Prime Minister Pledges Tax Cuts Ahead of May Election

David Cameron has stated that the people of the UK “deserve tax cuts” and that there is an “economic, moral and practical case” for reducing the amount of tax they pay. The Prime Minister’s comments came as part of a speech given in Hampshire, in which he outlined his pledges on the subject of taxation ahead of the general election in May.

According to the Prime Minister, his party’s plans for taxation would see the personal allowance – the amount an individual can earn each year before they start paying tax – raised to £12,500 by 2020. This, he said, was fitting for a country that is “thoroughly in favour of work and effort.” The term of the coalition government has already seen the personal allowance raised from £6,475 when the current parliament was formed in 2010/2011 to 10,500 in the current financial year.

The Liberal Democrats have also pledged to ensure the personal allowance reaches the £12,500 by the time the next parliament ends in 2020. Though the pledges are identical, the parties disagree on where it originates within the current coalition government. Both parties seem keen to claim themselves as originators of the idea, with the Liberal Democrats also claiming to be the ones behind tax cuts during the current parliamentary term.

The Prime Minister insisted that the pledge to raise the personal allowance was “not just a vague promise” but that “we have a track record.” He went on to point out that, since his party came to power as the larger part of the coalition in 2010, tax cuts have delivered a £700 saving for 24 million people, and removed 3 million people from tax entirely. However, the Liberal Democrats seem to feel this is really their track record, claiming that they have “fought tooth and nail” to reduce tax as part of the coalition with the Conservatives.

Regarding the way a Conservative government would approach taxation if elected in May, the Prime Minister said: “We should start from the proposition that it is people’s money not government’s money and we should leave them with as much to spend as we can rather than frittering it away on wasteful government projects.”

He claimed that the Conservative party’s tax plans would remove a further million people from the need to pay any tax at all, with nobody working a 30 hour week at minimum wage required to give money to the government.

The government has also pledged to raise the threshold at which people are required to start paying tax at the 40% rate from £41,900 to £50,000 in a bid to help earners in middle income brackets. This would, he said, support “aspiration.”

Forex Controversy Leads RBS to Suspend Bonuses

The Royal Bank of Scotland (RBS) has suspended the bonuses of 18 employees as the bank continues its internal investigation into forex rigging. The bank has so far investigated the conduct of over 50 present an previous staff in relation to the scandal and has looked over millions of documents.

The bank announced yesterday that 18 forex traders employed by the bank would have their bonuses frozen in relation to the investigation. According to the bank’s head of conduct and regulatory affairs, Jon Pain, “no further bonus payments will be made or unvested bonus awards released to those in scope of the review until it has concluded and its recommendations have been considered by the Remuneration Committee and the Board Risk Committee.”

However, it has not been definitely established whether the traders in question have in fact done any wrong, and each is being investigated individually. As such, the number of individuals associated with the investigation and having their bonuses frozen could be subject to change by the time of the final review. Currently, the final review is due for early 2015.

The Foreign Exchange (ForEx) market is currently worth around US$5.3 trillion a day. It involves trading funds into different currencies in order to achieve a profit. By correctly predicting which currencies will rise in value against other monies and then placing funds in those currencies, it is possible for experienced traders to make significant profits (and for novices to make equally significant losses).

The recent scandal surrounds attempts made by certain traders to not just predict the market but deliberately manipulate it in order to rig their investments for success. By trading confidential information about their clients’ investments, traders were able to deliberately coordinate trades in order to noticeably impact the market and boost profits. This is one of the latest in a line of scandals that have impacted public confidence in the banking system in recent years.

RBS was among the banks embroiled in the scandal, and last month was handed a fine worth £400 million by international regulators. The bank is reportedly still in discussion with other regulatory bodies, and could potentially face further fines.

According to an investigation carried out by the Bank of England and the Financial Conduct Authority (FCA), traders openly boasted about their manipulation of the market in online chatrooms. Transcripts show boasting from a number of traders, including some employed by RBS. Six of the bank’s employees are currently facing disciplinary action, and three of those have been suspended ahead of further investigation into their involvement in the scandal.

The bank has declined to disclose the identities of the eighteen staff who have now had their bonuses frozen.

Lloyds Bank Cutting 9,000 Jobs as Branches Close

Lloyds Banking Group has now confirmed that the next three years will see them close 150 branches, and this will result in the loss of 9,000 jobs. This represents the loss of roughly 10% of the bank’s current workforce.

As well as those high street banks branded under the Lloyds name, the group also owns the Bank of Scotland and Halifax firms.

This is the latest in a series of job cuts made by the major banking group. Since 2008, 43,000 jobs have been cut by Lloyds. This figure excludes those losses that have just been announced, which will take place over the next three years as branches close.

The bank has also dropped its previous pledge to keep “the last branch in town” open. It will now proceed with branch closures without regard to this principle, and has said that it will concentrate on closing down urban branches first.

The group has suffered from a number of fines in recent years for various issues, mistakes and missteps. The PPI scandal, in particular, has hit the Lloyds Banking Group hard. When administration costs of £2.5 billion are included, the PPI scandal has cost the group £11.3 billion to date and a further £900 million has now been set aside to cover future payouts. Recent fines that do not relate to the scandal have totalled over £200 million – a significant figure even if it seems small next to the volume of PPI claims.

Despite these problems, chief executive Antonio Horta-Osorio insists that “the group is performing strongly.” Indeed, over the nine months leading up to 30th September this year, the group reported strong pre-tax profits of £1.61 billion. According to Horta-Osorio, “We have met or exceeded the strategic objectives set out in 2011 and are ready to move on to the next stage in our development.”

The 150 bank closures for the next three years are a net figure, with planned new branches subtracted from the total. The bank actually intends to close 200 of its current branches, but also to open 50 new ones in different locations. With 2,250 branches belonging to the group at present, the overall number of branches owned by the group will have shrunk by roughly 7% once the three-year process has been completed.

A call from the Unite union urges the bank to give a “no compulsory redundancy guarantee.” A spokesman for the union, Rob MacGregor, said “The wallets of top executives at Lloyds should not be getting fat by forcing low paid workers onto the dole.”

Super ISAs Fail to Grab Savers as Rates Fall

ISA popularity seems to be dropping. According to the most recent data from the British Bankers Association (BBA), the amount of money placed into tax-free savings accounts at the end of August has dropped 15% compared to the same time last year.

In the period from January to August 2014, £9.3 billion was placed into cash ISAs by savers around the UK. Across the same portion of 2013, savers invested £11 billion into cash ISAs.

For the government, these figures are likely to come as something of a disappointment. July saw the introduction of the “super ISA,” which were first announced in the 2014 Budget by Chancellor George Osborne. This resulted in a number of reforms including a new, higher tax-free savings limit of £15,000. The restrictions in how much of this could be held as cash were also lifted, so for cash-only savers the allowance increase nearly threefold.

More than half of the money deposited in cash ISAs during this period, a total of £4.9 billion, was invested in just a single month. The month in question was July, so this disproportionately large figure is likely down to people holding onto their money until the changes to the ISA rules came into effect.

At the time, the large amount of money deposited in July was taken as good news. It seemed to explain a slow start to the year’s ISA activity, as savers held back in order to take advantage of super ISAs. As BBA Chief Economist Richard Woolhouse put it, “it seems people were just waiting until the new rules came into effect to invest their money.”

However, with figures now showing data for the whole of July and the following month, this optimism seems to have been not entirely well-placed. With ISA deposits still 15% below the previous year’s levels, it appears that 2014 has still marked a fall in the fortunes of ISAs even with the introduction of the new, more attractive rules.

In their place, new options such as retail bonds and peer-to-peer lending are growing in favour. These kinds of options are a form of investment rather than straightforward saving, and accordingly they come with a level of risk. However, amidst low ISA rates it seems many savers are wiling to accept those risks in the pursuit of better returns.

Poor ISA rates have dropped further, and this could be partly because of the fall in ISA deposits. A two year fixed rate ISA will now net you 1.97% interest at most, whereas in July the best offer was 2.06%.

UK service sector growth remains strong

In June 2014, the UK service sector continued its steady growth which points to a further strengthening of the economy in the first half of 2014.

Furthermore, according to the same survey, employment in the service sector grew at a record pace. The services sector plays an important role for UK economy because it accounts for three quarters of UK economic growth. The indication showed that business volumes in the service sector rose at the fastest pace for six months.

According to chief economists, the services sector index taken together with strong construction and manufacturing data published earlier this week suggested that economic momentum was holding.

The ongoing surge in construction and the largest quarterly rise in manufacturing output for 20 years, confirms that the economy is getting back in shape on all fronts. The data shows that there is a UK growth of 0.8% in the second quarter which is building on economic growth of 0.8% in the first three months of the year. Thus, this makes it more likely that there will be an interest rate rise which would occur later this year rather than in 2015.

The data coming from the surveys conducted by the Purchasing Managers’ Index, increases the likelihood of policy makers to decide that a preventive rise in interest rates later this year is warranted. This is believed to be so, especially when we look at the speed at which the labour market is improving.

However, officials from the Bank of England have given mixed signals on when a potential rise in interest rates may happen. The Bank of England governor Mark Carney has been accused by MPs for being unreliable after his suggestion that interest rates may rise by the end of this year and then refuting this idea the following week. According to him, it might be the case that there is more spare capacity in the economy than the Bank has initially estimated in its February Inflation Report. The specific concern of the Bank is the slow rate at which the average wages are increasing,

Markets are seen to be focused on when interest rates would rise, rather than on the point where they would ultimately settle at. Thus, interest rates may rise to 2.5% by the end of the first quarter of 2017.

If the figures are correct, economists believe that we might see even larger falls in unemployment ahead. More payrolls are expected to support consumer spending over coming quarters.

PPI claims ‘have yet to peak’

Over £13 billion has been paid out in compensation for mis-sold PPI since 2008. Despite this the Chief executive of the Financial Services Compensation Scheme, Mark Neale warns that these “[claims] will go on for a number of years”. The Financial Services Compensation Scheme often helps customers by getting back their money for them after businesses have become insolvent. Mark Neale has stated, “we will continue to see firms fail with PPI liabilities and it’s too early to say we’ve seen the peak”.

It is predicted that PPI claims will rise by 20% in 2014, which equates to higher than 16,000 claims. Mr Neale went on to say, “I can’t tell you for how long, nor can I tell you when the peak of claims will be, but typically, you have a fairly normal distribution curve over the years”.

PPI was originally provided to customers as a safety measure to help protect them, by covering their loan repayments if the customer became ill or became unemployed.  However, many complaints have arisen from customers who believe they have been mis-sold PPI. As a result, a large amount of money has been paid out to compensate these customers. £20 billion has been earmarked by the Big Four banks, in order to compensate their customers. In May 2001, it was estimated that an average of £735 million a month was being paid out.

Although there does seem to be a decline in new claims currently, there is still approximately £500 million being paid out each month.

The majority of customers claimed through the Financial Ombudsman. Mr Neale said, “the Ombudsman service has seen a fall in new claims it’s receiving. Sooner or later that will happen to us, but it’s too soon to say [exactly when] that’s going to be”.

According to the head of the UK’s financial compensation authority,  the financial sector in Britain will continue to see claims for PPI from customers who have been mis-sold to,  and it is clear that the situation has not peaked and that there are many more claims  to arrive and therefore more payouts to be made.

How the 2014 Budget Affects You and I

The Budget plans of the chancellor George Osborne affect us all.

The biggest change this year seems to be regarding pensions. Pensioners will no longer be required to buy an annuity, but will be able to access their cash lump sum and use it as they wish. Although this change has been criticised as it could mean that some pensioners may become liable. As they may fall into a higher tax threshold, which means they will need to pay tax at this rate. This also means that they may need to pay the income tax earlier, rather than in stages. Pensioners will be able to obtain free financial advice to help make these decisions.  However, this will not affect pensioners who have an existing annuity. On another note, pensioners who enjoy playing bingo will be pleased to hear that the duty on bingo has been reduced to 10%.

From January, the over 65’s age group will have the opportunity to save in a 1 year bond at a rate of approximately 2.8% or a 3 year bond at a rate of 4% if they wish to.

Many savers will be pleased to know that the tax-free limit on Individual Savings accounts has been increased to £15,000 and the 10p tax rate on savings will cease to exist.

To help families the Help to Buy scheme will extend to 2020. From next September the government will also provide 20% of childcare costs tax-free to parents who pay 80% of childcare costs to a registered provider. The chancellor will bring changes to fuel duty, which will benefit families by approximately £15 a year.

There will be an increase by 2% over inflation on tobacco and taxes on alcohol will increase above inflation, with the exception of ordinary cider and Scottish Whisky. However, beer duty will be cut by a penny which will reduce the price of beer.

The personal allowance will increase to £10,500 for everyone in 2015 to 2016. This will be a relief to many taxpayers.

So as the austerity plan continues and taking into account the economic situation, there does seem to be a few changes made, in an attempt to benefit the majority of people and balance out the economic situation in the UK.

Finding the Right Solution for Effective PPI Claims

The whole payment protection insurance debacle created by Britain’s banks and lenders is an ongoing issue – namely because even though thousands of people are justifiably due compensation for their mis-sold PPI policy, many are struggling to receive the recompense they are due. Banks have been caught deliberately trying to delay claims, persuade customers they are not valid, and training staff to find ways of deterring and not compensating whenever possible.

Although many people are choosing to pursue their claim for PPI compensation on their own, it is for the above reason that many are turning to professional claims handers for help.

Why You should Get the Help of an Expert for PPI Claims?

When you look at the PPI scam, you will realize that the lending companies or the banks involved will not give out the money owed to you just like that. They will first contest your claim and most probably, you will have to go through legal proceedings before you get your PPI refund. And standing against a big financial company whether it is a bank or a money lending institution is an ill-advised move.

Finding an Expert

In the UK, there are many companies, like the PPI Claims Advice Line, which handle PPI complaints. You can browse online and find some of the best experts who can help you succeed. The problem with the PPI claim agencies is that the numerous numbers present make it difficult for you to choose the right one. There are many ways in which you can choose an appropriate agency.

  • You can shop around and look for the best possible service offered by the experts.
  • The review websites give an approximate idea about the services and their advantage from which you can make a choice.
  • There are many forums online that also deal with the claims. You can get objective as well as unfiltered information about the experts.

Make sure you research completely on the professional service you are going to approach for PPI help. Go for a company that is popular and well-known – they are more likely to be reputable and have more experience. Look into their track record and how many successful cases they have dealt with earlier. When you are satisfied with the results, you can approach the company for helping you with your PPI claim.

The Cost of An Education

The cost to get an education in this country has increased exponentially in the last decade, with UK students now paying tuition fees of £9,000 a year compared to it being free before the turn of the century.  This situation is the same as in America, where the cost of a university education has risen dramatically.  In America forty years ago federal aid was provided in the form of grants and other government subsidized funds (68%). These forms of financial aid, for example the Pell Grant, covered 2/3 of tuition costs. Fast forward to the present day and not only are we seeing an increase in school related expenses, but a decreasing number of federal subsidies. So much so that for the first time in American history, the amount of debt due to student loans has surpassed that of credit cards.

We will admit it can be a difficult pill to swallow. So where do we go from here? And what does this mean for generations to come? Consolidated Credit has created a visual history to answer these very questions. It traces American college debt from as early as the GI Bill to present day institutions. Be forewarned that these numbers pack a serious punch.

SME Conference Aims To Help CFOs Balance Risk & Growth

ICAEW held their annual SME conference in London recently and discussions centred on the importance of balancing growth with effective risk management. Whilst small and medium sized organisations across the country have cause to be optimistic after a lengthy period of consolidation, the message from economic thinkers is still one of caution.

The audience consisted of ICAEW members either heading up SMEs or operating on behalf of them, with an open floor discussion. Tony Tydeman, heading up the Commercial Finance division of asset-based lender ABN Amro, was the first to initiate proceedings at One Moorgate Place. He was followed by Steve Merchant of chartered accountants Baker Tilly, who introduced himself with the line “what a difference a year makes” – pointing to the predicted economic growth rate of 2.4% by the end of this year, rising to 3.8% in 2014. “Pretty stunning,” in his own words, and certainly cause for real optimism. His sentiments were echoed by recent research carried out by ABN Amro which discovered that 69% of SMEs are actively planning growth in the next one or two years. Though despite this, Merchant still urged caution.

“If your head is in the oven and your feet are in the freezer, your body temperature on average is OK,” he stated in reference to being wary of statistics coming off the back of surveys. In other words, whereas some companies and industries are enjoying a positive spell others are still lagging behind. However, his conclusion derived from spending time talking to business owners up and down the country was that there is a lot of “energy, optimism and activity” in evidence.

Corporate asset finance was discussed by the panel, with ABN’s Tydeman pointing to supplier-side finance issues through traditional finance and a growing appetite for alternative ways to access funding. Whilst a lot of SMEs are indeed keen to grow, research found that 44% of SMEs don’t feel that they have the right kind of people in charge to realise their growth ambitions.

Joining the discussion at this stage was Joe Jouhal of Data Duplication, a company pleased to have utilised asset-based lending in order to grow their business into the corporate sector. Backing up Merchant’s analogy, he explained that “things are mixed at the moment, it depends on where you are based and what your marketplace is as to whether you find the economy in a positive state or not.”

In conclusion, he referred to “downward pressure” on the economy, despite a growing surge of confidence in it. “The media’s coverage is important,” he went on to say. “During the Olympics, everyone felt great and it contributed to the uplift in public mood. The media can be quite negative in its take on the economy and it will filter into a business’ way of thinking.”