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Archive for the ‘Recession’ Category

Industrial backlash following pension scrappage at Barclays

Friday, July 17th, 2009

Are you affected by the closing down of a final salary pension scheme? Barclay’s decision to get rid of its final salary pension schemes has led to outrage from the unions associated with the bank, BBC Online reports. The scheme was originally stopped for new members, but now new proposals will stop the scheme letting existing members receive a final salary pension, which has led to anger reaching critical mass.

Unite, the union that represents 25,000 Barclays workers, will take a ballot for further industrial action at some stage during August, following a consultative ballot where 92% said they wanted to be balloted on industrial action.

Barclays has not been the only company to close their final salary pension schemes; many have seen the rising costs as too much to fund, and 18,000 existing staff will be taken off the scheme.

There has been a real variance in Barclays UK Retirement Fund, which two years ago recorded a surplus of around £200m compared with a huge deficit of £2.2bn last September. A shortfall of £200.1bn exists in the UK’s 7,400 defined-benefit schemes at the end of June, according to the Pension Protection Fund (PPF).

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Tags: Pension protection fund, Pensions, Trade Unions
Posted in Credit Crunch, Recession | No Comments »

Brits find pensions under further threat after prolonged Government gaffe

Thursday, July 16th, 2009

Have you been overpaid in the government’s latest gaffe? According to the National Audit Office (NAO) and BBC Online, £90m extra has been paid to public sector pensions. Retired soldiers, teachers, doctors and nurses have all been affected by the error, and 31,000 of them will see their income drop as a result next year. However, the number affected is expected to rise still further.

The overpayments have been sourced back to 1978 when there was a mix-up with the indexing of certain pensions. Some schemes did not have the required information recorded which meant that they did not apply the correct annual cost of living.

The real worrying issue is that the problem was highlighted years ago but the agencies who were involved refused to take responsibility for the situation. NAO pointed fingers at HM Revenue and Customs, the five pension schemes, and the Pension, Disability and Carers Service for passing the buck.

The NAO has urged these groups to work closer together as it feared there was the continual risk of further payment errors. In particular, the NAO has suggested it wanted to have a review to see if the process can be simplified.

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Tags: Government, National Audit Office, Pensions, Public Sector
Posted in Government, Payday Loans, Recession | No Comments »

Increasingly more people feel the emotional strain of financial problems

Wednesday, July 15th, 2009

Are you getting depressed about money? BBC Online highlights comments from the counselling charity Relate who are arguing that many younger people are becoming increasingly depressed about their financial situation. Of the 15,000 young people that they see every year, about a quarter of them are depressed about money or a lack of it.

Often these money problems significantly compound other problems that young people might already face, such as marital breakdown, and can lead to further behavioural problems. Relate findings show that money problems can strain family relationships, worsen behaviour academically and damage relationships with friends.

With increasing unemployment and difficult economic conditions it is expected that this problem will be exacerbated over the next few years if the recession deepens.

Relate’s Paula Hall advises that there is a fine line between being realistic and being hopeful. Depressed realists have got to understand that ‘we aren’t going to be in a recession forever and we are still in a fairly wealthy country’.

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Tags: Depression, Recession, Unemployment
Posted in Credit Crunch, Recession, Unemployment | No Comments »

Governmental measures to kick-start the mortgage sector show fundamental flaws

Tuesday, July 14th, 2009

How is your mortgage looking? The government is struggling to get the mortgage sector into swing as this latest attempt to get Britain out of the financial rut is being condemned as showing significant weaknesses, reports BBC Online.

The £50bn asset-backed guarantee scheme (ABS) has been criticised as ‘doomed to failure’, according to the Communities and Local Government (CLG) Committee.

Two reports from separate institutions have highlighted that UK property prices will continue to struggle to make a recovery until mortgages were more readily available.

Figures do show that mortgage lending has picked up, but the Council of Mortgage Lenders (CML) has highlighted it is still 28% lower than two years ago.

The government scheme, which was introduced in this year’s budget, provides a guarantee on lenders’ mortgage-backed securities. This allows lenders to sell on mortgages to lenders raising new money to lend to consumers.

However, MPs have highlighted that restrictions on the partaking institutions and the narrow band of loans that are actually covered has meant the scheme has limited effectiveness.

Dr Phyllis Starkey, who chairs the CLG, said that the CLG and senior officials must maintain pressure on the Treasury to bring in new measures to get the mortgage market moving. Further shortcomings have highlighted that not enough emphasis is being placed on the important rental sector.

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Tags: Council Of Mortgage Lenders, House Prices, Mortgages
Posted in Credit Crunch, Government, Recession | No Comments »

House prices - up or down?

Wednesday, July 8th, 2009

The latest part of the rollercoaster that is house prices comes from Halifax. Their findings show a sharp fall in house prices in June, which has partly reversed the gradual rise in house prices we’ve seen in the last couple of months, reports BBC News Online. The news contrasts with findings showing a large 2.6% increase in prices back in May.

The findings come from Halifax’s property survey. With some good news highlighting the slowing annual decrease in prices from 16.3% to 15% last month, it went on to say that there was evidence the property market is stabilising after sharp slumps since mid 2007.

Martin Ellis, Halifax’s chief lender, states that prices have ‘fallen by only 1.9% in the past three months’, the lowest quarterly decline but still a long way from those ‘green shoots’ predicted here in an earlier blog.

So why have these figures told a different story to that of Nationwide’s figures which sparked the earlier blog about a spring bounce or green shoots? Halifax, whose figures are based on a sample of its own lending, said prices had only risen once in the last four months and are still 2% lower than February. Nationwide’s findings showed that prices had risen in three of the last four months.

Overall there is hope, as undoubtedly house prices are picking up due to low interest rates. HM Revenue and Customs has shown that completed sales in May were at their highest since October 2008.

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Tags: House Prices, Housing, Recession
Posted in Credit Crunch, Recession | 1 Comment »

Paid to stay home - the CBI’s new measures to tackle redundancies

Tuesday, July 7th, 2009

How would you like to be paid to stay at home and do nothing? Well, that’s exactly what the Confederation of British Industry’s (CBI) ‘Alternative to Redundancy’ (AtR) scheme has suggested that employers should do. By putting workers into a low-paid limbo rather than making them redundant, the company is better able to respond to surges in demand. Times Online reports that the ATR scheme would give workers £130 a week, half of which would be covered by the employer and the other half by the Government.

Workers would stay on the scheme for six months and be ready to be re-hired at any time in this period. The CBI’s deputy director John Cridland sees this scheme as a way to help ‘business cope with sharp drops in demand’ yet also be prepared for recovery, while workers will be able to benefit from ‘improved financial support and a door that is kept open for six months’.

Opposition has been raised by unions, in particular Brendan Barber of the Trade Union Congress (TUC), who deem the proposals to be just another way for employers to short-circuit the current redundancy rules. With the AtR measures, employers would be able to fire workers with just four weeks notice rather than the 90-day consultation period, and any worker who is on the AtR scheme and accepts a job will lose all redundancy benefits effective immediately.

Barber argues that it is better to ‘keep people in work or training with their employer rather than sitting at home’; the TUC argues instead for wage subsidies that are now common in the rest of Europe. Cridland hit back, saying that subsidies are too costly for Britain’s finances. He argues that the AtR is not about letting business avoid their responsibilities, and points out ‘that if a scheme runs for six months and a redundancy is still made, then the business will actually end up paying more’.

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Tags: Benefits, CBI, Recession, TUC, Unemployment
Posted in Government, Recession, Unemployment | No Comments »

Holidaymakers need better protection, but not from the sun

Friday, June 26th, 2009

The summer is prime holiday time for 40 million of us Brits. Now there have been calls for the Government to look into the regulations covering holidays, according to BBC News. The Trading Standards authority have outlined that not only do package holidays coverage need to be reviewed but also that of holidays of any person going abroad, where regulation has been deemed to be outdated.

The outdated regulation has been levelled at the lack of ATOL protected holidays. ATOL protects against the travel agent going bankrupt and leaving passengers stranded. However, obviously in the current climate this is increasingly becoming an important aspect of any holiday making abroad. Vivid examples of this include XL which went down and led to thousands of people putting in claims for cancelled holidays.

Less than half of holidays are ATOL protected now, compared to 98% ten years ago. This is due to the increase of computer-customised holidays that mix elements of different holiday packages and subsequently aren’t fully ATOL protected.

Suggestions for rule changes include a blanket protection for all flights booked with scheduled airlines and protection for flights sold alongside another component, such as accommodation.

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Tags: Bankruptcy, Fast Loan, Holidays, Regulation, Trading Standards
Posted in Holiday Money, Recession | No Comments »

FSA admits impotence as building societies are scrutinised

Thursday, June 25th, 2009

The blame game is in full swing again today as accusations are being thrown about by top members of the Financial Services Authority (FSA), reports Times Online. High-ranking officials have pointed their fingers at some of the biggest building societies in Britain, who are being accused of ignoring numerous warnings and threats put forward by the FSA to stem borrowing.

Nick Lock, the manager of the FSA’s retail firms division, spearheaded the criticism. Hugh May, quoting Lock at the Building Societies Association (BSA) annual conference in Harrogate, stated that ‘we have seen unsustainable margins on prime-lending, over-ambitious growth targets and a risk appetite that was too great’. May also points out that there were ‘fundamental mispricing and inadequate investment in risk management’.

A number of building societies have been hitting the wall over the last 12 months. Scarborough Building Society has been rescued by Skipton and in March Nationwide bought the best bits of Dumfermline which had incurred losses amounting to £26 million.

Building societies had apparently ignored warnings from the FSA which had been repeated ‘over and over again’. But this only illustrates the argument that financial turmoil is not due simply to the building societies and financial institutions, but also to the lack of regulation.

Why did the FSA have no teeth to ratify their warnings? It is surely their job to prevent this situation occurring. It’s ot hard to see why building societies and all financial institutions have exploited the deregulated system for all it’ worth. A little reading into rational choice theory and Mancur Olson’s collective action problem can even describe how it has actually been rational for financial institutions to act greedily in a situation where regulation is sparse (Olson and his counterparts in game theory and collective action problems stipulate that irrespective of whether you choose to benefit or not from greedily exploiting a market, your rivals will, which will be to your detriment; firms are myopic especially as long-term goals require irrational collective action).

It is strange therefore that the FSA readily decides to stand up and show how impotent and pathetic it has been in reigning in their greedy subjects - perhaps in admitting their weak behaviour they will be allotted more powers in the upcoming regulation proposals.

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Tags: Building Societies, FSA, Mortgages
Posted in Government, Payday Loans, Recession | No Comments »

Housing sales: green shoots or ’spring bounce’?

Wednesday, June 24th, 2009

Optimistic findings today from HM Revenue and Customs (HMRC) which show that the number of homes being sold is continuing to rise, reports BBC Online. However, it is key to note that this may be due to the usual ’spring bounce’ period, when sales traditionally have tended to increase.

This complements or (could be attributed to) the increase in mortgage approvals in the last six months, highlighted by the British Bankers’ Association (BBA). The BBA put mortgage approvals up by 15.8%, at 31,162 since this time last year. But again the BBA points out the market as still subdued.

According to HMRC, 62,000 homes worth over £40,000+ have been sold in May, up 7% from last month. BBC then pointed out the truism that this is nowhere near the levels of the boom in housing.

Critics point out the usual spring bounce findings which occur every year, but, stripping out the seasonal factors, March saw a 40% leap in property sales from the month before. Perhaps, it can be argued, that green shoots are emerging in the property market. Home loan providers have even begun increasing their cost of fixed rate mortgages in the last couple of weeks in response to higher demand.

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Tags: HMRC, Housing, Mortgages
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King targets banks ‘too big to fail’

Tuesday, June 23rd, 2009

An interesting opinion from the governor of the Bank of England, Mervyn King, is that the banks ‘too big to fail’ should be prevented from getting that big in the first place. According to the Times Online King stresses this is not a personal ploy for power nor is it instigating a battle with the Treasury, but is in the country’s and taxpayers’ best interests.

This comes at a time when the chancellor, Alistair Darling, will be announcing proposals for regulation of the financial sector for the next ten years. The proposals will at large be based on the findings of Lord Turner’s report on the Financial Services Authority (FSA).

King’s remarks not only question the general size of banks but whether the banks are mixing high-street retail banking with high risk investment banking, which had caused so much trouble in the last couple of years. The issue of size and relative failure is a contentious issue, and many analysts have argued that the bigger banks were more likely to fail, and fail in a more expensive way to the taxpayer.

However, others highlight that even the relatively smaller banks have an impact, for instance Dunfermline, Northern Rock and Bradford & Bingley, and still needed to be saved. Even the biggest banks did not fail simply because of their size, for instance RBS’s disastrous acquisition of ABN Amro, leading to their needing to be rescued by the taxpayer.

The Swiss government is even considering measures to physically curb their big banks, UBS and Credit Suisse. However, one analyst argues this may lead to banks moving their headquarters abroad, and the last thing the country wants is a revenue drain abroad.

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