Coming on the same day that the EU has called for even more sweeping powers including the ability to seize failing banks, sack board members and impose haircuts on senior bank debt, this is an issue that appears no nearer a resolution.
Policymakers are essentially confronting two competing demands – if the UK economy is to return to some sort of normality, businesses and individuals must be able to borrow at reasonable levels, but governments are understandably keen to prevent the sort of irresponsible lending that contributed to the recent global economic downturn.
The Bank of England’s quarterly credit conditions survey revealed that the amount of capital available for lending had been ‘tighter’ since the Basel announcement in September, with lenders commenting that the rules would constrain net lending in the months and years ahead.
Banks also indicated continued difficulty in getting existing risk off their books amid weak demand in the debt markets.
Meanwhile the EU’s proposals for a new regulatory regime – to be in place by 2014 – are intended to ensure banks would in future be able to fail without endangering the wider economy but the prospect of additional regulation on this scale may well provide a further disincentive for banks to lend.
While the authorities’ moves to prevent reckless behaviour by the banks is understandable, they must ensure, as much as possible, that the small businesses and individuals – who did little to cause the crisis – are not the ones to suffer most.
For more information, please visit www.glazers.co.uk
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( 2.9 / 207 )There’s gloomy news on the pay front this morning as new research suggests that wage rises, for those fortunate enough to have them, will fail to keep pace with inflation over the coming year.
The research, by Incomes Data Services (IDS), indicates that November saw typical private sector pay awards of 2.2 per cent, slightly up on the two per cent achieved during most of 2010. And IDS suggests that average private sector pay may increase by three per cent in 2011.
At least things seem to be heading in the right direction, but the reality is that the Retail Prices Index (RPI) stood at 4.7 per cent in the year to November, leaving private sector pay deals trailing inflation. And there’s little comfort to be had when measuring pay against the Consumer Prices Index, the government’s target measure for inflation, which stood at 3.3 per cent in November.
Public sector workers, who are being hit hard by government action to cut the deficit, are faring even less well. According to IDS, typical public sector pay rose by just 0.75 per cent in 2010 and this year any increases will be lower.
With those in the know expecting RPI to stay above four per cent in 2011, both private and public sector employees are likely to see the value of their earnings continue to decline.
This week’s hike in VAT to 20 per cent is another blow and yesterday the United Nation’s Food and Agriculture Organisation reported that global food inflation hit a record high last month, with a warning that it would be “foolish” to assume it was at its peak.
So it looks as though we’re all in for another round of belt-tightening in 2011, although it’s interesting to note that while Mothercare and Clinton Cards today warned of reduced profits, after severe weather hit business at the end of 2010, Majestic Wine saw like-for-like sales grow by almost four per cent in the nine weeks to 3 January. Whether that’s because we’re deciding to eat, drink and be merry or to drown our sorrows is up for debate.
For more information, please visit www.glazers.co.uk
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( 3.1 / 76 )It’s probably fairly safe to say that aspiring to a financially secure old age is a common goal. If we’ve worked hard and tried to manage our money sensibly for many years, we’d like to enjoy a retirement free of financial worries.
Sadly, new figures from the Insolvency Service indicate that for an increasing number of pensioners, that’s just not the case.
The Insolvency Service, which has this week linked up with charities Citizens Advice, the Consumer Credit Counselling Service (CCCS) and the Money Advice Trust to run a Dealing with Your Debt campaign, has highlighted the fact that Britain’s pensioners are now the fastest growing group of bankrupt individuals in the UK.
Although bankruptcy levels in the over-65 age category are the lowest nationally, the numbers of bankrupt individuals in the age group have increased six times in a decade and at a 50 per cent faster rate than for other age groups.
For women over 65, the growth rate of bankruptcy is even sharper, increasing by more than ten times between 2000 and 20009 and by a staggering 43 times in London.
The debt levels involved for older people are also troubling. The CCCS says that for its clients aged over 55, the average debt is £25,826 – around £1,500 higher than the average for clients overall – while their average annual income is £12,920, almost £4,500 less than the average for all CCCS clients.
Dealing with debt at any time can be difficult but older people face the added challenge of having more limited opportunities to increase their income as they seek to get their finances back into shape.
A key message of the Dealing with Your Debt campaign is that if you are in trouble financially, there is plenty of expert advice available, much of it free.
Yet worryingly, the Money Advice Trust says its research shows that just one in six people with a debt problem seeks advice, which suggests that there are many, many more pensioners out there keeping their money worries to themselves: a sharp reminder, if we needed one, to keep our personal finances in order.
For more information, please visit www.glazers.co.uk
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( 2.9 / 233 )After the Christmas and new year holidays hopefully gave us a chance to forget, at least temporarily, the nation’s economic woes, today’s key event should bring us back down to earth with a bang.
VAT rose today by 2.5 per cent to 20 per cent, a rate that Chancellor George Osborne has signalled will be permanent, calling it “a structural change to the tax system to deal with a structural deficit”.
The 20 per cent rate is predicted to raise an extra £13 billion for the Treasury, a welcome boost for the coalition government as it works to balance the national books.
Mr Osborne calls the VAT hike “tough but necessary”. Labour leader Ed Miliband says the move is “the wrong tax at the wrong time” and that it will cost the average family an extra £7.50 a week, or £390 a year.
Mr Osborne says the increase in VAT will help to boost employment by increasing confidence that the government is tackling the budget deficit. A report by the Centre for Retail Research and Kelkoo, Europe's largest e-commerce website, says the bottom one-fifth of earners will be hit hard, as VAT payments represent 12.1 per cent of their disposable income compared to 7.4 per cent in the average household.
Mr Osborne says raising VAT is the least harmful tax option to help tackle the nation’s debts, compared with a rise in income tax or national insurance, which he describes as “far more economically damaging”.
The British Retail Consortium says the rise will push inflation up and contribute to reduced sales as the year continues – although it accepts that the increase, coupled with public spending cuts, is necessary as part of the government's package to tackle the deficit.
No doubt we will listen to the arguments, pay our money and take our choice as to who is right and who is wrong on the VAT front. One thing is certain: when it comes to 20 per cent VAT, we don’t have much choice other than paying up – or keeping our money in our pockets.
For more information, please visit www.glazers.co.uk
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( 3 / 228 )If the run-up to Christmas has not been the best so far, then today should at least bring some partial compensation.
Last weekend, shoppers were kept at home by severe winter weather but with the icy conditions now lifting a little, they look set to hit the high streets in earnest in a late surge of Christmas shopping. Some experts are predicting that today could be the biggest shopping day of all time.
To give a measure of the business that is expected to go through the nation’s tills, card company Visa says it expects to process around 26.5 million transactions, worth more than £1.2 billion, throughout the day, some 20 per cent up compared with last year.
That’s good news for retailers, particularly smaller traders. According to the Federation of Small Businesses, many had taken on extra seasonal staff to cope with anticipated Christmas demand, only to see a drop in footfall of up to 30 per cent last weekend, leaving them to cope with increased overheads and reduced takings.
As John Walker, national chairman of the FSB says: "Small businesses were banking on a good Christmas to make up for a bad year and the prospect of more bad news in 2011.”
With two shopping days to go before Christmas, a significant spending spree will go at least some way to get retailers back on track. And the start of the sales on 27 December should help too.
So while this may not have been quite the festive season they had hoped for, perhaps retailers will be enjoying some kind of a Christmas bonus after all.
For more information, please visit www.glazers.co.uk
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