifi, power sockets and leather seats aboard.

Also at Victoria coach station, Fay Ali, 23, an educational psychology student at Birkbeck, who paid £12.50 on the day for a single National Express journey to Sheffield, said: "I always intend to catch the train and then something happens so I'm left with nought options but to catch a coach. I had a train ticket booked but I missed it."

Alex Vardy-Meers, 25, a tree surgeon hauling his bags of tools, said that coach travel was the one thing that made his business viable. "Any money I earn would have to go straight into the costs of a car. The coach is OK. It would be easier to take a van but I can't afford that. If I didn't have a railcard I wouldn't ever take the train either."

But others have fallen in love with coach travel. Anne Wilkes, 66, a full-time carer for her husband, said it was also their favoured choice for European holidays. "If you're driving, you're low. On a coach you can see a lot more and I'm a nosy person. I like to see into people's gardens."

Carless whispers

Caroline Mortimer, 21, Harrogate, English student, University of Birmingham:

"Certainly the reason I don't drive, and haven't learned to drive, is the cost. I started taking lessons but I lost my job and couldn't afford to continue learning. I've always taken the train to travel between home and university and I do have a railcard, but I'm still forced to travel late at night when it's only £25 or at off-peak times as otherwise it's still too expensive. I can't take a coach either because it's not convenient where I live."

Nicholas Hughes, 21, from London, politics and economics student, University of Leeds:

"Living in London my need for driving isn't great, because the transport links are so good. However, at the same time, there's no doubt that the price of driving for young people – including lessons, insurance and petrol – is off-putting, and that's one reason why I haven't learned to drive. When I used to head up to university I would take the train, but even with a young person's railcard I feel that trains have become so expensive I've been priced out of those too. The coach is definitely much cheaper, and that's always how I travel back up to Leeds now."

Poonam Lad, 20, Ashton-under-Lyne, art student,Birmingham City University:

"I failed my test and it's far too expensive, if you fail, to have to pay for more lessons again. The cost can be hundreds of pounds. I take the train and the young person's railcard definitely makes a difference, and it's popular among students. A lot of students bank with NatWest, who provide the card for free when you open a student bank account. The NUS card is also helpful for discounts on the coach, but I still feel generally that the costs of travelling are too high at any age, not just students and young people."

Saoirse Linder, 20, Rostrevor (Northern Ireland), sociology student, University of Bristol:

"The cost of driving has been a big factor in deciding not to learn, and if you're a slow learner like myself it makes it that much more expensive. In Bristol, parking charges run into the hundreds of pounds too. Why would I drive when I can take a two-hour coach for a few pounds, and my university bus is free? Certainly railcard and NUS cards have an impact in that they are a hugely attractive alternative to driving, although whilst it is good that students have railcards you still have to pay for the railcard or your NUS card in the first place."

• Transport
• Student finance
• Higher education
• Students

Gwyn Topham
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Candidates rushing to embrace Arizona's crackdown on illegal immigrants should remember that the Latino vote is growing fast

For someone who holds the relatively modest position of county sheriff, Joe Arpaio has received an astonishing amount of attention from this year's Republican presidential candidates.

He has been wooed by Michele Bachmann, Herman Cain and Rick Santorum, who all made pilgrimages to Arizona to see him in person, Santorum as recently as last week. Rick Perry invited him to tour Texas with him and Mitt Romney, for whom he acted as Arizona campaign chair in 2008, has also been in contact.

There is a simple reason for this otherwise peculiar courting of an ageing and famously grouchy middle-ranking official: the area that Arpaio polices around Phoenix, Arizona's capital, is the ground zero of the fight against illegal immigration in America and he is its most famous advocate.

For two decades, he has studiously cultivated his image as "America's toughest sheriff" – raiding private businesses suspected of employing undocumented workers, rounding up Latinos as they are smuggled across the border with Mexico, sending his "posse" to swamp entire neighbourhoods and arrest individuals, usually Hispanic, for often minor infringements, handing anyone found to be undocumented to the Feds.

"They say I racially profile," Arpaio said in his office in downtown Phoenix on the eve of Arizona's Republican primary on Tuesday. "But we arrest everybody – it's not my fault a high percentage happen to be here illegally."

In the past two years, Arpaio's once lonely stance as the tough guy of US immigration policy has suddenly become de rigueur on the American right, inspired by the rise of the Tea Party movement. His approach has been elevated into Arizona state law, in the form of SB 1070, a crackdown on undocumented Hispanics that requires police to check the papers of anyone they suspect of being unlawfully present.

SB 1070 has spread like wildfire to other states across America, from Alabama and Georgia to Oklahoma and Missouri and many more.

Hence the unseemly rush of presidential candidates seeking Arpaio's endorsement. Both frontrunners, Romney and Santorum, who are locked in a bitter battle for the Republican nomination, have embraced Arizona's example.

Last week, Romney went so far as to laud SB 1070 as a model for America. On Sunday Jan Brewer, the Arizona Governor, returned the favour by endorsing Romney.

"He has that pro-business background and he has that political history that I think ... would serve America the best," she told NBC's Meet the Press. "I think he is the man who can carry the day."

But there are storm clouds gathering over Arpaio that should give Romney and Santorum pause. The sheriff is under investigation from the US justice department for racial profiling of Hispanics. He also faces growing opposition from a nascent Hispanic electorate that is finally discovering its voice.

A coalition of Hispanic and labour organisations in Arizona has just launched a campaign to oust Arpaio, who comes up for re-election in November. Led by Citizens for a Better Arizona, it produced a TV advertisement accusing the sheriff of wasting $50m (£31m) of taxpayers' money which aired during last week's Republican debate.

Arpaio says he is utterly unflustered by the opposition. "They are going after me, hoping I retire or get defeated. But I've got news for them: I'm not going anywhere."

Russell Pearce did not think he was going anywhere either. As leader of the controlling Republican group in the Arizona state senate, he was the architect of SB 1070. His aim in framing the bill was to drive illegal immigrants out of Arizona. As he puts it when we meet in a cafe in a Phoenix suburb: "Illegals are criminals, they come across the border because we incentivise them with jobs and free stuff. Lots of free stuff. We fertilise our weeds in society today."

Pearce is proud of the fact that more than 100,000 undocumented immigrants have already fled Arizona under the shadow of SB 1070 – and that is before the supreme court rules this summer on the new law. If the court allows key provisions to stand, another mass exodus could follow.

Pearce has one other statistic of which he is very proud: so many children have been taken out of schools in his district because of the fears of their undocumented, primarily Hispanic, parents that the authorities could close 13 elementary schools and save the taxpayer $400m.

Despite such success, as he sees it, Pearce has paid a heavy personal price for spearheading the crackdown. The same coalition that is turning its sights on Arpaio forced a recall election against him last November, which he lost. Since then he has been in the political wilderness.

Like Arpaio, Pearce is dismissive of the opposition that ousted him. "This recall was brought on by far-left folks, the open-border crowd, anarchists. I wouldn't disrespect the name communist by calling them that."

He has vowed to continue his mission to drive all undocumented families out of Arizona and is considering standing for office again this November, all of which delights Randy Parraz, the community organiser who led the recall campaign that drove Pearce from power.

"Pearce is still in denial and that's great because if he tries to make a comeback we will do the same to him again," Parraz said.

Parraz believes that Pearce and Arpaio – and, by extension, the Republican presidential candidates who are so eager to embrace them – are making a huge political mistake. "They don't realise that there are consequences to their extreme and arrogant behaviour: they are going to drive the Latino voters to the polls like nothing else."

Parraz goes so far as to venture that Arizona – a state that has voted Republican in every presidential election since 1952 other than Bill Clinton's victory in 1996 – could turn permanently Democratic as a result of the Republican party's perceived hostility towards Hispanics.

"It's not a matter of if Arizona will go blue [Democratic], but when," he says.

An army of volunteers is working quietly in Arizona to increase Hispanic voter registration and participation before the November presidential election. A fifth of the state's eligible voters are now Hispanic, yet just 43% of them cast their ballot in 2010 – 15% below the proportion of the general population that voted.

If that democratic deficit can be closed, it could have a huge political impact. Francisco Heredia of Mi Familia Vota, a group that encourages Hispanics to vote, aims to persuade 50,000 Latinos to register to cast their choice early by mail in the presidential election, as that will give more time for canvassers to ensure they participate and could, he believes, raise turnout to 65%.

The same push to get out the vote is under way in key battleground states with large Hispanic populations across America, raising the prospect that the Latino vote could determine the outcome of the presidential election itself.

Jeb Bush, brother of George and the former governor of Florida, has predicted that Hispanics will control the margin of victory in 15 states which will decide who takes the White House.

Yet the Republican grip on Hispanic voters is slipping. In 2004, George Bush gained 44% of the Hispanic vote and held on to the presidency; in 2008 John McCain gained only 31%. This year, that figure could fall further as a result of the Republicans' aggressive posture on immigration.

Demographically, Latinos are the voting group to watch. The number of eligible Hispanic voters has increased from 13m in 2000 to 21m in 2010 – a rise that is particularly evident in battleground states such as Arizona, Nevada, New Mexico, Florida, Pennsylvania and Virginia. In Nevada and Virginia, the Latino population has nearly doubled in the past decade.

Take a long view and the picture is even clearer: nearly a quarter of all children in America are Latino and, according to the Pew Hispanic Centre, every year about 600,000 US-born Latinos turn 18 and become eligible to vote – a demographic timebomb that should be focusing the minds of every American politician.

It is indeed focusing the mind of Barack Obama. He is regularly to be heard addressing Spanish-language media and his re-election campaign is openly courting Hispanic voters in all relevant battleground states.

Meanwhile, the Republican presidential nominees are paying homage to Arpaio.

In the view of the sheriff's arch-nemesis, that is political suicide. "The Republican anti-Latino platform is going to lock the Latino vote into the Democratic camp for a generation," Parraz says. "In order to placate the Tea Party, they are going to pay a terrible long-term price. To which I say: 'Hallelujah brother! Keep on doing that!'"

• US immigration
• Republican presidential nomination 2012
• US elections 2012
• Republicans
• US politics
• Mitt Romney
• Arizona
• Rick Santorum
• United States

Ed Pilkington
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South Africa's former president discharged following a procedure on a long-standing abdominal complaint

Nelson Mandela has returned home from hospital, easing fears over his health and demonstrating his resilience and will to live at 93.

South Africa's first black president was discharged from One Military hospital in the capital, Pretoria, on Sunday and travelled in a VIP police convoy to his house in the Johannesburg suburb of Houghton.

He had stayed overnight for minor diagnostic surgery to determine the cause of an abdominal complaint, officials said. He is now in good spirits and resting at his home, they added, ensuring a collective gasp of relief from millions of well-wishers.

Mac Maharaj, the presidential spokesman, said Mandela had undergone a laparoscopy, a procedure that involves surgeons making an incision in the belly to insert a thin, lighted tube with a tiny camera to study abdominal organs.

"The doctors have decided to send him home as the diagnostic procedure he underwent did not indicate anything seriously wrong with him," Maharaj added.

Mandela, who spent 27 years on Robben Island and in other prisons for resisting white minority rule, was elected president in 1994. The Nobel peace laureate is officially retired and last appeared in public in July 2010.

Inevitably, the nonagenarian's wellbeing is an almost constant source of speculation and, often, misinformation. When he was previously admitted to hospital, just over a year ago, it was variously claimed that he had suffered a collapsed lung, was in a coma or already dead; he was in fact treated for an acute respiratory infection.

In an interview on South Africa's eNews channel on Sunday, Maharaj, also a former Robben Island inmate, described Mandela as a strong character who liked to keep fit and remained positive even when facing the prospect of the death penalty in 1964.

Maharaj highlighted the longevity of a tough generation of struggle veterans such as Rebecca Kotane, who turned 100 earlier this month, despite South Africa's average life expectancy being 54.5 according to the World Health Organisation.

"They are a pain in my neck," joked Maharaj, a mere 76.

Ahmed Kathrada, a close friend of Mandela and fellow Robben Island survivor, and Richard Maponya, who defied apartheid to build a business empire in Soweto, are still active in public life at 82 and 85 respectively. Albertina Sisulu, born three months after Mandela and widow of his great friend and comrade Walter, died last year aged 92.

Earlier in the day, the defence minister, Lindiwe Sisulu, said Mandela had an "investigative laparoscopy" and denied reports he had undergone surgery for a hernia.

"It wasn't the surgery that has been out there in the media at all," Sisulu said. "The reason why we took him to hospital is because he did have an ongoing discomfort and when you attend to someone you want to improve the condition of that person.

"The only way that we could finally get to the bottom of this was by taking him to hospital and having a number of tests to find out if what was prescribed was working and whether we could do anything better."

Mandela looks less fragile than most recently published photos suggest, she added. "He looks very handsome, very healthy. He's as fine as can be at his age."

President Jacob Zuma also released a statement saying that Mandela was "surrounded by his family and is relaxed and comfortable".

He added: "The doctors are happy with the progress he is making. We thank all South Africans for their love and support of Madiba. We also thank all for affording Madiba [Mandela's clan name] and his family privacy and dignity.

"The doctors have assured us that there is nothing to worry about and that Madiba is in good health."

The media generally praised the government for handling the episode better than the debacle of Mandela's hospitalisation in January last year. On that occasion, the government and the Nelson Mandela Foundation kept journalists largely in the dark about his treatment, initially described as routine testing.

On Sunday, South Africa's City Press newspaper ran a front-page headline: "Newsflash: Madiba: Don't panic; World on tenterhooks as Mandela is admitted to hospital."

The paper named and shamed tweeters who spread word that Mandela had died with messages such as: "Omg biggest news ever Nelson Mandela is dead" and "RIP Nelson Mandela a great man, an inspiration, will be sorely missed."

• Nelson Mandela
• South Africa

David Smith
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Pakistan is demolishing compound where Osama bin Laden lived for years and was killed by US commandos last May

Pakistani forces have begun demolishing the house where Osama bin Laden was killed by US special forces last May, in the city of Abbottabad.

The boundary wall and upper portion of the building had already been destroyed by midnight, Karim Khan, a senior police official in the town, told Reuters.

"Yes, we have begun demolition work on the Osama house," he said. "This is a joint operation of the local administration and security forces."

He did not say why the compound was being demolished - a move that marks an ignominious end to the site of both one of the most daring raids in US special forces history, and one of the most embarrassing episodes for the Pakistani army.

Bin Laden was killed in a night-time raid by commandos after a 10-year manhunt that spanned the globe.

On the night of 2 May, Navy Seals swooped in on specially modified Black Hawk choppers, forced their way to the top floor of the house and killed Bin Laden with shots to the head and the chest.

During the raid, one of the helicopters was damaged and forced to land, leaving the Seal team to pile into the remaining chopper along with the al-Qaida chief's body. The Pakistani army says it never knew what happened.

While the raid was lauded in the United States, Pakistan reacted angrily to what it said was a violation of its sovereignty.

Residents said the compound, which had been off-limits to townspeople since the raid, was surrounded by a heavy contingent of troops and at least five construction cranes.

"After arriving in the area, they cordoned the entire town from all sides and didn't allow local residents to come or go out of the area," local resident Momin Khan said.

He said they believed the army would use explosives to blow up the building but that did not happen.

"They installed heavy lights around the building and started first demolishing the boundary walls. The area was completely cordoned off and there was no media in the area," he said.

"Local residents tried to capture pictures of the demolition process of the famous building but many of them couldn't succeed due to dark."

It was unclear why the Pakistanis had decided to demolish it now. "I think they finally decided to get rid of it as it was of no use," a senior government official in Abbottabad said, asking for anonymity because of the sensitivity of the matter.

Another senior official there said residents faced numerous problems due security measures since the raid, saying it was better to remove it altogether and let the people live their lives.

The United States has said it kept the raid secret because it feared elements within Pakistan - possibly connected with its spy agency or military - could tip off Bin Laden.

The relationship has never recovered. It deteriorated further after a 26 November, 2011 attack by Nato helicopters on a Pakistan border post left 24 Pakistani soldiers dead.

Pakistan has closed off Nato supply routes to troops in Afghanistan. A Pakistani doctor who helped the United States verify bin Laden's location in Abbottabad is in a military prison facing possible treason charges for working for the US Central Intelligence Agency.

• Pakistan
• United States
• Osama bin Laden
• al-Qaida
• Nato

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It's obviously not for the weather, so what is it about Britain that the obscenely wealthy find so attractive?

Here's something you definitely shouldn't do if you're even a tiny bit leftwing and suffer from high blood pressure: look at a document called the Forbes cost of living extremely well index. Forbes is an American business magazine, and it's cost of living extremely well index is an annual survey of price trends for things popular at the very, very top end of the income distribution. The riveting thing about the CLEWI isn't the headline attached, because that tends to be the same every year. The headline news is usually that very expensive things have gone up at a rate higher than the rate of inflation – often by as much as double. Common sense leads us not to be surprised at that, since people who don't care what stuff costs will logically not mind too much if the cost of that stuff goes up. What's gripping about the index – a basket of 40 goods and services targeting the super-rich – is the detail of what's on it.

In fact, that's always true for these indices. The fun is in the specifics. The UK Office for National Statistics publishes my favourite one. This measures inflation using a basket of goods in common use – a category that is constantly shifting, and at the moment includes mobile phone downloads, sparkling wine and long-sleeved cotton shirts. There is, in a wonky way, something moving about the close attention the resident stattos give to detailing the realities of ordinary lives; it's like a novel about British domestic life in 2012. Oven-ready joints of meat, for example, burst on to the index last year with this explanatory note: "Replaces pork shoulder joint reflecting a longer-term movement to prepared food and replacing an item which was sometimes difficult to collect since joints are sometimes only available towards the end of the week and on weekends." Someone has really thought hard about that. It's reassuring to contemplate a household that has managed to buy every single thing on the index, from hardback fiction to hair conditioner, from a provincial newspaper to women's high-heeled shoes to dried fruit (all those being new additions in 2011).

The super-rich index is made up of items that are, let's say, different. A Russian sable coat at $240,000, a facelift for $18,500, a thoroughbred yearling racehorse at $319,340, a Sikorsky helicopter at $14.8m, an arrangement of flowers changed weekly for six rooms at $98,100 or a year's tuition at Harvard at $56,652. It is, in a dark way, hilarious that a Harvard education counts as a luxury good. If all that starts getting too much, you can always decompress with a week at the Golden Door Spa in California, $6,750, or 45 minutes with an Upper East side shrink for $325. This, too, is like a novel, a novel about people whose lives are full of stuff you don't want to own and things you don't want to do. It's a novel, I find, that I don't particularly want to read.

I also didn't want to write it. A few years ago, when I set out to write a novel about contemporary London, my point of departure was to think about who I wanted to be in it. I wanted to have characters who were lucky and unlucky, immigrants and natives, mindful and oblivious, poor and rich – but the question there quickly became, just how rich? London is full of the 1%, the people at the top of the income distribution, whose circumstances are at the moment so much on the agenda for the other 99%. But the thing is that while the 1% are rich by everyone else's standards, they are not rich by the standards that rich people use themselves. To be in the 1%, in income terms, you have to earn – or, as the Socialist Worker has it, "earn" – £150,000 a year. That's a lot, to most people's way of thinking – but not to the way of thinking of the rich. I've asked quite a few people in the world of money, the kind of people who know properly seriously rich people, what counts are being properly, seriously rich. The consensus figure is that you need $100m. At that level, even the seriously rich agree that you are rich. Anyone with that amount of money is obviously way, way past the point where they will never have to think about any of their material needs, ever again.

There are more of these people in the UK than there used to be, and they have more money, too. In 1990, to come in the top 200 of the Sunday Times's annual rich list, you needed £50m. Now you need £430m. Income levels for most social groups have stagnated in the last few decades, but the super-rich have continued to get sharply richer, and to own an ever increasing share of the economic cake. This reverses the trend of the preceding few decades – and by the way, the fact that the process has continued in that direction, even as the economy contracts and average household incomes decline, refutes the whole rationale for the laissez-faire attitude to high incomes. The argument for allowing the rich to grow richer is that it starts a process where everyone else grows richer, too – but this simply hasn't happened. In fact, they're growing richer while everyone else grows poorer. "Economic imbalances and social inequality" were the top global risks cited at the World Economic Forum this year; there were 70 billionaires in Davos, so it's a subject they know something about.

As for what this has got to do with London, the answer is, perhaps too much. The capital of the UK has one of the world's largest concentrations of the super-rich, and the reason for that is that we have chosen to have them here, as a matter of deliberate government policy. The relevant policy is the notorious provision in relation to "domicile", as a definition of an individual's tax status. Every other civilised country in the world taxes its inhabitants on their income and capital: the basic rule is that if you live in a place, you pay its taxes. But it's different in the UK. Here, if you come from overseas, and can prove strong links with overseas, and can prove that you are going to return to overseas, and can therefore establish a "domicile" overseas that is different from your "residency" in the UK – well, in that case, you are treated entirely differently for tax purposes. You pay tax on your income in the UK, like the rest of us; and you can remit capital to the UK; but your overseas income, as long as you keep it overseas, is out of the reach of the Inland Revenue.

What this policy amounts to, in practice, is that the UK has a gigantic sign hanging over it saying, "Rich People! Come and Live Here! You Won't Have to Pay Any Tax!" It is an extraordinary policy for any developed nation, and not one that anyone else has been tempted to adopt. Other countries have low tax rates to attract businesses – in the EU, Ireland and the Netherlands stand out – but the only countries that have anything even vaguely resembling the British policy towards the super-rich are places that are openly accepted as tax havens, such as Monaco and Switzerland. (And even in Switzerland the tax policies vary canton by canton, and are regularly put to the vote.) Tyler Cowen, a respected American economist with a popular blog, Marginal Revolution, describes Britain quite simply as a "residential tax haven". A glance at any list of this country's richest residents will not confirm this fact, because it's impossible to know the private details of individual tax arrangements, but it is striking that of the 12 families and individuals at the top of the Sunday Times rich list, only two are citizens of the UK. The others, clearly, are attracted here by the weather.

The remarkable thing about this policy is twofold: first, it has been consistent across government after government, for decades; second, nobody ever defends or explains it in public. Every few years there's a small populist flurry of complaint against the domicile laws, and the government mutters something, and even very occasionally does something, such as introduce the £30,000 annual fee for domicile, rising later this year to £50,000. But to the super-rich such sums are – as a brief glance at the CLEWI will show – significantly less than the florists' bill at any one of their many properties. Parties deplore the domicile policy when they're in opposition but leave it intact in office.

Why? Because they think the super-rich bring more than they take away. The Treasury documents on domicile don't tell us much, and they sum up the benefits of the policy in a single sentence. "The government recognises that non-domiciled individuals ('non-domiciles') can make a valuable contribution to the UK economy – through the money they spend here, the funds they invest, the skills they bring as employees and the tax they pay." Leaving aside the huge question that immediately raises – why are we the only country which sees it that way? – the most important of those criteria is the first of them: "through the money they spend here."

"Funnily enough, though everyone remembers the Arabs, it started out with Greek shipping magnates," Michael Wilson, an accountant, told me. "That was when the Treasury first latched on to the fact that we could attract these sorts of people through the non-domicile rule. Then Arabs started coming here after the oil price shock of 1974. Then it was Asians, then Russians. It's to do with the amount they spend here."

Why doesn't it bring Americans here?

"Because American citizens pay tax on their worldwide income, wherever they are," he said, then shrugged, and added, "If every government in the world followed that policy, things would look very different."

It's strange that the Treasury doesn't publish any studies on the amount spent in the UK by affluent non-doms, but the effects are everywhere apparent in London, and are compounded by the presence of a second group, that of the international super-rich who don't live full-time in the UK but who own a property here. This group are a big part of the reason London, at least in its central areas, is so insulated from the economic troubles affecting the rest of the country. They are buying in London for a number of linked reasons, including the robustness of the legal system and the stability of the political system, but the crucial reason for the current boom at the top end of the capital's property market is sterling's decline in value. Central London property might seem insanely expensive to us, but we aren't paying for it in euros. At its nadir, sterling had lost 30% of its value against both the dollar and the euro – that's amazing, considering that a devaluation of only 14% destroyed the Labour government's reputation for economic competence in the late 1960s. The euro has weakened a bit since, but London property is still, for anyone paying with foreign currency, a bargain. Last year, half a billion pounds of property was bought in London by Greek and Italian buyers alone. A large part of their motive, we can be sure, was simply to get their money out of their own country and out of the euro; the acquisition of a bolt-hole here is a pleasant way of hedging against troubles at home. It was buyers of this sort, mainly targeting super-premium areas such as Mayfair and Knightsbridge, who last year made London property prices rise more than those in New York, Paris or Hong Kong.

It's these two groups, non-doms and the internationally mobile, who mainly make up the London super-rich. They aren't the 1%, or even the 0.1%, but the 0.01% – the few thousand richest people in the country. We go out of our way to entice them here: that's what the non-dom rule is for. But there are almost no studies of their effect on the UK; of their impact on the debate about inequality and fairness; of their impact on the capital of having a group of people who simply don't have to pay any attention to what things cost. One of the salient qualities of life in London, remarked on by long-term residents, by newcomers and by tourists, in short by everybody, is how expensive everything is. City pay is a big part of that, but the international super-rich contribute to it, too. The money they spend is obviously welcome, but it seems to me possible that it comes at too high a price to the rest of our polity. Inequality feeding down from the top of the income distribution is provably linked to a whole range of negative consequences for society, from higher rates of mental illness and incarceration and family breakdown to alcoholism, drug abuse and suicide. By choosing to have the tax system we have, we are choosing to make these problems worse; and we are concentrating the top of the inequality range in our capital city. The consequences of this need some real study. And yet it's infinitely better to live in a country where people want to be, rather than a country that people want to flee – and these people's presence here reflects that fact, too.

"Community", that loaded word so beloved of politicians, is simply not a reality in most people's lives. It's normal for us to be cut off from each other. The super-rich, however, are so cut off that they are barely living here at all. Everything that can have the word "private" attached in front of it, they have: schools, hospitals, jets, islands. Even things like the shops, which you'd have thought was one of the attractions of London for people who can afford it, function differently for the 0.01% – for the most part, they prefer to have stuff brought to them.

Fitzgerald said to Hemingway that the rich are different, and Hemingway replied, "Yes, they have more money." The realities of the overwhelming majority of lives – realities that in large part, and especially in hard times, are to do with money – have no bearing on them. Most people find they have to worry about money; if you don't ever, then in some fundamental way you are cut off from most people. Perhaps the biggest difficulty caused by the presence of so many of the super-rich is to do with the fact that they prove, precisely and completely, that we aren't in it together. We were much less aware of that while we all, on average, were doing slightly better year by year: while the cake was growing for everybody. Now the cake is shrinking, but the super-rich are still getting richer. I don't think this issue is going to go away.

• John Lanchester's novel, Capital, is published on 1 March by Faber & Faber at £17.99. To order a copy for £14.39, including UK mainland p&p, visit the Guardian Bookshop.

• Communities
• Rich lists
• Tax
• Tax and spending
• Property

John Lanchester
guardian.co.uk © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

Foreign minister tells conference on Syria that supplying weapons to rebels fighting Assad regime is 'an excellent idea' as Obama vows to use 'every tool available' to stop the slaughter

Saudi Arabia has backed the arming of Syria's opposition guerrilla army in remarks that could signal an intervention by the Sunni Muslim superpower in the Assad regime's crackdown against the uprising.

The Saudi foreign minister, Prince Saud al-Faisal, described the arming of the Free Syria Army as an "excellent idea" at an inaugural meeting in Tunisia of an anti-Assad group – the Friends of Syria.

But the Saudi delegation later walked out of the summit citing "inactivity" among the member states gathered.

Qatar's foreign minister, Sheikh Hamad bin Jassim al-Thani, called for the creation of an Arab force to "open humanitarian corridors to provide security to the Syrian people".

In the Syrian city of Homs, the International Committee of the Red Cross (ICRC) said it had begun to evacuate women and children from the Baba Amr district, where injured western journalists including the Le Figaro reporter Edith Bouvier and the Sunday Times photographer Paul Conroy had become stranded. The ICRC said 27 Syrian women and children had been taken to a hospital elsewhere in the city. "It's a first step forward," ICRC chief spokeswoman Carla Haddad told Reuters in Geneva. "The priority now is evacuating the seriously wounded or sick." She said the injured journalists were not among those evacuated.

The first day of the three-day summit in Tunis offered little to stem the rapidly deteriorating situation, although Russia, a key ally of Syria, added its voice to calls for a ceasefire to allow aid to reach areas in desperate need, such as Homs. Hopes for a ceasefire had been the centrepiece of the summit, which is being attended by almost 80 countries, many of whom are looking for ways to embolden Syria's opposition movement.

In Baba Amr, where 20,000 residents remain under military siege, neither the west nor the opposition Syrian National Council are seen as saviours. "Nothing has changed it is the same situation, the same siege," one resident told the Guardian. "They keep killing and nobody cares about our lives. We feel a lot of anger.

"Is there any real action from the world? We don't want statements. He [President Bashar al-Assad] will never stop. He will keep killing. We want them to protect our families, our children, our women. To provide food, to provide medicine. To remove this dictatorship from our head.

"Any kind of protection for civilians would be welcome. Military [intervention] would be welcome. We want action to stop the bloodshed. We want them to remove Bashar al-Assad."

In Washington President Barack Obama said the US and its allies would use "every tool available" to stop the slaughter of innocent people in Syria, uttering his most forceful words to date in response to an increasingly grim crisis that has gripped the world.

"It is absolutely imperative for the international community to rally and send a clear message to President Assad that it is time for a transition," Obama said.

"It is time for that regime to move on. And it is time to stop the killing of Syrian citizens by their own government."

He added that nations cannot afford to be "bystanders" as the killing continues.

Britain took the first step in that process,has formally recognised the SNC as legitimate representatives of the Syrian people in a move it hopes will propel the disjointed opposition and generate a global shift away from Assad's regime.

The foreign secretary William Hague's announcement in Tunis marks the first time a western state has given full backing to the nascent opposition, which had failed to lock in patrons despite a brazen and ferocious year-long regime assault on dissent.

Hague chose the summit's opening minutes to sever ties with Damascus, which has ignored repeated calls to withdraw its forces to barracks and enter into power-sharing talks.

He called on leaders of the 80 states represented in Tunis to "tighten the diplomatic and economic stranglehold" on the Syrian government, whose leaders have been already been hit with a series of increasingly harsh sanctions.

"We, in common with other nations, will now treat them and recognise them as a legitimate representative of the Syrian people," Hague said.

At the same time, the US, France and other western countries are pushing Assad to agree to a ceasefire, particularly in Homs, which was on Friday again pounded by rockets and shells for a 21st consecutive day.

Hillary Clinton warned Assad would pay a heavy price for the violence in Syria and said he must allow in urgent humanitarian relief. "If the Assad regime refuses to allow this life-saving aid to reach civilians, it will have even more blood on its hands," said the US secretary of state. "So too will those nations that continue to protect and arm the regime."

She appealed to Syrian security forces to disobey orders from their commanders to carry out acts of violence. "Their refusal to continue this slaughter will make them heroes in the eyes of not only Syrians but people of conscience everywhere. They can help the guns fall silent."

In Gaza , leaders of the Palestinian Islamist movement Hamas publicly endorsed the opposition movement in Syria, depriving Assad of one of his few remaining Sunni Muslim supporters in the Arab world, deepening his international isolation.

The SNC has signalled it will drop its objection to arm the opposition Free Syria Army, which is battling loyalist military. The SNC has suggested it would no longer oppose foreign military trainers, advisers, or even weapons, if the regime failed to agree to the terms of an Arab League initiative to end the violence.

"If the regime fails to accept the terms of the political initiative outlined by the Arab League and end violence against citizens, the Friends of Syria should not constrain individual countries from aiding the Syrian opposition by means of military advisers, training and provision of arms to defend themselves," the SNC said.

The key plank of the Arab League plan was a call for Assad to stand down, something which he, along with his allies, Russia, China and Iran, have rejected.

Instead, he is pushing ahead with a referendum on a new constitution, scheduled for Sunday, which aims to reorientate the totalitarian state towards a more pluralistic political system.

The Friends of Syria conference marks the best opportunity yet for the political opposition to shake off the same misgivings and win the confidence of the west, which has waited a year before choosing to embrace it. The SNC represents only around 70% of Syria's opposition movement and had so far struggled to adopt unified stances on many key issues.

In Bab al- Amr, where around 20,000 residents remain trapped by a military siege, neither the west or the SNC are seen as saviours "Nothing has changed it is the same situation, the same siege ," one rBaba Amr resident told the Guardian today. " They keep killing and nobody cares about our lives. We feel a lot of anger.

"Is there any real action from the world? We don't want statements. He [Assad] will never stop. He will keep killing. We want them to protect our families, our children, our women. To provide food, to provide medicine. To remove this dictatorship from our head.

"Any kind of protection for civilians would be welcome. Military interfere[nce] would be welcome. We want action to stop the bloodshed. We want them to remove Bashar al-Assad."

• Syria
• Middle East and North Africa
• Saudi Arabia
• Tunisia
• Africa
• Arab and Middle East unrest

Martin ChulovMatthew Weaver
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