Chancellor George Osborne has laid out the government’s latest austerity plans which will raise £4.5 billion and include the sell off the government’s remaining £1.5 billion share of Royal Mail. A further £3 billion will be saved through cuts to all government department budgets except the NHS, schools and aid.
Whitehall departments most affected by the cuts are the Ministry of Defence, the Department for Education and Business (non schools) and Innovation and Skills.
£500 million will be saved at the Ministry of Defence, a controversial move because the government is unlikely to be able to commit to Nato’s target – that the UK spends 2 per cent of its national income on defence.
The budget for schools has been ring fenced so cuts could hit sixth form colleges and children’s services. However, a spokeswoman for the Department for Education said that savings would be made through ‘efficiencies and under spends in demand led budgets.’
The NHS budget is also safeguarded and so will not be directly affected by the government’s austerity measures. However, the Department of Health will have £200 million less for public health grants to local authorities.
The announcement that the government is also to sell its final share in Royal Mail of 30 per cent has also drawn criticism, following the previous sale of Royal Mail shares in 2013 which were undervalued, possibly by as much as £1 billion. Shares fell by 3.3 per cent immediately after the latest announcement, causing the value of the government’s stake in Royal Mail to drop by £50 million.
This time the coming sale of Royal Mail shares is likely to be aimed at companies rather than the public. None of the shares will be reserved for Royal Mail staff, unlike in 2013, when a block of 10 per cent was set aside for employees.
People living in the Scottish Borders saw the greatest rise in disposable income during 2013, according to figures recently released by the Office for National Statistics.
Gross disposable income is defined by the ONS as money left over after taxes, mortgages, rent and pension contributions have been deducted.
Incomes have risen most in rural areas around the UK, says the ONS, particularly in Scotland. The Scottish Borders, the Western Isles and West Cumbria saw the fastest growth. Disposable household income rose in the Scottish Borders by 5.2 per cent and by 5.1 per cent in both the Western Isles and West Cumbria.
Bradford and Hull also saw an increase in gross disposable household income, rising by 4.2 per cent and 3.8 per cent, respectively.
The richest residents in the UK remain in Central London, however. People living in the London Borough of Westminster have the most disposable income, an average of £43,577 per person. In fact, residents in the four richest London boroughs of Kensington and Chelsea, Westminster, Camden and City of London have disposable incomes twice as large as the average UK resident, which is £17,559. Whilst disposable income didn’t rise as much in Fulham and Hammersmith or Kensington and Chelsea, as it did in the Scottish Borders, it still rose by 3.7 per cent.
In contrast, household disposable incomes actually fell in many urban areas of the UK. Areas in north east London, such as Redbridge and Waltham Forest, were particularly hit, seeing GDHIs fall by as much as 3.8 per cent.
Manchester, Enfield, Luton, York and South Nottinghamshire also saw disposable incomes drop by more than three per cent during 2013.
The area in Britain with the lowest level of disposable income is Leicester, with just £11,739, a quarter of the amount residents in Westminster have.
The value of property in the UK will soar over the coming months, according to leading economists.
House prices rose modestly in April but are expected to rise rapidly now that the uncertainty that led up to May’s General Election is at an end. In fact, the Conservative win has galvanized sellers and buyers of property alike.
By April of this year, average house prices had risen to just £1,200 below their highest peak reached just before the financial crisis in 2007. Figures released by the Land Registry show that house prices increased by 0.9 per cent in April, having fallen by 0.8 per cent in the previous month.
Property economist, Matthew Pointon, of City consultancy Capital Economics, said that he expects further rises in house values this year because the stock of properties for sale is at an historic low.
Annual house inflation is the lowest it has been for 14 months at 5.7 per cent but, Matthew Pointon believes that it is has reached its low point and is set to rise.
Rising incomes, as well as competition between mortgage lenders to attract customers with the best deals, are likely to increase the supply of homes on the housing market and to push up values.
In the run up to the general election, the number of properties at the top end of the housing market fell by as much as 30 per cent, as homeowners worried that a Labour win would see the introduction of a mansion tax on properties worth more than £2 million. Since the Conservative win, buyers of luxury homes have been returning to the market.
Surging house prices are likely to pose a dilemma for the Bank of England who may choose to avoid another housing boom by raising base rates earlier than otherwise predicted.
Consumer confidence has risen to its highest level since 2006, according to recently released data from market research company, Nielsen.
Job prospects are rising and inflation is at a record low, leading to increased confidence in personal finances. The Nielsen Consumer Confidence index hit 97 during the first quarter of this year, its highest since 2006 when it reached 101, and ten points higher than at the same time last year.
The proportion of households feeling that now is a good time to spend rather than save was also up, reaching 45 per cent in April, the highest figure since records began in 2006.
Nielsen’s managing director, Tony Steve Smith, said that the rise in consumer confidence was due to the fact that unemployment is falling, inflation is at zero and people are enjoying lower prices in supermarkets and at petrol stations. The UK is one of the world’s fastest growing economies and the increase in consumer confidence reflects this.
Nielsen’s survey questioned 500 people in the UK and found that the number of people feeling more positive about their job prospects has also risen to 45 per cent, its highest level since 2008.
A second survey, conducted on behalf of Asda, showed that the average UK household had an extra £17 per week to spend on luxuries during April, indicating that household finances are continuing to improve.
The Asda income tracker revealed that average household disposable income has risen by ten per cent, to £187, due to increased employment, rising wages and low inflation. Gas and electricity, food and non-alcoholic drinks are almost three per cent cheaper than they were 12 months ago.
Asda managing director, Andy Clarke, said that this is the first time he has ever seen essential item deflation during thirty years in retail.
Holidaymakers travelling to Greece this summer are being advised to take euros with them rather than relying on credit cards and cash machines.
The advice from the Greek Tourist Board in London is in response to the possibility that the financial crisis could force banks to switch off their cash machines. While they are not expecting problems at the moment, they state that tourists should not visit the country expecting to rely solely on cash machines and credit cards.
The Foreign and Commonwealth Office’s official guidance to anyone visiting Greece is to take enough cash with them to cover unexpected delays and emergencies.
Bob Atkinson from Travelsupermarket.com said that travellers to the debt ridden country should take with them a number of different payment options. He referred to the Cyprus bailout in 2013 when some restaurants and shops would not accept card payments and many banks limited cash withdrawals.
The Greek finance minister, Yanis Varoufakis, has said that his country could run out of money in a matter of weeks. Greece owes a total of 323 billion euros and its economy has shrunk by 25 per cent since the start of the Eurozone crisis. The total debt is 175 per cent of the country’s gross domestic product. Sixty per cent of the money owed is to the Eurozone and 10 per cent to the International Monetary fund, IMF.
Greece has until the end of June to reach an agreement with its creditors. The financial situation was described as ‘terribly urgent’ by Mr Varoufakis. Eurozone member states are insisting that Greece makes a number of reforms in return for its bailout, one of which is to cut pensions.
Concerns continue that Greece might default on the money it owes to the IMF, although these have been somewhat allayed by the news that it has made part of a £750 million payment due on May 13.
Both UK shares and the value of the pound shot up following the Conservative win in the general election.
Traditionally, investors in the UK are thrilled by a Conservative win and the Tory party’s unexpected clear win was no exception. The FTSE 100 rose by 1.7 per cent even before the final seats had been declared whilst the pound rose by two cents against the dollar. The pound also rose against the euro, climbing rapidly by almost two euro cents.
Earlier opinion polls had indicated that no one party would win a clear majority, to the nervousness of the financial markets which had feared the possibility of a hung parliament, bringing with it a long period of uncertainty. Jason Hughes, from CMC Markets, a trading firm, said that the financial markets favour periods of stability and certainty and this win enables the Conservatives to continue to push through their policies of the previous parliament.
Bank shares initially saw the largest increase because the Conservative win lessens the likelihood of a rise in bank levies. Lloyds Banking group shares surged by 5.9 per cent and shares in Barclays by 4.1 per cent. Energy suppliers also saw their share prices rise because Labour had promised a freeze on energy prices and greater powers to the regulator, Ofgem. Shares in Centrica, owner of British Gas, were up by 7.9 per cent within hours of the news of the Conservative party victory.
However, according to analysts the rise in shares and the pound could be short lived. The possibility of Britain leaving the European Union will become a very real issue over the coming months and this will affect trading. Bill O’Neill of UBS Wealth International said that Britain’s possible exit of the EU and Scotland’s devolution will impact on the value of the pound sooner rather than later.
According to the British Banking Association (BBA), borrowing with either a loan or an overdraft has grown by 4.4 per cent during the past twelve months, the fastest growth since the financial crisis of 2008.
During and after the recession, bank clients were more cautious but confidence is now at a six year high.
Some experts are expressing concern than many of those choosing to borrow money from their banks could find themselves in financial difficulty should interest rates rise from their record low of 0.5 per cent.
Analysts believe that borrowing has increased because wage levels have remained fairly stagnant and many households are feeling the squeeze on their ability to make larger purchases.
Many consumers are choosing to make purchases they have put off for years. Chief economist at the BBA, Richard Woolhouse, said that demand for personal overdrafts and loans has risen steeply during the past year. Consumers are clearly feeling more confident about more expensive purchases such as cars, holidays or home improvements and this is indicative of the recovery of the economy.
However, Mr Woolhouse added, the number of consumers choosing to place their savings in High street banks is reducing, probably because of the higher interest rates offered by the new Pensioner Bonds.
Michelle Highman, chief executive of the Money Charity, said that the increase in loans and overdrafts over the past twelve months shows that the banks are increasingly willing to lend money to their clients.
Unsecured borrowing is likely to boom over the coming five years, reaching 55 per cent of total household incomes by 2020 according to the Office of Budget Responsibility (OBR). The current level is 37 per cent.
The OBR is also predicting that house prices will increase by as much as 30 per cent by 2020.
More payments are now made by card than with notes and coins, according to The Payments Council.
The use of cash to pay for goods fell to less than half of all payments made during 2014. All other payments were made by debit or credit card, cheques or electronic transactions.
The Payments Council said that the move towards mobile and contact-less payments is set to continue and that cash payments are likely to fall by as much as 30 per cent over the next ten years.
Cash is still the most commonly used payment method, however, accounting for more than eight out of every ten purchases made in pubs, newsagents and clubs last year. Nearly 80 per cent of all goods bought in convenience stores were also paid for with cash.
24 per cent of all payments were made by debit card and a further ten per cent by direct debit.
The use of cheques is continuing to fall with only 1 per cent of consumer payments made by cheque in 2014.
The Bank of England has announced plans to change the look of much of the cash we keep in our wallets and purses. There will be a new 12-sided £1 coin in 2017; a plastic £5 note in 2016; and a plastic £10 note in 2017. The plastic notes are made from polymer and have a life expectancy of twice that of the traditional paper note. Polymer bank notes are already in circulation in Scotland, a year ahead of the rest of the UK. The plastic £5 has been issued by Clydesdale Bank and commemorates the 125th anniversary of the Forth Bridge.
Other findings by The Payments Council were that only 4.4 per cent of adults rarely use cash and that the average cash withdrawal made at ATMs in 2014 was £67.
Britain’s economic recovery slowed sharply in the first quarter of 2015, according to official figures from the Office for National Statistics.
The economy grew by only 0.3 per cent between January and March, half as much as that of the previous quarter. Economists had forecast a growth rate of 0.5 per cent.
David Cameron warned that the UK’s economic recovery could not be taken for granted and that a Labour government would put it in jeopardy.
The rate of growth for the first three months of 2015 was the slowest since the final quarter of 2012, when economists believed that the economy might fall back into recession.
The slowdown in the economy was unwelcome news to the Conservative party, coming in the final week before the next general election. Chief economist for IHS Global Insight, Howard Archer, said that the newly released figures would give a ‘jolt’ to the Coalition government, who had been hoping that the continued recovery of the economy would persuade undecided voters to vote for them.
The service industry was the only UK sector to show growth. The output of services, such as bars, restaurants and hotels, grew by 0.5 per cent during the first quarter but this was still down on the rate of growth for the last quarter of 2014, when it reached 0.9 per cent. It is, in fact, the only sector to have recovered and exceeded its pre-financial crisis level.
Other sectors shrank during the first three months of the year, with construction falling by 1.6 per cent, industrial production by 0.1 per cent and agricultural output by 0.2 per cent.
Industrial production barely grew, managing a growth of just 0.1 per cent, brought down largely by mining production and water and waste management.
Britain has negative inflation for the first time in more than fifty years, according to the latest Consumer Price Index figures – the index used by The Office for National Statistics to measure inflation. In February and March, the rate was measured at 0 per cent and this fell by 0.1 per cent in April, to – 0.1 per cent.
The last time Britain had deflation was in 1960 when Lonnie Donegan topped the charts, a loaf of bread cost the equivalent of 5 pence and a house could be bought for £2,500.
Negative inflation means that the money in your pocket will go further because the cost of living is falling, rather than rising. It also means that interest rates are likely to stay at their record low for some time to come. This is bad news for savers but good news for borrowers, who will continue to enjoy cheaper borrowing costs.
Economists are calling the current consumer price index decline negative inflation rather than deflation, because the former is used to refer to a short term situation and deflation when it lasts for more than a month or two.
The Governor of the Bank of England, Mark Carney, expects Britain to have negative inflation for a brief period only, referring to it as a ‘temporary period of falling prices’ rather than something more damaging to the economy.
Mark Carney has said that this period of negative inflation is ‘unambiguously good’ for everyone. We all benefit from lower food prices and lower fuel costs. What’s more, spending less on petrol and groceries means that we have more spare cash to spend on other things which, in turn, is good news for the UK economy. Experts predict that the average householder will save £140 a year because petrol prices have fallen.
For a typical loan of £30,000.00 over 120 months with a variable interest rate of 19.56% per annum, your monthly repayments would be £598.34.
Including a Product Fee of £2,400.00 (8% of the loan amount) and a Lending Fee of £807.00, the total amount repayable is £71,800.20.
Annual Interest Rates ranging from 11.88% to 29.38% (variable). Maximum 50.00% APRC. The loan must be paid back by your 70th birthday. Read more.
Think carefully before securing debts against your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured against it. If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
