Financial Review 20th March 2015

Internet users at risk as organised criminals latch on to cyber crime
International criminals are abandoning drug dealing and other high risk rackets in favour of cyber crime, putting everyone who uses the internet at risk, one of the country’s more senior police officers has warned. Up to a quarter of all organised crime is now thought to involve some form of financial crime, but with the majority of online fraud committed overseas it’s difficult to assess the full scale of the problem.

Adrian Leppard, commissioner of the City of London Police, says many people who use the internet every day to shop or do their banking are doing the online equivalent of leaving their homes and vehicles unlocked for burglars to exploit. “If you ask a room full of people, who has been a victim of some sort of fraud or financial crime, half of them will put their hands up. You would have difficulty finding any other area of crime with similar statistics,” he says.

Mr Leppard adds that up to 80% of this activity is not reported, possibly because it’s often linked to visiting inappropriate websites. He says cyber crime appeals to organised criminals because it is a “low risk, high yield” offence.

Bill Gates still tops the global rich list
Bill Gates has once again topped Forbes magazine’s annual ranking of global billionaires. It’s the second time in a row the Microsoft founder has been the world’s richest person. Mr Gates’ net worth rose to £51 billion after he sold a third of his remaining stake in the company he co-founded in the 1970s. Much of his fortune goes to the charity foundation he set up with his wife, Melinda. Mexico telecommunications mogul Carlos Slim was second in the rich list, followed by Berkshire Hathaway chief Warren Buffett.

Forbes identified a record 1,826 billionaires, up from 1,645 last year, worth a combined $7.05 trillion. The magazine said entrepreneurship is thriving globally, as 1,191 members of the list are self-made billionaires, while just 230 inherited their wealth. The youngest billionaires were Evan Spiegel, 24, and Bobby Murphy, 25, who co-founded mobile messaging app Snap-chat, and are each worth $1.5 billion.

Supermarkets hit by high street revival
Consumers are turning their backs on big chains and returning to small local shops, claims a new report into the state of Britain’s high streets. The High Street Tracker found a 111% increase in small, local retailers opening over the past five years and the strongest small shop renaissance took place in the North-West. The survey logged almost 6,000 new cafés opening last year – 18% of all independent retail start-ups. These were followed by takeaways, restaurants and hairdressers.

The findings highlight one of the many pressures on the large supermarket chains, with many customers buying essentials online and increasingly visiting the high street for more specific items and a shopping experience they enjoy.

Pensioners’ incomes have done better than workers’ since crash
Average household incomes are back to where they were before the financial crisis, according to research by the Institute for Fiscal Studies (IFS). However, the think tank also found incomes for working age people were still below their pre-recession levels, after allowing for inflation.

Only the over-60s will have higher incomes this year than in 2007-08, the IFS report said. That is partly because pensioners have been protected from benefit cuts, thanks to the ‘triple lock’ on pensions which means they have risen by inflation, earnings or 2.5%, which-ever is the highest. While this group has seen their income rise by a relatively generous amount, pensioners are typically at the lower end of the income scale.

No end yet for mobile phone roaming charges
EU governments have said roaming charges for mobile phone users travelling in Member States will remain at least until the end of 2018. This challenges the European Commission and parliament, both of which wanted roaming charges scrapped by the end of this year.
National governments backed mobile phone firms by agreeing a common position to allow them to continue levying extra charges on travellers for at least another three years, when the situation could be reviewed. Governments said consumers should be given a small roaming allowance to use outside their home country from the middle of next year, but usage above it should still be subject to further charges.

Consumer groups have criticised this decision, claiming it goes back on what was agreed and is incompatible with a single market.

Low earners’ savings to be tax-free
A million savers need to register to pay no tax on their savings interest when changes to the tax system come in April. The rule where people pay 10% on their first £2,880 of savings interest, as long as total income is below a certain level, will disappear in the new tax year. It will be replaced by a zero-tax band on the first £5,000 of savings interest.

If income, including from savings, is less than £15,600 a year, people can register as a non-taxpayer. This involves completing a new R85 form for each account. People can check via the HMRC website whether they are eligible to register.

Households see benefit of lower inflation
People’s inflation expectations for the year ahead have fallen to their lowest in 13 years as households begin to benefit from the brake on the cost of living, a new survey shows. The expectation is that consumer price inflation will be 1.9% over the next 12 months, compared with average expectations of 2.5% in November, according to the latest quarterly attitude survey by the Bank of England.

Inflation expectations have averaged 2.8% over the past 15 years, while the actual rate has averaged 2.6%. Consumer price inflation has been falling in recent months, dropping to 0.3% in January from 0.5% in December, with the Bank of England now expecting it to dip into negative territory in the near term.

Bailout inquiry looks for banks’ fraud
Banks could be hit with more huge fines after a Serious Fraud Office (SFO) investigation into whether government bailout deals were rigged.


Banks may have abused a 2007 and 2008 Bank of England rescue scheme. The SFO is investigating, and banks could face huge financial penalties from the City regulator when the SFO inquiry ends. The Financial Conduct Authority will not investigate until the SFO has concluded its criminal investigation. While the activities being considered are not thought to be formally regulated, the FCA is expected to enforce general principles of good conduct. This means that even if the SFO does not find any grounds for a prosecution, the FCA may still impose fines.

Cheaper fuel and higher wages boost consumer spending
The falling cost of petrol, the weakening of the euro, and an increase in wages has encouraged consumers to splash out on holidays and restaurant meals, according to new spending data. Consumer spending rose by 4.1% in February compared with the same month last year, Barclaycard figures show. When inflation is stripped out, this is the second-strongest growth in monthly sales in the past three years.

The growth was driven by a 16% rise in restaurant sales, while spending in hotels was up 9.5%. The figures suggest the fall in the price of oil is starting to feed through to consumers’ confidence and boosting their spending power. Inflation is at a record low of 0.3%, while wages have returned to growth.

Barclaycard processes over 40% of the debit and credit card transactions in the UK, and the spending figures are based on this. The data show that holiday bookings rose by 26% in February.

Rural areas to benefit from cheaper petrol
Drivers living in rural areas with expensive petrol prices are set for a discount, thanks to an EU agreed rebate. Around five pence a litre will be cut off the price of petrol for residents in the 17 most expensive rural locations for fuel in Britain. Areas to benefit include much of the North of England and the Scottish Highlands. It will cut the average cost of unleaded from 110.5p to 104.9p a litre, saving £150 a year for motorists who fill up once a week. The rebate comes into effect on 31st May and is expected to benefit 125,000 people.

“I know from experience that cars are a necessity, not a luxury, for people living in remote communities, and petrol in these areas is more expensive,” said Danny Alexander, chief secretary at the Treasury.

Petrol retailers in eligible areas can register with the Revenue to claim back 5p a litre.

Banks should do more to help people switch
Consumers are unaware, and lack confidence, in the seven-day service for switching bank accounts, the regulator has found. The Financial Conduct Authority (FCA) said the service was likely to have a limited impact, unless more was done to publicise it. It has suggested that banks should do more to raise awareness. In total, 1.64 million people have switched current accounts since September 2013, but the peak was hit soon after that, in November 2013.

The FCA believes it would be easier for people to switch accounts if they could keep their present account numbers. The industry has been working on the feasibility of ‘portable’ bank accounts for some time, but there is no indication of when that might be possible. The FCA acknowledged, however, that the switching service was working well for those consumers who had used it.

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