Energy firms face regulator inquiry
Energy companies are making £101 profit a year from every family – an astonishing 1,000% increase in just five years. The industry regulator, Ofgem, announced a full-blown inquiry into the energy market as it revealed that the profit figure had doubled from £48 last year, despite a fall of up to 38% in wholesale gas and electricity prices.
The Competition and Markets Authority (CMA) will investigate the energy market and whether major players are taking advantage of price movements to unfairly boost profits. The regulator criticised the big six companies – British Gas, Npower, SSE, EDF, Eon and Scottish Power – for not passing on falls in wholesale prices.
IMF sees less growth
The head of the International Monetary Fund (IMF), Christine Lagarde, has warned that global economic recovery could be less robust than expected. She hinted that the IMF may cut its global growth forecasts because of depressed levels of investment. Ms Lagarde suggested efforts from central banks to accelerate a recovery in the global economy may now be finding their limit. She urged governments to inject a ‘booster shot’ by increasing investment in areas such as infrastructure, education and health.
Tax squeezes the middle class
The number of people who receive more in benefits and public services than they pay in tax is at record levels, official figures show. More than half of households now take more from the public purse than they contribute, thanks to surging government expenditure, despite claims of austerity policies. This has left a minority of middle class taxpayers bearing a growing share of the tax bill. Well-off families now receive £1 in benefits and services for every £5.10 they contribute in tax.
The figures will fuel concerns that the Treasury’s reliance on a narrowing tax base is a danger to the stability of public finances. Some 52% of households, or 13.8 million families, received more in benefits and public services than they contributed in taxes last year, says the Office for National Statistics. In 1977, just 40% of households took more than they contributed, rising to 44% in 2000. The figure peaked at 53.5% in 2010, but has been above 50% since the coalition came to power.
Savers penalised for bank loyalty
Millions of savers are receiving poor returns because they fail to move their money to new accounts, the UK financial regulator has said. The Financial Conduct Authority (FCA) said banks were paying lower rates to customers who stayed with the same bank for years on end. It is seeking ideas on how to encourage switching between accounts and to make it easier to compare interest rates. But the FCA has stopped short of banning so-called teaser rates to draw in new customers, which are soon cut to poor levels.
The regulator found that interest rates on savings accounts opened more recently tended to be higher than those opened some time ago. Savers who opened accounts in 2012 and 2013 received an average return of 0.8%. However, those who had opened accounts more than five years ago, and stuck with them, only received 0.3% on average.
Cost savings are slipping the net
Millions of people are paying an average of £440 extra a year because they do not use the internet to buy goods and services, according to a report from the Centre for Economics and Business Research. The report highlights the extra cost that companies impose on customers who choose to pay bills by cheque, shop on the high street rather than online, or fail to take advantage of online-only tariffs.
The higher costs are for energy and telephone bills; they also pay more for food and holidays, and may be charged extra if they want to receive their bank statements on paper. The amount lost by families from the ‘offline penalty’ ranges from £360 a year for the poorest 10% to £2,040 for the richest 10%. The biggest extra cost is food, with an additional bill of £175 a year for those who do not shop online, followed by mobile telephones and landlines.
Around seven million people in the UK have never used the internet, according to the Office for National Statistics, while millions more use it, but not to buy goods and services.
Revenue red-faced over tax errors
The Revenue has been humiliated for getting its sums wrong on how much tax was collected. In a damning report, the National Audit Office said HM Revenue and Customs had miscalculated its figures by £1.9 billion a year since the coalition Government came to power. This embarrassing toll or errors came to light as HMRC is seeking new powers to be able to raid people’s bank accounts. It wants to be able to take money directly from people’s current accounts, joint accounts or even tax-free ISAs to settle unpaid tax bills.
In November 2010, HMRC set itself a target for how much tax it would collect each year. For the next few years it boasted that it had beaten this target. But in fact, it had got its baseline calculation, used to work out whether it had beaten or missed its target, wrong. This made it easy to hit targets, when in fact things were getting worse each year.
Fraud victims up a gumtree
Criminals are allegedly using the online small ads site Gumtree, which allows people to sell everything from cars to mobile phones, to steal from innocent consumers. Citizens Advice issued a warning after revealing that one in six of the consumer problems it has investigated associated with Gumtree was a scam or potential scam. Police are reportedly receiving around 250 crime and fraud allegations a week connected to the site. Gumtree is particularly vulnerable because the website does not vet or take identification details from its users. The website is owned by eBay, which does have ID checking.
Gumtree says it is an open platform site with minimal restrictions and that it does try to spot criminal activity. It says it actively encourages people to contact the police if they have been victims of fraud or believe goods for sale are not legitimate.
Banks face premium phone line ban
Expensive enquiry phone lines used by banks are likely to be banned next year, but some providers are already scrapping them. Under the Consumer Rights Directive, introduced by the EU last month, many businesses are now prohibited from charging premium phone rates for customer enquiries and complaints. Financial services companies and public bodies are exempt from this new law, but the City regulator, the Financial Conduct Authority, wants banks, building societies, insurers and investment brokers to be included. It is consulting the industry on the issue and is likely to impose a ban next year. In advance of the regulator’s intervention some banks and other financial bodies have already ended the use of these lines, by swapping 0845 numbers for cheaper 0345 numbers.
UK output slips 1.3%
Manufacturing output in the UK recorded a surprise fall of 1.3% in May, the biggest decline since January 2013. The figure from the Office for National Statistics (ONS) was much weaker than economists’ forecasts. Manufacturing data and surveys so far this year have indicated that the sector is growing robustly. The wider measure of industrial output also fell in May, the ONS figures showed, dropping by 0.7%.
Economists are struggling to explain this surprise fall, which also happened in Germany. It may have been influenced by weather or seasonal patterns affecting demand, including the lateness of Easter when production was lost over the holiday break.
Bank hints at ‘new normal’ rates
The cost of a typical mortgage could jump by nearly £175 a month over the next three years. The Bank of England has suggested interest rates are likely to rise to 2.5% by early 2017. When this happens it will add £174 a month – or £2,088 a year – to a typical £150,000 standard variable rate mortgage. Although the move would benefit millions of savers who have been hit by rock-bottom rates since March 2009, many cash-strapped households are vulnerable to higher borrowing costs.
The Bank’s Governor, Mark Carney, said a rise to 2.5% would cushion the blow because it is still half the average rate of 5% before the financial crisis. He said there would be no fast return to pre-downturn interest rate levels. “The new normal will be materially lower than the old normal,” he said.
Branch banking on the way out?
The head of the group that represents Britain’s biggest banks has called time on the traditional high street branch in the wake of the continued rise of online banking. Anthony Browne, chief executive of the British Bankers Association (BBA), has admitted that branch numbers will continue to fall. He claimed those who call for a return to branch banking are out of kilter with what millions of customers want.
Mr Browne said new research conducted by the BBA shows three out of four people use either mobile or internet banking each month. He added that the supposed golden age of banking, with its branches and traditional managers, is now a myth. “The way we bank now is far easier and faster,” he said.