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Taxes

Written by supervisor on June 27, 2016

“UK families pay £400 a year to subsidise the Common Agricultural Policy”
The Leave.EU campaign claims that UK consumers get a particularly bad deal out of the EU’s Common Agricultural Policy (CAP), which “effectively adds around £400 a year to each family’s living costs”.

However, many agriculturalists say this is essential to support UK farms too. The Worshipful Company of Farmers has expressed concern that a British version of the CAP payments to UK farmers would not continue at the same rates and there would be no guarantee it might continue.

As for the £400 claim, its report on the consequences of Brexit for agriculture comments: “There will be more customs controls, and thus higher trading costs, than now on trade with the EU (both ways). These could depress UK farm prices and raise some consumer costs.”

Wages

“Lower migration would push wages up”
This did not actually come from the Leave camp but was mentioned, surprisingly, by Lord Rose, the head of the Britain Stronger In Europe campaign, in comments to MPs.

He has been extensively quoted by team Leave following his comment: “If you are short of labour the price will, frankly, go up. So, yes.” Some of the context of his comments was ignored: the former head of business added “that’s not necessarily a good thing”, before elaborating on the long-term employment benefits of membership. But how accurate was his initial statement?

Last year, a report from the Bank of England supported his comment, suggesting that the wages of low-paid employees in catering, hospitality and care have been driven down by increased competition from EU workers.

However, the Centre for Economic Performance at the London School of Economics, claimed that areas of the UK with large recent increases in EU immigration did not suffer greater falls in pay as a result, but that wages fell as a result of the global financial crisis. It added: “Immigrants consume goods and services and this increased demand helps to create more employment opportunities.”

More recently, Lord Rose has clarified that his comments were misunderstood and argued that wages would fall following Brexit because the country would plunge into recession.

Such extensive reporting of fraud risks raising public perception

Written by supervisor on June 16, 2016

And some believe the stigma is growing. Three quarters of the nation feels that press courage of ‘scroungers’ and cheats has increased the stigma of accepting benefits and there’s certainly no shortage of it. In the last month alone the press has covered a multitude of benefit cheats stories, including a landlord convicted of falsifying tenants to claim housing benefit; a pensioner who wrongly claimed £35,000; and a woman who claimed £33,000 in single occupancy benefits because she and her husband weren’t having sex and she thought she was entitled to it.

Such extensive reporting of fraud risks raising public perception that many claimants are cheating the system. In fact, there’s a huge disparity between the official estimate of benefit fraud and the public perception.

A 2013 Ipsos Mori survey found that the general public believed 24 per cent of benefit payments are fraudulently claimed. The official estimate is just 0.7 per cent. The most recent British Social Attitudes survey found that almost 80 per cent of people felt that “large numbers of people falsely claim benefits”.

£10bn worth of benefits go unclaimed each year in the UK

Written by supervisor on May 11, 2016

As far as uncomfortable stats go, they are right up there. Research carried out for The Independent suggests that three-quarters of people who rely on working age benefits say they feel shame about claiming, either sometimes, most or all the time. Not only that, but two thirds of people in work agree that claimants should feel that way.

It paints a picture of a pretty bleak outlook given that one of the founding aims of the Beveridge Report, which launched the modern welfare state, was to free social assistance from stigma.

The research, which was carried out by OnePulse exclusively for The Independent, echoes the findings of a recent study from the University of Kent that found many people say they don’t think there is or should be any stigma attached to claiming benefits, but when they were asked to respond to more subtle statements such as ‘benefits are not for people like me’, just under half were conscious of some sort of benefits stigma. Most worryingly, such a stigma meant that a sizable number would or had put off making a claim.

Dangerous delays

Many people consider stigma itself to be damaging. Globally renowned psychologist Steven Pinker has argued: “The imposition of stigma is the commonest form of violence used in democratic societies.”

However, some commentators would say that there needs to be some stigma attached to benefits claims to keep the system affordable and stop more people from claiming.

Regardless, the idea that some claimants will delay applying for support because of feelings of shame is a real concern. Further research by the University of Kent has shown that one in four eligible people had either delayed or failed to apply for benefits because of the perceived stigma. That leaves them without the funds they need to live.

Income and consumption

Written by supervisor on May 3, 2016

“Britain will be able to secure trade deals following a Brexit”
Trade deals may seem very distant from personal finances and household spending, but if agreements were not secured it would have a direct effect on incomes and consumer choice. Vote Leave is adamant that the UK would still be able to trade via a new relationship, citing countries as distant as Australia that have mutual recognition agreements with the UK.

Leave claims that trade with the rest of the world could increase following a Brexit vote. One campaign leaflet reads: “After we retake control, we will negotiate new agreements with countries like India, which represent the future of global growth, much faster than the EU slowcoach wants to or is able to.”

There is particularly wild disagreement about what might happen to trade deals if Britain left the EU. Some independent think-tanks and economists believe new deals would quickly be formed; others believe it could take years to negotiate with all 28 member states.

How a Leave or Remain vote could affect your personal finances

Written by supervisor on April 3, 2016

We’ve been inundated by questions about how a vote to leave or remain would affect your personal financial circumstances. Here are a representative sample of the issues that matter most when it comes to your money, and the all-important responses from experts within impartial organisations…

I need to pay for something, in euros, by the end of July. Should I do so now – even though the exchange rate is rubbish – because it will likely get even worse if we vote to leave? Or should I wait until after the referendum, because if we vote to stay the pound will likely bounce back?

A Marklew, Wendover, Bucks, UK

Mark Bodega, director at currency dealer HiFX.com says: “The Brexit debate has already played a significant role in undermining the value of the pound. At the end of December last year, £1 was worth €1.42 – today it’s only worth €1.26. Similarly, while £1 was worth $1.56 last September, it’s since fallen to $1.42 today. The lower exchange rates mean your money gets you less. For example, if you’d changed £500 into euros at the end of last year, you’d have received €710 – today you’ll get only €630 to spend on holiday; similarly, your £500 used to buy $780, but now it gets you just $710.

You need to need to weigh up the risks. In the event that voters opt for Brexit, there may be further significant declines with many warning that a Leave vote would be likely to trigger a 15 to 20 per cent fall in the value of the pound.

On the flip side of this, if the UK votes to stay, the pound may recover some or all of the losses it has made in recent months as, Brexit aside, the outlook for sterling is relatively strong, particularly against the euro. For example, the Bank of England is almost universally expected to raise interest rates in the UK before the European Central Bank does so in the single currency zone. In other words, there’s a risk to buying in advance of the referendum – if, within days of a Remain vote, the pound bounces back you could be regretting having missed out on the rising value of the pound.

That said, the potential downside of not buying ahead of the referendum is likely to be greater than the risk of doing so as a Remain win would be unlikely to trigger a rise in the pound as large as the potential 15 to 20 per cent fall that could occur if Vote Leave wins.

Contact your creditors and make arrangements

Written by supervisor on March 20, 2016

A five-step guide to dealing with debt:

1. Work out how much money you owe and which debts are the most urgent.

2. Decide how much, if anything, you have available to pay off your debts and deal with the most urgent first.

3. Look at your options for dealing with less urgent debts and work out how to pay them off.

4. Contact your creditors and make arrangements to pay back what you owe.

5. Work out your options if you don’t have enough money to pay off all your debts.

Charities including StepChange.org offer free impartial debt management advice and support including budgeting, writing repayment plans, negotiating with creditors, and guidance on bankruptcy and other options for those who can’t afford to pay off some or all their debts.

Runaway debt levels expose 14 million Brits to grave new financial risks

Written by supervisor on February 29, 2016

Fears are growing over the speed at which UK consumers are gobbling up new credit, putting their whole households on the line in the process, as the nation approaches a level of debt similar to that experienced before the financial crisis.

Last week the Bank of England published figures showing consumer credit increased by £1.3bn in April 2016, up almost 10 per cent in 12 months. This is the second highest rate of increase since the height of the last economic boom in December 2005.

Despite tax changes for landlords and uncertainty over the UK’s future in Europe dampening mortgage lending in April to its weakest rate of growth since 2012, British consumers currently owe £1,475bn, including £64bn credit card debt and £118bn on other loans and overdrafts.

With around 2.5 million people relying on credit cards for day-to-day living and the Financial Conduct Authority warning that it will take millions of people a decade or more to pay off their bills, the figures have set alarm bells ringing among debt campaigners.

The UK’s leading debt charity StepChange this week warned that runaway borrowing could have severe consequences for many households in the event of an economic shock such as the one economists warn could be caused by a Brexit vote.

“These debt figures are going north really quite quickly and we are increasingly concerned that households will find it much harder to recover from the next economic shock,” said Peter Tutton, head of policy at StepChange.

“We are now getting close to the outstanding consumer credit levels of November 2008, and with their needles already in the red we see 14 million people struggling with unexpected income shocks and unplanned bills, half of whom are using credit to cover them,” he added.

The problem is, he said, that the last time borrowing was this high we weren’t trying to cope with income squeezes, hadn’t been faced with a long period of recession, and weren’t lulled by record low interest rates.

“The rates of credit growth are starting to get back to the bananas levels of the early 2000s,” Mr Tutton warned. “But this time it’s rising from a much higher starting point.

“And with the rise in zero-hours contracts, welfare reductions and self-employment, help for people when they do fall over isn’t as comprehensive this time around. There is just no slack anywhere in the economy.”

Meanwhile the return of questionable lending practices, including unsolicited credit limit increases, are fuelling the debt. A study last week suggested that banks increased credit limits for more than half of all credit card holders in 2015, without their request, which had pushed half of those into further debt.

Campaigners are calling on the Financial Conduct Authority to ban the practice, arguing that it fails to meet the criteria of responsible lending based on thorough affordability checks – increasing the vulnerability of those already struggling and dragging a new group of people into debt.

how your money might be affected by Brexit

Written by supervisor on February 25, 2016

The dizzying numbers flying around in this referendum seem to allow both sides of the EU debate to claim we’d be far richer or far poorer if we choose to leave or agree to remain.

Although both sides have made claims about the wealth of the country as a whole, Leave campaigners have said less about how voting with them would make individual households richer. Instead, they have mostly reacted to and rejected arguments from the Remain campaigners, who believe that a vote to leave would make us all poorer.

But Brexiteers have made some specific claims about how leaving could make a big difference to households’ personal finances, so we’ve taken a look at whether these stand up to close scrutiny.

Utilities

“EU energy regulations cost families and small businesses millions”
Vote Leave, the official campaign, claims that energy regulations handed down by the European Union add millions to the cost of generating energy and that drives up prices for UK households and businesses. It claims that getting out of the EU would allow the UK to cut prices, which would be particularly important for low-income homes living in fuel poverty.

There are several strands to this argument, including that the Lisbon Treaty is being used to force the closure of coal-fired power stations in the UK, and that EU state-aid rules are behind the delay in building Hinkley Point power station. What’s more, the campaign says that proposed EU rules regarding the sharing of gas between member states means that there could be a gas crisis in the UK as a result. However, the other side claim that energy bills will rocket if the UK does leave, so it’s easy to be confused. What do we actually know?

It’s certainly true that energy bills are high in the UK, – indeed, official figures show that our domestic energy prices are among the highest in Europe. One oft-cited reason for these high prices is green energy targets, but the UK has its own domestic targets that would need to be ditched in order for prices to fall, which could be a very unpopular move with environmentally minded voters.

10 tips for taking out a personal loan

Written by supervisor on January 29, 2016

The personal loans price war is hotting up. This week Derbyshire Building Society has thrown down the gauntlet to rival providers by launching a rate of 5.6 per cent on loans between £7,500 and £14,999.

According to analysts at price comparison site Moneysupermarket, this is the lowest headline rate since November 2006.

Although the Bank of England base rate has been at an all-time low of 0.5 per cent for three-and-a-half years now, loan rates have remained stubbornly high – until now.

With rates falling, we’ve put together 10 top tips for taking out a personal loan.

1. Shop around

As with any financial product, when it comes to taking out a personal loan it pays to shop around and compare APRs. The APR (annual percentage rate) tells the true cost of a loan taking into account the interest payable, any other charges, and when the payments fall due.

Your bank may say it offers preferential rates to its current account customers but you might still find there are cheaper loans available elsewhere. For example, existing Natwest customers are offered a rate of 7.9 per cent – 2.3 per cent above the rate offered by Derbyshire BS.

2. Check the small print

Before you apply for a loan, check the small print to see if you’re eligible. Some best buys come with some onerous conditions. Sainsbury’s Bank offers a loan rate of 5.6 per cent, for example, but applicants must have a Nectar Card and have used it at Sainsbury’s in the past six months. Natwest and RBS only offer their best loan rates to current account customers.

3. Think about early repayment charges

It might seem unlikely at the time when you take out a personal loan – but don’t forget that it’s possible you will be able to pay off your debt early. Many loan providers will apply a charge if you wish to do so, so it’s a good idea to check how much this might cost before you apply for a particular deal. If you think there is a good chance you will want to settle your loan early, it may be worth searching for a deal that comes without any early repayment charges.

4. Shop around for PPI

Payment protection insurance (PPI) has had some bad press but it’s still a useful product for some people. It’s designed to cover your monthly loan or credit card repayments if you are unable to meet them due to sickness or unemployment. If you decide you need this type of protection, it’s vital you shop around for the cheapest deal: buying a policy direct from your lender could still cost you far more than buying from a standalone provider. Furthermore, PPI policies often come with a long list of exclusions, so make sure you fully understand what is, and is not, covered before committing to a policy.

5. Check your credit rating

If you plan to apply for a market leading personal loan, it’s crucial that you check your credit rating first. Lenders are only required to offer their advertised ‘typical’ APRs to two-thirds of applicants. Therefore, if your credit rating is not in good shape, you may be offered a more expensive deal than the low rate loan you originally applied for.

6. Consider a credit card

Before you apply for a personal loan, consider other forms of credit. You might find a credit card is cheaper and a card with a 0 per cent introductory offer on purchases will enable you to spread the cost of big purchase interest-free. The longest 0 per cent deal currently is 16 months from Tesco Bank. However, if you don’t think you will be able to repay your debt within the 0 per cent offer period, you may be better off with a long term, low rate deal. Right now, the Sainsbury’s Bank Low Rate Credit Card offers a rate of 6.9 per cent APR on purchases.

7. Check out peer-to-peer lending

If you’re anti-banks you might want to borrow from a peer-to-peer lender such as Zopa. The site, “a marketplace for social lending”, links borrowers and lenders. Applicants are credit scored and you need a decent score to be accepted. Rates vary but Moneyfacts lists a rate of 6.2 per cent on a £7,500 loan over three years.

8. Borrow more

In general, the larger the loan the lower the interest rate. Due to the way some providers price their loans, there are occasions where you can actually save money by borrowing slightly more. Currently, a £7,000 loan over five years from the AA is advertised at 13.9 per cent APR with repayments of £159.58 a month. But if you were to borrow an extra £500 the advertised rate drops to 6.4 per cent APR and the monthly repayments are lower at £145.76. So borrowing the additional £500 will actually save you £829.20 over the full 60-month term of the loan.

9. Don’t apply for too many loans

When you apply for a loan online, most applicants will leave a “footprint” on your credit record which lenders check before approving a loan. Having lots of applications on your record makes you look desperate or in financial difficulties. As a result lenders will see you as more of a credit risk, so your latest loan application is less likely to be approved.

10. Know the risks of secured loans

Secured loans are cheaper than unsecured loans but you run the risk of losing your home if you don’t keep up repayments. Secured loans are only offered to homeowners with equity in their property and mean the lender effectively takes a charge on your property. So don’t sign-up unless you’re 100 per cent sure that you will be able to meet your repayments – this type of loan is basically less risky for lenders but more risky for borrowers.

The Scottish response

Written by supervisor on January 26, 2016

Change could be coming, however. Earlier this year, when the Scottish government received new welfare powers it pledged to end the stigma. Alex Neil, Scotland’s social justice secretary, said: “With our new social security powers we have the opportunity to take a different approach and develop policies for Scotland which will help to remove the stigma attached to accessing benefits.

“These policies will be based on principles which will ensure people are treated with dignity and respect. We want to show that social security can be fairer, tackle inequalities, and protect and support the vulnerable in our society.”

If they lead the way north of the border then perhaps the rest of the UK will return to viewing benefits as a support network and not something that people should feel ashamed for accepting. After all, when you include benefits for disabilities, supporting families or receiving a pension, almost two thirds of UK households receive some sort of state support.