The Budget: A First Response

March 12th, 2008

Supposedly one of the most exciting days in the politico-economic calendar, today is budget day. While some people are saying that the budget this year was a boring and long winded way of saying and doing very little, others are saying that this is what the Chancellor intended. And yet there seem to be a whole host of consequences of this doing nothing, which I shall now examine.

Firstly, there will be an increase in the overall tax burden over the next three years. In his first Budget the Chancellor put 4p on a pint of beer, 14p on a bottle of wine and 55p on a bottle of spirits. Duty on a packet of cigarettes is up 11p. There were no significant changes on income tax or VAT.

Plans to increase first-year road tax by £950 for the most polluting vehicles and a general reform of Vehicle Excise Duty aimed at encouraging the production of greener cars are also expected to bring in an extra £730m annually by 2010. Mr Darling also said he was setting aside new funding to develop road-pricing schemes. Risking the anger of environmental groups the Chancellor delaying a planned increase in fuel duty for six months but motorists will face an April 2009 fuel duty rise of 1.84p a litr

The over-60s will now get £250 winter fuel payment instead of £200 and the over-80s will get £400 instead of £300. Similarly, child benefit will rise from April 2009 to £20 week – a year earlier than planned, and there was more help for families using pre-paid electricity meters.

Darling announced an increase in the amount airlines will have to pay to become “greener,” an extra 10% on plane duty in the second year of a new per-flight tax regime, replacing the unpopular Air Passenger Duty (APD) from November 2009.

Following on with the vote winning environmental theme, Mr Darling ordered stores to ban single-use carrier bags by next year or face legislation and announced a review of carbon targets with aim of reducing emissions by 80% by 2050, up from 60%.

In other changes, stamp duty on shared-ownership homes will not be required until buyers own 80% of the equity in their home.

The budget has had a mixed reception, the changes that benefit poor children have elicited praise from charities such as Barnardos but the environmental aspects have been criticised by airlines for being too strict and by environmental pressure groups for being too lenient.

The truth is that with the economy’s growth slowing at the current rate there was little the Chancellor could do but tinker, a fact which David Cameron was swift to pounce upon. He called the budget a ‘dire list of review and reannouncements.’ The general feeling will take longer to judge but looks like being summed up by Cameron’s subsequent statement. ‘The cost of living is going up and Labour is making it worse.’

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More Top Tips

March 11th, 2008

Following on from the 5 ways to stay in control of your loans I have come up with 5 ways of staying in control of spiralling spending, so that you should not need a loan in the first place.

The first of these is make a budget, and stick to it. This is something that seems so obvious I’m amazed that more people do not do it. It allows the chance for a complete overhaul of personal finances. It makes it clear that we don’t really need to be wasting money on gym memberships we never use, expensive Sky packages we hardly ever watch or rip-off mobile phone and broadband tariffs. Even eating in rather than feasting on take-away food can save you money. This does not mean cutting out all your luxuries. Just be a little more careful with the cash and you can watch the savings begin to stack up.Sticking with the food theme, there are now sites that allow you to enter your typical weekly shop and they will tell you which supermarket locally will allow you to buy your groceries for the lowest price. Mysupermarket.co.uk is the most well known, and it even tells you if there are special offers that will allow you to stretch your money even further.The next area where people may need to save money is on their utility bills. There are a plethora of price comparison sites in this area, many advertised on television and in newspapers, but there are reasons to be wary. Many are in fact glorified middlemen who will take a cut of whatever price at which they snare you. Needless to say there are much cheaper deals to be found. Price comparison sites are a good place to start to get an idea of the market, but since some companies do not let themselves appear on them there is no substitute for shopping around until you find the best deal.Some sources of financial advice preach that in times of hardship a good way to save money is to cancel insurance policies, and then take them out again when times of plenty return. This is BAD advice. The choice is not, however, between keeping overpriced and under serviced insurance policies or going without insurance altogether. Each time an insurance policy comes up for renewal you should check the market, it is likely that there will be a cheaper deal available and you will be able to save money without compromising your cover.Lastly, if you must use a credit card make sure that you are getting the best deal. Get your expenditure down by moving to a 0% balance transfer credit card. Take a look at Virgin’s credit card which will put a freeze on your interest bill for a full 15 months, although there are many good deals to be found.There is a feeling in many that the tips outlines above are a lot of effort and to do all that is just as bad as being in debt. This is both lazy and stupid. Shopping around on the internet is a good way of saving money easily and quickly, and if it means the difference between staying on budget or overspending and going into debt, the effort is very much worth it every time.

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Advice and Contacts

March 8th, 2008

An article published in the Times this week has caused widespread controversy. Purporting to contain a ‘20 point guide to staying in control of your loans’, it actually contained a large amount of utter drivel. Debate has raged about how many of the points (if any) were actually good advice, while others are thought to be easy means of going bankrupt.

Unlike the deeply cynical who have piled into the argument, I have pulled 5 of the 20 points out of the mire and washed them down to be presented here. Some may seem like stating the obvious but as the growing extent of Britain’s debt crisis testifies, these lessons still need to be learnt.

Firstly, watch for warning signs. Things are most worrying for the 1.4 million households that are due to come off low-price fixed-rate loans this year. But you should also be concerned if you are on a downward spiral of paying back less and less of your borrowings each month. Failing to repay your overdraft (and going up to, or exceeding, the limit regularly) is a sign of credit distress, as is taking on new borrowings, such as another credit card, without clearing the old.

Secondly, search in your finances for some extra cash. If you have suffered redundancy or are employed on short-term contracts, you may have paid too much tax under PAYE and may be due a refund. Check with Revenue & Customs. Go online to www.direct.gov.uk and check if you are getting all the benefits due to you. Check on your tax credits at www.taxcredits.inlandrevenue.gov.uk.

Thirdly, make sure you minimise your spending. You could be paying less for expensive items such as utilities. Check at a price-comparison site such as www.uswitch.com. Stop paying for insurance policies you don’t need, such as payment protection insurance (PPI) or mobile phone cover. Cancelling PPI on a £5,000 loan over three years will save £366.60 a year. The websites www.creditaction.org.uk and www.moneysavingexpert.co.uk have hundreds of money-saving ideas. Fourthly, do not be afraid to approach your lender. If your problem is short-term it may offer a payment holiday during which it will accept lower or even no payments. It may even suggest an alternative mortgage.

If you are repaying both capital and interest, switch to an interest-only loan. On a £200,000 loan, a borrower paying 6 per cent can save £289 a month this way. But be sure to begin repaying the capital again as soon as you can. Increase the term of your loan to reduce the monthly repayments due. An increase from 25 to 30 years on a £100,000 mortgage cuts £44 a month off the bill, but be warned, you will pay much more over the term of a longer loan. You may be able to take out a cheaper mortgage with another lender, although companies have tightened their lending criteria since the credit crunch so this may not be possible. Pay mortgage, council tax and utility bills before credit and store card bills. Non-payment of these important bills can bring much harsher penalties.

Lastly, never be afraid to face up to your problems. People in debt are often in denial. Do not underestimate how much you owe. Think of your partner and or children. You may be ashamed, angry, frightened and depressed, but you need to talk to them, not least because they can try to boost their income and cut their spending. You certainly need to be honest with your mortgage company. Your lender cannot be sympathetic if you have not told it. Always communicate in writing and keep copies of letters sent and received; only make offers you can afford and back this up by showing the company your budget. Tell it about every change in your circumstances. Ask the company’s advice.

One thing everyone does agree on is that at the end of the original article was a list of useful contacts for those who, having followed the original advice, was still having problems. I shall reproduce this here for referent for those who may need it.

The Consumer Credit Counselling Service www.cccs.co.uk (free helpline 0800 1381111)National Debtline www.nationaldebtline.co.uk .

www.creditaction.org.uk

www.moneysavingexpert.co.uk

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