British Households: Less Expenses, Yet No Improvement

Economic research company Markit on Monday mentioned that most British households had the smallest expenses in almost two years after the financial crisis of 2007-2009. The Household Finance Index had risen to 39.0 in October, having the highest level since 2010.

However, the research company states that even if the levels are quite nominal, many citizens still experienced worsening conditions rather than improvements. Many UK citizens have had stable economic development through better employment opportunities. The stable economies have helped them have more money in reserve and repay their debts in the last two years.

UK citizens continue to doubt about the stability being retained further in the future. Inflation is troubling most citizens, which had reached an all time high September last year of 5.2 percent. Last month, the inflation dropped to 2.2 percent and showed that many citizens were employed, the numbers breaking all records from 1971 when records began in 1971.

According to Markit, households may still tighten their spending and their belts in the next few years even if pressures may have returned to a sense of normalcy once again because of their spending sentiments. This is to prepare for the worst that can happen and that what is happening in the economy might only be temporary.

Source: Reuters

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The Effect of The Euro Crisis on UK Imports & Exports

There’s no denying that we are in the deepest recession for 70 years and British businesses have been heavily affected by the crisis across the channel. But what has been the real cost to UK businesses when it comes to the import and export of goods throughout Europe?

The largest impact that the debt crisis in the Eurozone has had is that of reversing the attitudes of the financial markets leading to a weak Euro, negative trading and a significant impact on UK importers and exporters. Obviously for those companies bringing products into the UK from the Eurozone, there are huge benefits as imports costs are at an all-time-low. The net result is that with the Euro at such a low value, these companies can use import letters of credit to expand their set-up and either reduce the price of their products (increasing competitiveness) or simply boost their margin of profit.

But there are two sides to every coin and UK exporters are looking very expensive right about now as the Euro buys you few pounds. In general British products are increasingly costly to European buyers and when you consider that over 50% of UK exports are bought by customers in Europe, you begin to see a worrying picture.

Simply put: 322 million Europeans in seventeen different nations use the Euro to buy their overseas goods, since the collapse in its worth, then haven’t been able to afford as many imports. Even worse, if Greece were to exit the Eurozone then UK exporters would instantly lose 2% of the European market with Greek policy focusing on domestic purchases over cash leaving the country.

Whatever happens in Greece or any of the other bail-out-dependent countries; the Euro debt crisis will continue to impact British importers and exporters, and the he crisis is far from over.

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Families to be £7000 Worse-off by 2015

The ongoing recession in the UK is having a major detrimental effect on the overall income of families. A recent report suggests that, thanks to a combination of factors, the average family will find they are £7000 out of pocket by 2015.

Figures suggest that, in 2011, a family had £800 less to spend compared to 2010, and this is expected to double for 2012. With further rises expected in coming years the total between 2010 and 2015 will be just over £7000 in total.

A combination of rising unemployment, lower average salaries and increased costs on fuel and food are the main influences on the rising cost of living. Records kept since 1948 show that the latest figures for disposable income feature the most dramatic and worrying decline of all time.

General pessimism regarding the overall state of the economy is unsurprising given the state of play in the eurozone at the moment, and it is perhaps telling that more people than ever before are seeking compensation for PPI payments and other mis-sold policies.

With little hope of light at the end of the tunnel families have no option but to tighten the purse strings and ride out the storm, and many are cutting out luxuries to help. Foreign holidays are becoming less popular as people look for cheaper options at home, and sales of luxury goods are also falling.

Commentators are readily blaming the coalition government for its failure to control the state of the economy, but it is fair to say that in a worldwide recession such things are far from simple.

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Top Nations Worry About Euro Zone Crisis Derailing Global Economy

The European debt crisis nowadays has worried many finance ministers from developed nations because the destruction of the Euro can potentially bring a great tremor in the world’s current economy. The nations fully support the effort to bring the crisis towards fiscal and financial union in the Euro zone. Because of the warning of the Spanish Prime Minister Mariano Rajoy, many finance ministers are formulating solutions to avert a crisis that can potentially disrupt the global economy.

George Osborne, the British chancellor and others from the group of top industrialized nations and central bankers discussed the growing problem in Europe through a telephone conference last Tuesday. It was described by British Officials as a form of a ‘stocktaking session’. David Cameron is to meet with the German Chancellor, Angela Merkel to talk about the British support for greater fiscal governance in the Euro zone.

Spain, facing problems because of the said financial crisis, is now off the bond market. The high interest rates of investors have prevented the company from raising enough funds. The top industrialized nations of the world mention that the Euro Zone Crisis will definitely be a hot topic in the upcoming G20 Summit.

The Euro Zone Crisis, according to US President Barack Obama, is the biggest impediment to the global economic growth. The president has discussed the Euro Zone Crisis with the prime minister last Tuesday as well.

Source: Guardian

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Cameron,Osbourne, King and Turner Meet to Discuss Euro Zone

Prime Minister David Cameron, Chancellor George Osbourne, Bank of England Governor Mervyn King and Bank Regulator Adair Turner will discuss the issue on the Euro Zone this Monday. This is said to be in response with the growing tensions circling the exit of Greece from the Euro and its return to the Drachma, its former currency.

The economical fluctuations and contingency plans are to be discussed upon the Euro’s impact to the UK, as well as Spain’s crisis and its plan to raise its fourth biggest bank using Spanish government bonds. Greece’s exit from the Euro meant economic destabilisation for countries such as Germany and France, who, at the moment, are feeling the intensity of the situation.

It was reported that the Euro Zone’s devastating effects have reached part of Europe’s inner circle, affecting much of the businesses in the areas.

It can be recalled that Spain is having economic problems because of its weakening currency. Their plan to use Spanish government bonds is quite similar to what the UK has done to save numerous banks, namely Northern Rock and Lloyds in the recent years. However, this can also impact the Euro and other economies in Europe.

Given that the top ministers were to meet with the Bank of England’s governor, the discussion was speculated to look into the general economy, the International Monetary Fund and the Euro Zone crisis.

SOURCE: Reuters

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Increased Tax Rate Fails to Improve Revenues

As the government faced greater spending cuts, David Cameron’s predecessor decided to increase the marginal tax rate. In theory, this was supposed to help the government substantially improve revenues so that they wouldn’t have to implement austerity measures to the same degree.

To Cameron’s disappointment, the increased marginal tax rate is unlikely to create the rebound in revenues that many people were expecting. In fact, it appears that the increased tax rate has actually decreased revenues by about 5%. The filings that were initiated on January 31 show that revenue is down almost half a billion pounds.

This months reports are the first indicator that Cameron and the Inland Revenue Service have to decide how effective the tax increase will be. The tax year will end on April, but the self assessment is due by the end of January report. Therefore, the first month of the year is the first time that the Inland Revenue Service can see what impact tax increases hold.

These figures indicate that Gordon Brown’s decision to implement these taxes has not yielded the promising results many hoped for. However, Cameron may face criticism from his own party for choosing to keep them in place.

The government doesn’t have many historical indicators to suggest that increasing taxes are going to have a major impact on revenues. Former Chancellor Lawson agreed to cut the tax rate from 60% to 40% nearly 30 years ago. The rate has not been increased since.

The biggest reason for the tax increase was to make sure the bankers paid for the damage they caused during the financial crisis. Cameron himself made a more unbiased statement, but many people insinuated that he felt the same way. Although the financial crisis initially originated on Wall Street by larger American banks, UK citizens haven’t felt any less animosity to their own bankers or held them any less accountable for their own mistakes.

One of the problems with the new tax system is that the richest citizens seem to have been able to shift their money overseas to avoid paying their taxes. This could be an indication to the government that they would need a new policy if they intended to make sure they could increase their tax revenue to any meaningful degree.

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Unemployment Rate Among College Grads and GCSE Holders Equal

Traditionally, most people have gone to college with the expectation that it would improve their chances of getting a job afterwards. That perspective has been accurate for a long time. However, citizens who based their decisions on that data seem to be sorely disappointed.

New surveys from the Office of National Statistics have shown that the unemployment rate among college graduates and high school drop outs is now the same. Data from 2011 said that 20% of 18 year-olds who left school at the top of their class were unemployed, while the unemployment rate for all university graduates was 25%. The unemployment rate for those students who received a graduate certificate of secondary education was 26%.

These figures point a concerning perspective for the younger generation. Studies released last month found that the younger generation was forced to start their career later in life than previous years due to the financial challenges they have undergone.

However, the figures are significantly more encouraging for graduates who are 24 years of age or older. Also, college graduates in that age group have a little higher than their peers. About five percent of college graduates over 24 were unemployed, compared with seven percent who finished high school in the top of their class. About 13% of those with a GCSE were unemployed.

A spokesperson from the Higher Education Careers Services Unit said that the statistics need to be taken in their appropriate context. The number of students who left their high school at the top of their class was significantly smaller than the number who attended college. Also, even though the jobs market is struggling just as much as it was before the recession, most graduates are able to find work within six months.

Although there are some defining features in the report, these statistics foreshadow a number of challenges for the rising workforce. A new economic infrastructure will be needed to get them back to the pre-recession levels. However, the unemployment situation still isn’t as bad as it had been during the recession of the 1980s.

Stephen Isherwood stated his position on the importance of younger workers clearly deciding whether or not they should attend university. Rather than succumb to the idea that attending college is the best approach to take, they should try to understand the importance of creating a future for themselves that they are going to be able to be comfortable with.

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Greece May Be About to Receive Second Bailout

The economic community is becoming even more concerned over the developments taking place in the Eurozone. Greece’s ability to avoid default depends on its ability to receive a second round of bailouts from the International Monetary Fund and the European Financial Stability Fund. A decision on the new round of bailouts is expected to be delivered on Monday.

According to Christine Lagarde, the new chief of the IMF, Greece has made very significant progress in putting itself back on the road to recovery and paying down its debt. However, she argued that more progress is needed and Greece will need another round of bailouts to recover from the financial burdens it is now facing.

Greek officials will have to meet later on Monday evening to decide what measures they will need to take for the banks to accept a voluntary haircut on their loans. This is one of the requirements before Greece will be able to receive another bailout. The new arrangement between the banks and Greece will involve a 100 billion euro cut on Greek debt.

The countries that are instituting the bailouts are also insisting on having more control over Greece’s budget. Although Greece has raised objections over being forced to implement new austerity measures, other countries argue that they are going to have to accept the terms if they have any expectation of receiving any more bailouts.

Despite its objections over some of the new measures, Germany said that Greece is willing to allow the money to be placed in a separate account rather than being handed directly the country’s treasury. This would give lender countries the ability to control when Greece received disbursements.

Greece has already begun to implement the austerity measures demanded by the IMF, EFSF and the lending nations. They made 325 million euros in additional spending cuts. This has proven to be highly unpopular for Greek citizens, who have already begun protesting on the streets of Athens. Regardless of how unpopular these austerity measures are becoming, they are a necessary part of the bailout package. They may prolong the depression Greece is currently undergoing, but without them Greece would have to deal with calamity of its first sovereign default.

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What is the New Student Loan Repayment Plan and How Will it Affect Consumers?

The new regulations over student loan reform have created a number of challenges to both current and aspiring students. Many students were concerned over a new repayment plan that was proposed by Vince Cable, David Cameron’s Business Secretary. Cable’s plan called for a 5% penalty on all students attempting to repay their student loans before the end of the term of their loan. This idea was implemented with the intention of preventing wealthier students from escaping the interest payments they would otherwise be forced to make on 30-year loans.

That repayment scheme has since been killed. According to Guardian sources, Cameron has apparently negotiated a new arrangement with Cable whereby Cable will be able to decide who to appoint to be the University admissions tsar. However, it is also possible that the tens of thousands of people who protested the idea are also responsible for creating the support needed to strike down the bill.

Under the new plan, students will be eligible to receive £9,000 a year for tuition. They will also be given maintenance loans for housing, which will be higher for students living in London. Students coming from families earning less than £25,000 a year will also be eligible for a non-repayment grant of £2,906.

Students taking out loans between September 2012 and September 2016 will be charged 3% interest. However, they will not need to repay their loans until they have started to earn an annual salary of £21,000. After that point, students will be repaying their loans based on their salary.

Many parents are asking how to manage the finances most appropriately. They have been informed that it is best to apply for these loans first rather than taking out a personal loan for their children. The interest will be much lower on the student loans. Also, students are discouraged from investing their maintenance loans, because the interest they will be paying on them is likely more than what they will earn after putting that money into savings.

Most families are happy to hear that the repayment plan Cable proposed had been killed. Although Cable stated that the loan was intended to go after wealthier families, lower and middle class families were going to be hit hard by it as well.

However, it is unclear whether or not this arrangement worked out for the best, because Cameron will now give Cable the discretion to appoint Les Ebdon to the Office of Fair Access. Many people are concerned that Ebdon could be a serious liability to the country.


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Cameron Considers Tax Breaks to Hire Cleaners

Prime Minister Cameron has stated that he is considering offering tax breaks to people who hire cleaners. Although this may sound like an unconventional reform proposal to many people, he intends to use it to create jobs.

Cameron said that such a measure would encourage more women to enter the workforce and would create a new jobs for cleaners. In the long run, these tax breaks would add many more jobs to Britain’s struggling work force.

Cameron said that he got the idea while visiting Sweden, which had created a similar policy. According to Cameron, Sweden had improved their economy and built its workforce with the use of cheap labor.

However, the tax break in Sweden has been highly criticized. Many people have argued that it exists to provide tax breaks to the wealthiest figures in society.

The Swedish government argues that the new process has created about 5,000 new jobs. However, those figures don’t stand up to the voice of all critics. The issue they have is that far more wealthy citizens are likely to take advantage of the services than poorer citizens. In fact, the group that is by far the most likely to use these services is those who are earning about £5,000 or more a month.

In addition, it is unclear how many UK citizens would really benefit from the policies Cameron is proposing. According to the findings at the summit, most of the people who have benefited from the tax break in Sweden have been immigrants.

However, Cameron stated that his real goal was to create a more flexible working style for women so that they would be able to work alongside men in the workforce. This is important, because organizations seem to benefit more when they have men and women working together in the workforce.

Fredrik Reinfeld, Sweden’s Prime Minister, has had a profound influence on Cameron’s ideas in this summit. Reinfeld said that he felt encouraging more women to join the workforce would reduce the risk levels in a number of different fields such as finance. These feelings are likely to be supported by many feminists who have stated that the lack of women in the workforce played a role in the financial downfall of 2008.

Although many people find these proposals to either be interesting solutions or highly controversial, the policy will likely not be implemented for some time. Cameron is just giving some feedback on possible ideas and it is unlikely he will commit to anything right away.

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