The Institute of Fiscal Studies, (IFS) has said that more spending cuts lie ahead for the UK. In its Green Budget, published ahead of next month’s Budget, it says that the UK economy still has a long way to go and that many more spending cuts are needed.
Government departments must save a total of £51.4 billion or 14.1 per cent of their overall budget during the next Parliament. Cuts for the current Parliament will reach £38.4 billion or 9.5 per cent by the time Parliament is dissolved prior to the general election in May.
According to the IFS, the UK is making more spending cuts than any of the other 32 advanced economies. Public spending will fall to its lowest as a proportion of the national income since 1948. There will be fewer people working in the public sector than before 1971.
The IFS report is positive in its summary of the UK economy, predicting zero inflation and growth of 3 per cent in 2015.
Senior economist at Oxford Economics, Andrew Goodwin, co-wrote a chapter of the Green Budget. He said that the prognosis for the British economy was very good and that household finances were likely to improve dramatically for many during 2015.
Paul Johnson, IFS director, said that spending cuts have so far been fewer that George Osborne’s rhetoric implied. Spending on social security has not been reduced and both capital spending and departmental investment spending have only been cut by half as much as originally planned. As a result, George Osborne or his successor will have much to do during the next parliament if public finances are to recover fully from the financial crisis of 2008.
The IFS report cited the poor performance of the economy at the start of this parliament in 2010 as the cause of the current high deficit.
Men’s pay has fallen much further in real terms than women’s pay, according to new figures from the Institute for Fiscal Studies (IFS).
The IFS think tank studied pay for both sexes over the last seven years and found that, taking inflation into account, the average hourly wage for both men and women is still 4.7 per cent lower than it was in 2008, at the time of the financial crisis.
The drop in wages for women in real terms has been 2.5 per cent but, for men, it has been almost three times bigger, at 7.3 per cent.
The report by the IFS is based on its analysis of the Annual Survey of Hours and Earnings (ASHE). The survey looks at one in every hundred of all income tax returns from UK employees. The IFS compared the ASHE data from 2008 with the data from 2014.
One likely reason for the discrepancy between men and women’s earnings is that more women work in the public sector, where wages have fallen significantly less than earnings in the private sector.
The Institute for Fiscal Studies also found that the average wage of younger employees, that is those between 20 and 29, has fallen in real terms by as much as 9 per cent since 2008. The average wage of employees in their sixties, however, is now back at its 2008 level.
The number of employees who work part-time because their employers have not offered them more hours is nearly twice as high as in 2008.
The top ten per cent of earners have seen their earnings drop by nearly twice as much as the bottom ten per cent of earners. Those earning the highest wages have seen a fall in real terms of 6.4 per cent, in comparison with the bottom ten per cent, whose wages have only fallen by 3.3 per cent.
The recent cuts to energy bills made by the big six energy suppliers should have been made earlier and should have been much bigger, says the consumer watchdog, Which?
Which? said that the energy firms had failed to keep their standard tariffs in line with oil and gas wholesale prices for at least two years. Consequently, those households following a standard energy tariff found themselves £145 worse off by the end of 2014. The six major energy firms, therefore, charged their customers a total of £2.9 billion more than they could have done.
Energy UK, the industry body, responded to the criticism saying that firms cut their prices as soon as they possibly can.
Richard Lloyd, chief executive for Which?, said that their research questions the process used by energy suppliers to set their prices during the last twenty four months. He also feels that they needed to explain why their bills have not fallen further despite the dramatic drop in wholesale prices.
The six major energy firms are Scottish Power, RWE Npower, Centrica, E.On, EDF Energy and SSE. They dominate the energy supply market, only 5 per cent of which is supplied by smaller companies.
Which? said that these smaller suppliers are offering lower prices and yet are not able to put enough pressure on the big six to cut their prices.
Lawrence Slade, chief executive for Energy UK, said that the big energy firms buy wholesale gas on the futures market, ‘hedging’ or protecting themselves against future price increases. As a result, they do not immediately benefit from lower prices themselves and so are not able to pass any savings onto their clients. When companies can afford to pass their savings on, they do so, he said.
The UK economy grew by 2.6 per cent during 2014, the fastest growth for seven years, rising from 1.7 per cent in 2013.
However, official figures indicate that the pace of growth slowed towards the end of last year. Figures from the Office for National Statistics (ONS), show that the economy increased by 0.5 per cent in the final quarter of 2014, a slowdown of 0.2 per cent on the previous three months.
Economists are unsure if the slowdown is temporary or likely to be prolonged. Chief economist of the ONS, Joe Grice, said that it was too early to be sure if the slowdown is likely to last. Whilst the services sector is strong, construction, mining and energy supply sectors have contracted, he added.
According to chief investment officer at Close Brothers Asset Management, Nancy Curtin however, the figure for the last quarter of 2014 shows that the economy is definitely slowing.
The services sector increased by 0.8 per cent in the fourth quarter but construction contracted by 1.8 per cent. Manufacturing’s performance was its worse since the first quarter of 2013, growing by just 0.1 per cent.
However, Chancellor of the Exchequer, George Osborne, said that the economy was on track and that the figures from the ONS bore this out. He went on to warn that as the international economy is worsening, Britain must continue with its own economic strategy.
Despite the slowdown at the end of the year, the ONS figures show that Britain has one of the strongest performing economies in the world today. The overall economic growth figure for the US is soon to be published and is estimated to be 2.4 per cent.
The International Monetary Fund (IMF) estimates that UK growth for this year, 2015, will be 2.7 per cent.
The Pension Tracing Service will be tripling its number of staff, to help people trace pension pots they have lost track of, in order to cope with record numbers of enquiries.
The service is free to members of the public and helps them to locate former pension providers whose details they may have lost because they have changed jobs.
145,000 people contacted The Pension Tracing Service during 2014, twice as many as in 2010.
The National Association of Pension Funds estimates that there may be as many as 50 million dormant and lost pension pots by 2050.
Steve Webb, minister for pensions, said that whilst the government intends to help people to combine their pension pots if they change employers, there are still too many lost pensions.
The operational manager of the Pension Tracing Service, Jill Scott, said that being able to recover missing pension funds will put them in a much better position when they make the transition into retirement. She added that it is surprisingly easy to lose track of previous pension funds and that people today change jobs much more frequently than they used to.
From April of this year, people will be able to use the government’s new ‘pension wise’ service. This will offer guidance to everyone over the age of 55, explaining to them how they can make the most of the new pension regulations that also come into force in April.
Following George Osborne’s announcement regarding new freedoms, allowing workers to access their pensions, it is estimated that 300,000 people a year will be able to get to their defined contribution pension savings when they wish to, rather than having to take out an annuity.
Concerns have already been raised that the government’s advice service will not be able to cope with demand when the new regulations come into force in April.
Homes in the London Borough of Greenwich recorded the highest leap in value during 2014, says Halifax, the UK’s biggest mortgage lender.
The London borough is at the top of the Halifax’s list of rising house prices in cities and towns throughout the UK. The average house value in Greenwich rose from £263,183 at the end of 2013, to £328,044 at the end of November 2014, an increase of 24.6 per cent, close to three times as much as the national average of 8.5 per cent.
Halifax compiled its list from data regarding the number of mortgages it has approved during 2014. Unsurprisingly, the top of the list is dominated by London boroughs, with all but one of the top ten being in the capital. Ealing saw the second biggest rise, recording price increases of 24.5 per cent. The average house value there is now £365,859.
Prices increased in a number of other London boroughs by more than one fifth, including Sutton and Tower Hamlets. The only town in the top ten that is not in London, is Crawley in Sussex, where prices rose by 22.4 per cent according to Halifax. The town has excellent commuter links to London and a lower average house price of £267,925.
In the capital as a whole, house values rose by £43,935, thirteen per cent over all, despite estate agents reporting a slowdown in housing market activity towards the end of the year.
In stark opposition to the increased affluence of London and the south east, house values fell in many areas in the north of England, Scotland and Wales. The biggest slump was in Bury, Greater Manchester, where prices fell by 4.8 per cent, £7,000. House values in Keighley in West Yorkshire also fell, dropping by 4.4 per cent. Other areas recording a drop were Nuneaton and Stoke-on-Trent in the West Midlands and Newport in Wales.
The UK pound is at its highest level against the Euro in seven years.
The dramatic slide follows the European Central Bank’s announcement that it will pump 60 billion euros a month into the Eurozone’s economy. As a result of the bank’s quantitative easing programme, investors have been selling the euro, causing the pound to reach an all-time high of 1.34 euros.
The euro also hit an all-time low against the US dollar of $1.115, recovering slightly subsequently.
The increasingly weakening euro brings mixed blessings for the UK. Cheaper foreign holidays within the Eurozone are an advantage but this is offset by the increased hardships UK exporters will face.
Governor of the Bank of England, Mark Carney, said that the move by the European Central Bank, (ECB), was a welcome step in the preservation of the likelihood of prosperity within Europe in the medium term.
Roger Bootle, the chairman of Capital Economics did not agree, however, calling it a ‘net negative,’ because it will make life much harder for British export enterprises and much easier for European firms exporting to the UK. Foreign holidays may be cheaper but that will be of little use to those who have lost their jobs because of the rise of the pound/euro exchange rate.
The euro has been steadily falling in value against the pound for several months as the market anticipated the recent action by the ECB. It has lost around 9 per cent of its value against sterling during the past 12 months.
The ECB’s 1.1 trillion euro stimulus programme should lower the cost of borrowing and encourage European businesses and consumers to increase their spending throughout the 19 nation Eurozone.
Share markets throughout Europe all responded positively, with shares in Athens rising by more than 5 per cent.
Savers in Britain are getting a poor deal from their banks, says the Financial Conduct Authority, FCA. The regulator found that £160 billion in savings is currently earning less than or equal to the Bank of England’s base rate, 0.5 per cent.
The FCA also stated that savers are finding it difficult to compare savings accounts and so to switch providers. During the last three years, 80 per cent of quick access accounts have not been switched because many savers are put off by the perceived inconvenience.
Many savers are not even aware that the rate of interest that they are receiving has fallen. In future, the FCA says, building societies and banks must display the rates of interest their customers are receiving prominently in all communications with them.
However, the FCA has not banned the controversial so called ‘teaser rates.’ These attract savers with high interest rates for an introductory period of say six months or a year, after which the interest rate generally falls dramatically to around 0.5 per cent.
Christopher Woolard, the FCA’s director of strategy and competition, said that the FCA has no plans to ban introductory high interest rate accounts because many customers benefit from them. However, it will be demanding that banks and building societies improve their communication with their clients and ensure that they know exactly how much interest their savings are earning and when their high introductory rates expire.
The FCA found that a significant proportion of savings are held in older accounts which earn lower rates of interest than newer accounts. Savers receive scant information from their providers about alternative accounts they could switch to and often assume that the process of switching will be time consuming and problematic.
Woolard added that banks and building societies must be more transparent about reductions in interest rates on all their savings accounts.
The cost of bringing up a child from birth to the age of 21 has increased by close to £2,000 during the last 12 months, to almost £230,000.
The increase is chiefly due to the increased cost of childcare, according to a report for insurers, LV=, which was based upon figures from the Centre of Economic and Business Research. The report found that parents have to pay an average of £67,000 for each child for childcare during the 21 year period, a dramatic 70 per cent increase since 2013.
The second largest increase was in the cost of education. Parents pay an average £74,319 on uniform, lunches, school trips and university fees. The figure does not include private education and has increased by 128 per cent in the past 24 months.
The only cost to have dropped during the last year is that of clothing. Pocket money, food, toys and holiday costs have all increased. As a result, the study concluded, parents are spending as much as a third of their annual income on their children.
Myles Rix, LV =’s managing director of protection, said that having children is more expensive than it has ever been.
Findababysitter.com published its annual childcare report in January, showing that one in four of all unemployed mothers would like to work but is put off by the high costs of childcare.
Four out of every ten parents have reduced their routine spending in order to pay their bills, the report said, whilst ten per cent of parents said that they had postponed having more children because of the high costs.
In March 2014, the government announced a number of moves designed to help parents with childcare costs, such as a new childcare voucher scheme that will come into effect later this year.
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.
