One story dominates the front pages

Osborne on the rack says the Times

Osborne fights for political life says the Independent

Osborne at bay says the Guardian

Yacht a rotter is the Mirror's take

The Telegraph's headline is Osborne and the Oligarch

The Times broke the story yesterday and updates us on the latest developments

Mr Rothschild issued his statement at 9pm in what appeared to be an escalation of hostilities between the hedge fund manager and his old friend from Oxford. In it, he directly contradicted Mr Osborne’s account that there had been no discussion of channelling donations through a British company.
He went on to say that his witness, Mr Goodwin, recalled that the subject of a donation arose briefly after they went to the Russian’s yacht “but the conversation gained no traction”.
Mr Goodwin is a former adviser to President Clinton and a prospective nonexecutive director of Rusal, Mr Deripaska’s aluminium company, Mr Rothschild added that at dinner later that evening the donation was again talked about “and Mr Osborne was interested in whether and how such a donation could be secured

The crisis engulfing George Osborne deepened last night when new evidence emerged challenging his denial that he solicited a £50,000 donation to the Conservative Party from a Russian billionaire.
The shadow Chancellor's fight to keep his job was undermined when a new witness emerged who appeared to back claims by the banking dynasty scion Nathaniel Rothschild that Mr Osborne sought money from the aluminium magnate Oleg Deripaska on his yacht in Corfu in August.

says the Independent

The Telegraph says

Last night, Mr Osborne issued a statement detailing all his meetings with Mr Deripaska, including a drinks party on the magnate's £60 million yacht.
He admitted money had been offered to the Tory party through Leyland Daf, a company owned by Mr Deripaska, who is Russia's richest man.
It had followed a public appearance outside the Tories' headquarters in Millbank, during which a clearly flustered Mr Osborne denied asking for or receiving a donation but pointedly failed to deny it had been discussed.

The Guardian relates that

On a day of extreme political danger for Osborne, Rothschild, a regular fundraiser for the Conservatives, revealed he was willing to go to court to prove his claim that Osborne had not only wanted to secure a donation from the Russian, but had been party to discussions as to how this could be made legal.
Rothschild claimed Osborne had been present when the party's chief executive and fundraiser, Andrew Feldman, had suggested the money could be channelled through LDV, a British firm owned by Deripaska. It is not illegal to accept a donation from a registered UK company, but could be in breach of section 61 of the 2000 political parties law to enter into or "act in furtherance of" an arrangement which disguised an overseas donation.

The Mail calls it Mandleson's revenge

George Osborne is struggling to contain a political firestorm over illegal donations as he paid the price of crossing Peter Mandelson

The Sun's headline could be on the same story,No 1 Idiot but it relates to

POP star Katy Perry poses with a knife — an image which sparked fury last night after another teen was killed by a blade in Broken Britain.
Angry critics said 23-year-old Katy, who sold five million copies of her No1 hit I Kissed A Girl, was “out of her mind” for glamorising knives.
The picture emerged as Army cadet Joey Lappin, 16, was stabbed to death by a gang in Liverpool.

The economy is relegated to the inside pages,

At last, Bank chief admits: it really is a recession says the Guardian

Against a backdrop of more bad news on the economy, King told a business audience in Leeds what most of them already knew - that the economy is shrinking.
"The combination of a squeeze on real take-home pay and a decline in the availability of credit poses the risk of a sharp and prolonged slowdown in domestic demand. Indeed, it now seems likely that the UK economy is entering a recession," King said.

The Telegraph meanwhile reports that

The insurance companies have acted after the stock market plunges of recent weeks in the latest evidence that the contagion in the City has spread to the 'real economy'.
It means millions of prudent people, who want to access their nest eggs to stave off the effects of the credit crunch, will now have to leave their money invested - or lose an average £4,000

The Mail reports on The massive 'gold-plated' pensions for civil servants worth £700,000 EACH... funded entirely by the taxpayer

The retirement pot for Britain's top civil servants - funded entirely by taxpayers - has risen to a record £138million.
Just over 200 mandarins in Whitehall are sitting on massive 'gold-plated' pensions worth almost £700,000 each.
The officials, many of whom have presided over a series of blunders, saw their final-salary schemes soar by £16million this year, research shows.

According to the Independent,Lockerbie bomber with prostate cancer may be freed to go home

The Libyan intelligence agent serving a life sentence for the Lockerbie bombing may be freed and returned home because he is suffering from advanced cancer. Talks have been held between Libyan and British officials over Abdelbaset Ali Mohmed al-Megrahi who is said by his lawyer to be so seriously ill that it would be "unwise" to predict his life expectancy

The Telegraph says that

Britain will face a threat from radicalised young Muslims for another 30 years, the Security Minister Lord West has said.Lord West warned that it will take decades to win the argument against terrorism and extremism in some sections of British society.
"To stop this radicalisation of extremists is going to take about 30 years," the minister told MPs on the Commons Defence Committee

Science and maths revival at university boosted by £350m grant reports the Times

The number of undergraduates studying maths, physics, chemistry and engineering is on the increase after years of decline, thanks to an injection of £350 million of government money.
Co-ordinated action by universities, schools, learned societies and the Government to boost interest in science-based study is beginning to pay off, research from the Higher Education Funding Council for England suggests

The Sun reports that

BUSES could soon carry the slogan “There’s probably no God” in an atheist advertising campaign.
The British Humanist Association, which objects to Christian ads, has raised £18,000 to pay for the ads in London.
It will read: “There’s probably no God. Now stop worrying and enjoy your life.”

Gap between rich and poor narrows, but UK is still one of the world's most unequal countries

The gap between rich and poor in Britain narrowed "remarkably" between 2000 and 2005 but the country remained one of the most unequal in the developed world, the Organisation for Economic Cooperation and Development said yesterday.
The UK's growth in wealth equality has been the fastest among the world's 30 richest and most developed countries. But in 2005, when the organisation compiled its latest data, the UK remained a more unequal society than three-quarters of OECD countries, with the richest 10% earning nine times more than the poorest 10%.

Plenty on the US election,the Independent reports how Obama is selling his message to small-town sceptics

Barack Obama came to Lebanon High for a town-hall meeting with voters on the Tuesday after Labour Day (the first Monday in September), marking the first time that any presidential candidate had stepped foot in the area since Jimmy Carter came to nearby Castlewood in 1976. The campaign made tickets available to its local offices a few days before the event, and a lot of the roughly 2,400 attendees queued to get them. As a result, most of the voters in the school gymnasium seemed to be committed Obama backers already.

The Times reveals that

Al-Qaeda supporters back John McCain for president

The message, posted on Monday on the password-protected al-Hesbah website, said if al-Qaeda wants to exhaust the US militarily and economically, "impetuous" Republican presidential candidate Senator John McCain is the better choice because he is more likely to continue the wars in Iraq and Afghanistan.

With 16% of the population uninsured and the economy flatlining, healthcare has emerged as a huge election issue

says the Guardian

Other foreign news and the Times reports that

Trucks bear the fruits of peace as Kashmir trade route reopens after 61 years

India and Pakistan reopened an ancient trade route through Kashmir yesterday, allowing trucks loaded with fruit, nuts and other local produce to cross their disputed border for the first time since the Partition of British India 61 years ago.
Several hundred people cheered, waved and beat drums on the Indian side as 13 trucks headed across the heavily militarised line of control (LOC) towards Pakistani Kashmir

A harsh lesson for Germany, courtesy of its socialist past reports the Independent

A po-faced teacher, in a drab, grey synthetic dress, snatches a Mickey Mouse comic from under a school desk: "Don't you know this Western rubbish is strictly forbidden in our school. You will be reported," she barks at the cowed classroom culprit.
A few minutes earlier, the class has been drilled to respond to the slogan "For Peace and Socialism – Are You Prepared?" Fifteen blue neckerchief-clad pupils leap to attention and salute. Like robots they answer in unison: "Always prepared!"
The scenes might have been lifted from a Communist Party propaganda film about the state once known as the German Democratic Republic, but at least twice a month, they are played out for real (well almost) inside the former Stasi secret police office in the east German city of Leipzig.

Family of six killed in M6 crash were 'brightest in the world' reports the Telegraph

David Statham, 38, his wife Michelle, 33, and their children Reece, 13, Jay, nine, Mason, 20 months, and baby girl Elouise, 10 weeks, died after their car burst into flames following a five-vehicle collision on a stretch of the motorway in Cheshire.
Police picking through the wreckage on the M6 near Sandbach said it resembled a "war zone", and the Stathams' car could only be identified by its chassis number.
A Portuguese lorry driver has been arrested on suspicion of causing death by dangerous driving and is waiting to be questioned through an interpreter

According to the Mail

Shoppers buying alcohol at the supermarket face a 'walk of shame' to a dedicated checkout counter.
The plan is being drawn up by ministers to curb Britain's growing binge-drinking culture.
Stores would have to create the 'alcohol-only' areas manned by specially-trained staff.
This would hopefully deter shoppers from making excessive purchases by putting them under the scrutiny of fellow customers.

Day of judgment in the Lords for evicted Chagos islanders reports the Guardian

The long-running legal battle between the British government and the Chagos islanders over their eviction from their homes in the Indian Ocean nearly 40 years ago will reach its conclusion in the House of Lords this morning.
The law lords will deliver their ruling on whether the surviving islanders have the right to return, after being removed from the archipelago to make way for the US base on Diego Garcia

Finally the Express continues its cheery outlook

GAS bills could fall by up to £100 within weeks in a welcome piece of good news for crisis-weary Britain.
Industry analysts said the 10 per cent cut could be in place by Christmas.
At the same time energy suppliers were under pressure to pass on falling costs to consumers, with the former chief of the industry’s watchdog saying joint gas and electricity bills should be slashed by at least £400 a year.