Wednesday, May 20, 2009

Phil Mickelson's wife, Amy, diagnosed with breast cancer

Phil Mickelson was gearing up for his favorite time of year, working his way toward Bethpage Black and another crack at the U.S. Open before a New York gallery that treats him like a rock star.

All that changed today, along with his priorities, when he disclosed that his wife, Amy, has been diagnosed with breast cancer.


Mickelson is taking an indefinite leave from the PGA Tour. He withdrew from the Byron Nelson Championship, which he won in 1996. He is to defend his title next week at Colonial, but even that is uncertain. A statement from his management company said his 37-year-old wife would have more tests, though treatment would begin with "major surgery" as early as the next two weeks.

"We see Amy as this vibrant, bubbly mother of three who is tremendously devoted to her husband and family," Jack Nicklaus said. "No one, especially Amy, deserves to have to face the battle that accompanies cancer. But we know that Amy has this amazing inner strength and spirit, and with Phil's unwavering love and support, they will fight and overcome this."

Mickelson, a three-time major champion with 36 career PGA Tour victories, was closing in on the No. 1 ranking held by Tiger Woods. He was runner-up to Woods at Bethpage Black in 2002.


"Elin and I are deeply saddened to hear the news about Amy," Woods said. "Our thoughts and prayers are with her, Phil, the children and the entire Mickelson family."

Scott Verplank said Mickelson sent him a text message Tuesday night "and I had a hard time sleeping."

"Every time I've been around her, she's always had a smile on her face. She's always upbeat," Verplank said. "She's a neat girl. Hopefully, it's early and hopefully, they take care of it."

Amy Mickelson is one of the most visible wives on the PGA Tour, a former Phoenix Suns cheerleader who regularly walks the course during rounds and mingles easily with fans who recognize her blonde hair and engaging smile.

They met in 1992, when Mickelson was a senior at Arizona State, a year after he won his first PGA Tour event as an amateur. Amy knew nothing about golf at the time.

"I grew up in a tennis family, and when he told me he was a pro golfer, I thought he worked in the shop at a golf course," she wrote in Mickelson's book, "One Magical Sunday," after he won his first major at the 2004 Masters.

The first time she accompanied him to a golf tournament, the Bob Hope Classic, she figured they would walk hand-in-hand down the fairway and was angry at him for not spending enough time with her. But once she learned the difference between birdies and bogeys, she has been at his side during the highs and lows of golf tournaments.

They were married in 1996 and have three children: Amanda, 9, Sophia, 7, and Evan, 6. Their first child was born the day after the 1999 U.S. Open at Pinehurst No. 2., where Mickelson carried a pager and promised to leave if his wife went into labor.

Contractions began on Sunday, but she decided not to page him because he was so close to winning his first major. Mickelson lost by one stroke when Payne Stewart holed a 15-foot par putt on the final hole. Mickelson arrived home in time for the birth.

He nearly lost his wife during the delivery of their third child.

Sarah Strange, a breast cancer survivor and wife of former Ryder Cup captain Curtis Strange, said Amy Mickelson's outgoing personality would play a big part in her recovery.

"She's such an upbeat person, and I think she'll approach this in the same way, moving forward with confidence," Sarah Strange said. "I'm sure she's getting the best treatment they can find. An upbeat attitude plays such a key role in this, her own and those around her. I'll certainly be extending any experiences I've had, any questions she could ask me to keep upbeat.

"She was so supportive of me being a captain's wife," she said. "In return, she will feel that support from others."

Nicklaus and his wife, Barbara, spent time with the Mickelsons during his four stints as captain of the Presidents Cup team.

"She was the wife I went to for advice," Barbara Nicklaus said. "Amy is just one of those people who simply wants to help other people. Now we need to help her."

How much golf Mickelson misses this summer is uncertain, but it comes at a time when Woods, his chief rival, returned from eight months away with knee surgery. They played together in the final round of the Masters and practically stole the show with an exciting charge up the leaderboard. Mickelson finished one shot ahead of Woods, but three shots out of the playoff won by Angel Cabrera.

Credit Card Industry Aims to Profit From Sterling Payers

Credit cards have long been a very good deal for people who pay their bills on time and in full. Even as card companies imposed punitive fees and penalties on those late with their payments, the best customers racked up cash-back rewards, frequent-flier miles and other perks in recent years.


Now Congress is moving to limit the penalties on riskier borrowers, who have become a prime source of billions of dollars in fee revenue for the industry. And to make up for lost income, the card companies are going after those people with sterling credit.

Banks are expected to look at reviving annual fees, curtailing cash-back and other rewards programs and charging interest immediately on a purchase instead of allowing a grace period of weeks, according to bank officials and trade groups.

“It will be a different business,” said Edward L. Yingling, the chief executive of the American Bankers Association, which has been lobbying Congress for more lenient legislation on behalf of the nation’s biggest banks. “Those that manage their credit well will in some degree subsidize those that have credit problems.”

As they thin their ranks of risky cardholders to deal with an economic downturn, major banks including American Express, Citigroup, Bank of America and a long list of others have already begun to raise interest rates, and some have set their sights on consumers who pay their bills on time. The legislation scheduled for a Senate vote on Tuesday does not cap interest rates, so banks can continue to lift them, albeit at a slower pace and with greater disclosure.

“There will be one-size-fits-all pricing, and as a result, you’ll see the industry will be more egalitarian in terms of its revenue base,” said David Robertson, publisher of the Nilson Report, which tracks the credit card business.

People who routinely pay off their credit card balances have been enjoying the equivalent of a free ride, he said, because many have not had to pay an annual fee even as they collect points for air travel and other perks.

“Despite all the terrible things that have been said, you’re making out like a bandit,” he said. “That’s a third of credit card customers, 50 million people who have gotten a great deal.”

Robert Hammer, an industry consultant, said the legislation might have the broad effect of encouraging card issuers to become ever more reliant on fees from marginal customers as well as creditworthy cardholders — “deadbeats” in industry parlance, because they generate scant fee revenue.

“They aren’t charities. They have shareholders to report to,” he said, referring to banks and credit card companies. “Whatever is left in the model to work from, they will start to maneuver.”

Banks used to give credit cards only to the best consumers and charge them a flat interest rate of about 20 percent and an annual fee. But with the relaxing of usury laws in some states, and the ready availability of credit scores in the late 1980s, banks began offering cards with a variety of different interest rates and fees, tying the pricing to the credit risk of the cardholder.

That helped push interest rates down for many consumers, but they soared for riskier cardholders, who became a significant source of revenue for the industry. The recent economic downturn challenged that formula, and banks started dumping the riskiest customers and lowering their credit limits in earnest as the recession accelerated. Now, consumers who pay their bills off every month are issuing a rising chorus of complaints about shortened grace periods, new hidden fees and higher interest rates.

The industry says that the proposals will force banks to issue fewer credit cards at greater cost to the current cardholders.

Citigroup and Capital One referred comments to the A.B.A. Discover and American Express declined to comment. Bank of America intends to “provide credit to the largest number of creditworthy customers possible, while also remaining prudent in our lending practices,” said Betty Riess, a spokeswoman. Together with JPMorgan Chase, which has said the changes will force it to limit credit availability and raise fees, these banks account for 80 percent of the credit card industry.

Banks are not required to publicly reveal how much money they make from penalty interest rates and fees, though government officials and industry consultants estimate they constitute a growing portion of revenue.

For instance, Mr. Hammer said the amount of money generated by penalty fees like late charges and exceeding credit limits had increased by about $1 billion annually in recent years, and should top $20 billion this year.

Regulations passed by the Federal Reserve in December to curb unexpected interest charges would cost issuers about $12 billion a year in lost fees and income, according to industry calculations. The legislation before Congress would build on the Fed rules and would further squeeze banks’ revenue when they are being hit with a high rate of credit card charge-offs. The government’s stress tests showed that the nation’s 19 biggest banks will take on $82 billion in credit card losses in the next two years.

A 2005 report by the Government Accountability Office estimated that 70 percent of card issuers’ revenue came from interest charges, and the portion from penalty rates appeared to be growing. The remainder came from fees on cardholders as well as retailers for processing transactions. Many retailers are angry at the high fees and plan to pass them on to shoppers once the Congressional legislation takes effect.

Consumer advocates say they have little sympathy for credit card issuers, arguing that they have made billions in recent years with unfair and sometimes deceptive practices.

“The business model will change because the business model doesn’t work for the public,” said Gail Hillebrand, a senior lawyer at Consumers Union.

“In order to do business under the new rules, they’ll actually have to tell you how much it’s going to cost,” she said.

With many consumers mired in debt and angry at what they consider gouging by credit card companies, the issue of credit card reform has broad populist appeal. Members of Congress and the Obama administration have seized on the discontent to push reforms that the industry succeeded in tamping down when the economy was flying high.

Austan Goolsbee, an economic adviser to President Obama, said that while the credit card industry had the right to make a reasonable profit as long as its contracts were in plain language and rule-breakers were held accountable, its current practices were akin to “a series of carjackings.”

“The card industry is giving the argument that if you didn’t want to be carjacked, why weren’t you locking your doors or taking a different road?” Mr. Goolsbee said.

Ron Lieber contributed reporting.

Senate votes to block funding for Guantanamo closure

In an abrupt departure from President Obama's plans, the Senate today voted overwhelmingly against paying for closure of the U.S. military-run detention facility for suspected terrorists at Guantanamo Bay, Cuba.

The 90-6 vote was the capstone of a weeks-long Republican drive to turn an issue that had been a cornerstone of Obama's campaign message into a political liability for Democrats whose constituents do not welcome the prospect of detainees being brought from the island prison to U.S. soil.
The vote comes on the eve of a national security address planned by Obama on Thursday in which he is expected to discuss in more detail his plan for closing Guantanamo, which he ordered shut days after his inauguration. He set a January 2010 deadline for its closure.

The administration requested $80 million to pay for closure costs, but Democrats balked after Republicans raised pointed questions about where and how the detainees would be transferred to the U.S. -- either in its prisons or its communities.

"It was a mistake to submit an amount [of money needed] without no plan," said Sen. Dianne Feinstein (D-Calif.), who voted to strip the $80 million that had been included in a $91-billion bill to finance wars in Afghanistan and Iraq.


The issue likely will resurface later this year in other budget debates, but the Senate vote -- coupled with a similar decision by the House last week to drop funding for closing Guantanamo -- signals that Obama has a lot more political groundwork to lay before Congress will go along with the plan.

"There's been a major retreat by Democrats and Republicans," said Sen. Lindsey Graham (R-S.C.), the rare Republican who supports closing the Guantanamo facility. "Time is not on our side."

Pushing back against growing congressional opposition to moving detainees to the United States, a top Pentagon official said today that closing the military-run prison at Guantanamo Bay, Cuba, would require prisoners to be moved to the U.S. and urged lawmakers to think more strategically. Yet the director of the FBI also warned Congress today that moving detainees from Guantanamo to the U.S. -- even into maximum security prisons -- poses potential security risks.

Michele A. Flournoy, undersecretary of Defense for policy and the Pentagon's No. 3 official, said that if allied nations were going to take detainees, the U.S. also needed to take some into its prisons.

"When we are asking allies to do their fair share in dealing with this challenge, we need to do our fair share," Flournoy said today. "This is a case where we need to ask members of Congress to take a more strategic view. Many of these members called for the closing of Guantanamo, and we need their partnership in making that possible."

But FBI Director Robert Mueller said that bringing detainees from Guantanamo Bay into the U.S. could pose a number of possible risks.

Mueller, appearing before the House Judiciary Committee, was asked what concerns the FBI has about the prospect of transferring some of the 240 inmates currently held at the Naval base in Cuba to American prisons.

"The concerns we have about individuals who may support terrorism being in the United States run from concerns about providing financing, radicalizing others," Mueller said, as well as "the potential for individuals undertaking attacks in the United States . . . All of those are relevant concerns."

Rep. Jerold Nadler (D-N.Y.) prodded the FBI director to agree that dangerous detainees could be safely kept in maximum security prisons. Mueller balked at Nadler's suggestion, noting that in some instances imprisoned gang leaders have run gangs from inside prisons. "It depends on the circumstances," Mueller said.

Senate Majority Leader Harry Reid (D-Nev.) said today that he wanted neither to have detainees released into the U.S. nor to see them imprisoned here.

"We don't want them around the United States," Reid said.

With Obama set to deliver a speech about Guantanamo and detainee policy on Thursday, the White House is billing the address at the National Archives as a major statement on national security.

Defense Secretary Robert M. Gates has predicted that between 50 and 100 detainees would eventually be moved to American prisons and that some of the Chinese Muslims, who are held at Guantanamo but not considered dangerous, would be released into the U.S.

Flournoy would not offer her own prediction of how many detainees the U.S. or its allies would eventually take. She said the administration was going through each case individually, and there were no decisions on where detainees might be moved.

"I am optimistic that all of us will take more than we have agreed so far," she said. "This is a challenge that will require all of us to step up and make hard choices."


European allies so far have offered to take only a couple additional detainees from Guantanamo. If the U.S. cannot move more of the detainees to allied countries, it will be faced with holding large number of detainees it cannot transfer to their home countries.

Officials have been reluctant to send many of the remaining 240 detainees to their countries of origin, fearful that the suspects would either be allowed to rejoin the fight against the U.S. or could be abused in prison.


Closing Guantanamo has proven to be a far more tricky political proposition than some in the Obama administration believed it would be. Top officials have remained largely silent, failing to offer broad arguments about how closing Guantanamo could help the U.S. position in the world. Obama is expected to answer these questions Thursday.

The administration has created task forces to deal with various aspects of interrogation and detention policies -- and craft new practices on how to handle current and future detainees.

The work is complicated by the fact that many of the detainees currently in custody were captured at different times, Flournoy said. "We are dealing with an inheritance," she said. "We are dealing with . . . people . . . taken into custody when different policies were in place."


One of the most critical questions facing the administration is what to do with the potentially dozens of detainees it cannot release, transfer or try. Until now, the detainees have been held indefinitely in Guantanamo.

But if they were moved to the United States, the Obama administration may seek congressional approval to continue to hold them without formal charges.

Pressed for the administration's position, Flournoy offered few details, but did not disavow continued detention without trial -- at least for some of the detainees.

"The desire is to provide due process to as many of these detainees as possible," she said.

Human rights groups remain strongly opposed to the Obama administration's push for congressional approval for detention without trial.

A Peace Overture in Afghanistan

Leaders of the Taliban and other armed groups battling the Afghan government are talking to intermediaries about a potential peace agreement, with initial demands focused on a timetable for a withdrawal of American troops, according to Afghan leaders here and in Pakistan.

The talks, if not the withdrawal proposals, are being supported by the Afghan government. The Obama administration, which has publicly declared its desire to coax “moderate” Taliban fighters away from armed struggle, says it is not involved in the discussions and will not be until the Taliban agree to lay down their arms. But nor are they trying to stop them, and Afghan officials believe they have tacit support from the Americans.

The discussions have so far produced no agreements, since the insurgents appear to be insisting that any deal include an American promise to pull out — at the very time that the Obama administration is sending more combat troops to help reverse the deteriorating situation on the battlefield. Indeed, with 20,000 additional troops on the way, American commanders seem determined to inflict greater pain on the Taliban first, to push them into negotiations and extract better terms. And most of the initial demands are nonstarters for the Americans in any case.

Even so, the talks are significant because they suggest how a political settlement may be able to end the eight-year-old war, and how such negotiations may proceed. They also raise the prospect of potentially difficult decisions by President Hamid Karzai and President Obama, who may have to consider making deals with groups like the Taliban that are anathema to many Americans, and other leaders with brutal and bloody pasts. Some of the leaders in the current talks have been involved with Al Qaeda.

While the talks have been under way for months, they have accelerated since Mr. Obama took office and have produced more specific demands, the Afghan intermediaries said.

The Taliban leaders, through their spokesman, and those of other armed groups publicly deny that they are involved in any negotiations. But several Afghans here and in Pakistan say they have been talking directly to the Taliban leadership group headed by Mullah Muhammad Omar, the movement’s secretive founder. The council is based in the Pakistani city of Quetta.

Discussions have also been held with representatives of Gulbuddin Hekmatyar, a longtime warlord with a record of extreme brutality, and with Sirajuddin Haqqani, whose guerrilla army is based in the tribal areas of Pakistan. Mr. Haqqani’s group is also known for its ruthlessness, and for sending suicide bombers into Afghanistan.

“America cannot win this war, and the Taliban cannot win this war,” Mullah Abdul Salaam Zaeef, a former Taliban ambassador and one of the intermediaries, said in an interview. “I have delivered this message to the Taliban.”

The talks under way now appear to be directed not at individual bands of antigovernment insurgents — the strategy suggested by President Obama — but at the leaders of the large movements.

American officials insist they are not participating in any talks. “The U.S. would support such efforts only if Taliban are willing to abandon violence and lay down their arms, and accept Afghanistan’s democratically elected government,” said Ian Kelly, a State Department spokesman. Still, two of the principal intermediaries, Mr. Zaeef and Daoud Abedi, said they had held extensive discussions with American officials.

A State Department memo described a single meeting with Mr. Abedi, but said it ended briefly because American officials were not permitted to meet with representatives of Mr. Hekmatyar. There is no independent confirmation of Mr. Zaeef ’s claim to have met with Americans.

Afghan officials said they welcomed the talks. “The government has kept all channels of communication open," said Homayun Hamidzada, a spokesman for Mr. Karzai. “This includes the Taliban and Hekmatyar.”

Mr. Abedi, an Afghan-American businessman from California and a member of Mr. Hekmatyar’s political party, the Islamic Party, said he conducted negotiations in March. Guerrillas loyal to Mr. Hekmatyar are battling the Americans in the mountains of eastern Afghanistan. His political party still has a wide following in the country.

In an interview, Mr. Abedi said he undertook the negotiations — with Mr. Hekmatyar and with the Taliban leaders — at the behest of the State Department, a claim that American officials deny. Mr. Abedi said he met several times with American officials in Washington before and after his trip to Pakistan and Afghanistan. He declined to say which American diplomats he met, saying, “I am a Pashtun, and I swore on my honor that I would not reveal the names of the people I met with, so I cannot.”

Mr. Abedi said he hammered out a common set of demands between the Taliban and Mr. Hekmatyar’s group. The groups agreed to stop fighting if those conditions were met, Mr. Abedi said. The Taliban’s demands seem incompatible with much of Mr. Obama’s strategy, which is to substantially weaken the Taliban through a combination of military force and economic development. Nor did the deal Mr. Abedi described mention either Osama bin Laden or Ayman al-Zawahri, the two senior Qaeda leaders who are believed to be hiding in Pakistan under the protection of the Taliban or some other armed group.

The first demand was an immediate pullback of American and other foreign forces to their bases, followed by a cease-fire and a total withdrawal from the country over the next 18 months. Then the current government would be replaced by a transitional government made up of a range of Afghan leaders, including those of the Taliban and other insurgents. Americans and other foreign soldiers would be replaced with a peacekeeping force drawn from predominantly Muslim nations, with a guarantee from the insurgent groups that they would not attack such a force. Nationwide elections would follow after the Western forces left.

As for Mr. Hekmatyar, Mr. Abedi said he maintained a “direct link” with the guerrilla leader, and that he was authorized to negotiate on his behalf. He did not meet with Afghan government officials.

After the agreement between the Taliban and the Islamic Party was reached, Mr. Abedi said the Taliban leaders added more conditions: an end to the drone attacks in Pakistan’s tribal areas, and a release of some Taliban prisoners.

Mr. Abedi said that when he returned to the United States with his proposal, he was greeted with enthusiasm by officials at the State Department. But he said they never called him back.

Mr. Hekmatyar earned a reputation as an especially brutal commander in the civil war that engulfed the country in the 1990s, in particular for the relentless bombardment of Kabul between 1994 and 1996 that killed an estimated 40,000 civilians during an attempt to capture the capital.

In 2002, after Mr. Hekmatyar resisted the American invasion, the Americans tried to kill him with a missile fired from a pilotless airplane. They missed.


The other main negotiation is led by Mr. Zaeef and Arsallah Rahmani, a former Taliban minister and now a member of the Afghan Parliament.

“We are not talking to low-ranking people — we are talking to the leaders,” Mr. Rahmani said in an interview. Mr. Zaeef was the Taliban’s ambassador to Pakistan; he served nearly four years in American military prisons, including the one at Guantánamo Bay.

Their plan would be for the guerrillas and the government to reconcile slowly, starting with the least contentious issues. One of the main low-level demands of the opposition leaders is that their names be removed from a so-called blacklist, contained in a resolution passed by the United Nations Security Council, which obliges governments to detain the men. More difficult issues would follow.

“Blood begets blood, but talking begets peace,” Mr. Rahmani said.

Mr. Zaeef said the public declarations of Mullah Omar, who usually vows to fight on, are not necessarily to be taken seriously.

“A policy can have many faces,” he said.

Bankruptcies Swell Deficit at Pension Agency to $33.5 Billion

The deficit at the federal agency that guarantees pensions for 44 million Americans tripled in the last six months to a record high, reaching $33.5 billion, largely as a result of surging bankruptcies among companies whose pensions it expects it will soon need to take over.

The agency, the Pension Benefit Guaranty Corporation, faced a shortfall of just $11 billion as of October. The combined effect of lower interest rates, losses on its investment portfolio and rising numbers of companies filing for bankruptcy produced the jump in its projected deficit, officials said Wednesday.

Because the agency has $56 billion in assets — most of which is invested in Treasury bonds — it is not facing any prospect of default in the short term, officials said.

“The P.B.G.C. has sufficient funds to meet its benefit obligations for many years because benefits are paid monthly over the lifetimes of beneficiaries, not as lump sums,” the agency’s acting director, Vince Snowbarger, testified Wednesday at a Senate hearing. “Nevertheless, over the long term, the deficit must be addressed.”

The financial troubles are just a small part of the challenges facing the pension agency, which was created by Congress in 1974 and today is responsible for pension programs covering 1.3 million people. It pays about 640,000 people actual benefits worth about $4.3 billion a year.

The P.B.G.C.’s former director, Charles E. F. Millard, was subpoenaed to testify at the hearing Wednesday. But he cited his Constitutional right to avoid self-incrimination and declined to answer any questions.

Mr. Millard, who resigned in January, has been accused by the agency’s inspector general of having inappropriate contact with companies including BlackRock, JPMorgan Chase and Goldman Sachs, all of which competed for and won contracts to help manage $2.5 billion of the agency’s funds. Those contracts will now most likely be canceled.

Employers nationwide with so-called defined-benefit, or traditional, pension plans pay fees to the P.B.G.C. in return for a promise that it will take over their pension plan if a company fails.

On Tuesday, for example, the agency announced that it had assumed the pension plan once run by the Lenox Group, a bankrupt maker of tableware, giftware and collectibles based in Eden Prairie, Minn. Assuming control of pensions for this company’s 4,300 workers will cost the agency an estimated $128 million — the difference between what Lenox had in its pension fund and what the total estimated obligations are.

In the last six months, 93 companies whose pension plans are covered by the agency have filed for bankruptcy, including Chrysler, whose failure alone could cost the agency $2 billion. A bankruptcy by General Motors would make the situation worse. G.M. had 670,000 workers as of late last year in its pension system, whose collapse would cost the agency an estimated $6 billion.

Options to close the $33.5 billion deficit include a federal bailout by taxpayers, a change in insurance premiums it charges employers or increasing its investment returns.

Last year, the agency’s board voted to allow it to shift its investment strategy to put more money into stocks, private equity and real estate, in an effort to reduce the deficit.

If that shift had taken place, the losses would most likely have been larger. But only a relatively small amount of the funds have already been shifted to stocks, so the losses on the investment portfolio were responsible for just $3 billion of the jump in the deficit in the last six months.

Senator Herb Kohl, Democrat of Wisconsin and chairman of the Senate Special Committee on Aging, which held the hearing Wednesday, blamed poor supervision by the agency’s board and management, at least in part, for the troubles, adding that he intended to introduce legislation that would expand the board and require it to meet at least four times a year. The board has not met in person since February 2008.

“The role of P.B.G.C. is too crucial to allow its governance to slip through the cracks,” Mr. Kohl said.

Gurkhas to get right to settle in the UK

Gurkha veterans who have served four years with the historic regiment will be told tomorrow that they will be allowed to settle in the UK. The home secretary is expected to reverse government guidance issued last month that made the obstacles to entry almost insurmountable for ordinary Gurkha soldiers traditionally recruited from Nepal.

It is understood that Jacqui Smith will announce rules that will allow entry into the UK for Gurkhas previously excluded because they retired from the regiment before 1997, provided they have fought for the British army for at least four years.

Keith Vaz, chairman of the home affairs select committee, wrote to the prime minister on Tuesday saying the government should immediately approve the 1,400 outstanding applications for settlement, whether they meet new criteria established by the Home Office or not.

In a reprimand to the government, Vaz said: "The figure of 100,000 ex-Gurkhas including dependants publicly cited by the government as likely to take up settlement is clearly much overblown."

The prospective turnaround in policy came after the Labour government suffered its first big defeat last month by 21 votes, as 27 Labour rebels joined the Tories and Liberal Democrats in demanding equal residency rights for all Gurkha soldiers after a high-profile public campaign.

In an indication of the imminent policy volte face, Gordon Brown said at prime minister's questions that he had a "great deal of sympathy and support" for Gurkhas who wished to live in the UK. He said: "I believe it is possible for us to honour our commitments to the Gurkhas and to do so in a way that protects the public finances. That will be part of the announcement that is made tomorrow."

The Vaz letter to the prime minister followed a private round table discussion between Gurkhas and their campaigners and the government on the issue. The committee urged the government to "use our conclusions as a catalyst to announcing a much-needed change in policy".

He said the prospective benefit to the UK economy by the ex-Gurkhas was agreed by all to be high, both in terms of skills and economic power and in visa application fees. The committee had heard no evidence of a threat to future recruitment of Gurkhas to the British army in Nepal.

Martin Howe, one of the lawyers representing the majority of Gurkhas fighting for settlement, said: "We hope that the Gurkhas will be entitled to settlement if they have four years' service. We understand that this will be reviewed in four years time. If this is the case, we will be delighted and thankful."

David Enright, another Gurkha lawyer, said: "We think it's more or less a fait accompli but we have had several false dawns before ... I'm not going to celebrate until I know for sure."

Earlier this month, actor Joanna Lumley extracted concessions from the home office minister Phil Woolas live on television. Five Gurkhas had been sent letters telling them that they did not qualify for admittance to the UK a day after Brown had promised that the former solders' cases would be reviewed. Brown had not known about the letters and was only informed of their existence by Lumley.

Power drill doctor saves boy's life

A doctor in rural Australia used a handyman's power drill to bore a hole into the skull of a boy with a severe head injury, saving his life.

Nicholas Rossi was taken to hospital after falling from his bike and hitting his head on the pavement in Maryborough, Victoria state, on Friday.

The doctor on duty, Rob Carson, recognised that the boy, who was slipping in and out of consciousness, was experiencing potentially fatal bleeding on the brain and that he needed to relieve the pressure in Daniel's skull.

The small hospital was not equipped with neurological drills, so Carson sent for a household drill from the maintenance room.

He called a neurosurgeon in Melbourne for help, who talked Carson through the procedure – which he had never before attempted – by telling him where to aim the drill and how deep to go.

The boy's father, Michael Rossi, told the Australian newspaper: "Dr Carson came over to us and said, 'I am going to have to drill into [Nicholas] to relieve the pressure on the brain – we've got one shot at this and one shot only'."

He told Fairfax Radio today: "All of a sudden the emergency ward was turned into an operating theatre. We didn't see anything, but we heard the noises, heard the drill. It was just one of those surreal experiences."

The procedure took just over a minute, said Dr David Tynan, an anaesthetist who assisted Carson.

"It was pretty scary. You obviously worry, [are] you pushing hard enough or pushing too hard, but then when some blood came out after we'd gone through the skull, we realised we'd made the right decision," he told Australian Broadcasting Corporation.

Rossi was airlifted to a larger hospital in Melbourne and released yesterday, his 13th birthday.

Carson told the Australian: "It is not a personal achievement, it is just a part of the job and I had a very good team of people helping me."