UK Employment equals record
UK unemployment fell by 121,000 to 2.12m in the three months to May, official figures show. The figure is the lowest level in nearly six years, according to the Office for National Statistics (ONS).
The latest figures show more than 78% of men and 68% of women are in work, giving an overall employment rate of 73.1%. That equals the record rate set in 2005 when the recession was still two years away and people believed the good times would last for ever. But wage rises are at their lowest since 2009, while excluding bonuses wage increases are their lowest since 2001.
Crash risk persists
The world economy is as vulnerable to a financial crash as it was before the recession hit in 2007, the global bank watchdog has warned. Soaring levels of government debt in Europe and America and easy loans in the developing world have left the global economy in the danger zone, according to the respected Bank for International Settlements.
The Bank said that booming economies outside Europe and America were now more important to the stability of the global economy than before the recession. China, Brazil, Turkey and other booming nations have seen personal debt levels soar. Their government debt has increased to 175% of their average economic output, or GDP. Borrowing rates are just 1%, encouraging people to take on even more debt. This increases the risk of another crash.
Tax windfall from pension changes
Bringing forward tax revenues is the main driver behind the Government’s plan to give savers unrestricted access to their pension pots, a former senior adviser has claimed. Actuary Chris Daykin warned that many pensioners will be left worse off by withdrawing their whole pension when the new freedom rules are introduced next April. People will then be allowed to withdraw as much as they want, provided they are over 55 and only pay marginal tax on it.
The Treasury is expected to take an extra £1.2bn in income tax on pensions by 2018-19. In taking their whole pot many savers would hit the 40% tax rate, rather than just paying 20% if they were to take a small income every year. After the changes were announced the Treasury admitted it would ‘front-load’ tax revenues from pension savings. But Mr Daykin’s concerns do not reflect research into people’s intentions come next April, with several surveys finding only a small minority planning to withdraw their entire pension pot.
Home Office fails on asylum fraud
The Home Office has come under fire for failing to stop asylum seekers fraudulently claiming benefits. In a scathing report, the Independent Chief Inspector of Borders and Immigration, John Vine, said there was no evidence of an effective strategy to fight fraud in the £155m asylum support system. He said insufficient resources meant opportunities to find and deter those planning fraud were lost.
The report found that only six people were successfully prosecuted in the UK in 2012-13 for fraud offences in this area, and just £5,673 was recovered. Mr Vine said these figures were far too low. The Home Office says work has begun to improve these areas.
Payday doesn’t come soon enough
More than a quarter of people make use of their overdraft little more than halfway through the month, a survey of bank customers has revealed. A survey of 2,000 current account holders found 27% are overdrawn by day 17 after payday. More than a third said they would drop into their overdraft at some point in the calendar month, while 1% said they spend the entire month overdrawn.
Millionaire investors in a £5bn alleged tax avoidance scheme run by the investment firm Ingenious are preparing to settle with the Revenue rather than face a court battle. The Ingenious scheme, one of the biggest of its kind, counts a string of celebrities among its members. Its 1,300 investors put £2bn a year into the scheme, based on investing in film production, over the past decade. Ingenious and the Revenue will face each other at a tribunal in November. But investors are preparing to take up an offer from the Revenue to pay a discounted proportion of the tax due to settle their affairs.
MPs urge treasury to recover debt
The Treasury and Cabinet Office need a plan to manage £22bn owed to the Government, says a group of MPs. Most, £15bn, is owed to HM Revenue and Customs (HMRC). The Department for Work and Pensions and the Ministry of Justice account for most of the remainder. The Public Accounts Committee says failure to tackle outstanding debt is having a direct impact in the shape of higher government borrowing. The money owed ranges from unpaid fines and taxes to overpaid tax credits.
The Government claims it has already done much to tackle the problem. But while funds owed to HMRC dropped by £5.5bn in the past four years, £3.5bn of this was due to written-off tax credits and other debt it has given up on.
Workers in the public sector have become more productive since the Government began wielding the axe on the sector, according to the head of its independent fiscal watchdog. Robert Chote, chairman of the Office for Budget Responsibility (OBR), said the financial crisis and subsequent spending cuts had made the civil service more efficient and forced people to respond to these changes by working harder.
According to official data, productivity in the public sector showed zero growth between 1997 and 2010. While Mr Chote stressed that it was not up to the OBR to judge whether civil servants were providing better value for money, he said he was confident staff had changed their behaviour and public bodies have squeezed more out of fewer resources.
UK growth forecast to lead rest of G7
The UK will grow faster in 2014 than any other G7 economy, while low wage rises will ensure interest rates do not rise until next year, an influential report has forecast. UK growth will hit 3.1% this year, spurred on by strong capital investment by businesses, the EY Item Club said.
The Item Club raised its forecast for growth this year from 2.9%. This, it said, was due to an expected 12.5% jump in business investment. This compares with 2% GDP growth in Canada and 1.8% in Germany.
The Club says it does not believe interest rate will rise before next year, despite a surprise jump in the inflation rate to 1.9% in July. It says low wage growth, the strong pound and the competition threat from low rates in the eurozone will combine to delay a rise in the UK base rate for a few months.
It’s fun in the sun
Soaring sterling has boosted the state pension of around half a million UK expats living in Europe by nearly 10%. The annual basic state pension for people who have retired in the eurozone rose by more that e650 over the past 12 months. Part is down to the annual rise in the state pension, but the rest is from sterling’s surge in value against the euro.
An estimated 445,000 people in the EU receive UK pensions, with Ireland, Spain and France the most popular destinations. Their pensions rise annually in line with inflation – the so-called triple lock guarantee to pick the highest rate of inflation for the annual increase. Those who retire to a Commonwealth country, as opposed to the EU, have their pensions frozen at the rate it was at when they first drew it down.
Those in the EU’s sunniest climes also receive an annual winter fuel payment.
Government borrowing too high
The Government borrowed more than expected in June and has failed to reduce public sector borrowing since the start of the fiscal year. Public sector net borrowing stood at £11.4bn in June, says the Office for National Statistics. That was above the forecast £10.65bn. For the financial year to date, the public deficit stands at £36.1bn, up 7.3% from a year earlier. If this trend continues, it will put public sector borrowing at about £113bn this year, missing the Government’s £95.5bn target.
The figures underline the challenge still faced by the Chancellor, George Osborne, despite improvements in headline economic figures, such as growth and employment. His goal is to cut the deficit to 5.5% of GDP in the 2014-15 fiscal year, from 6.5% last year, to meet targets set by the Office for Budget Responsibility.