June's survey indicated that 36 per cent of households saw their finances worsen since the previous month. As a result, the headline Markit Index fell from 36.0 in May to 35.1 in June.
And the trend looks set to continue, as the survey also showed that half of households expect their finances to deteriorate over the coming year, with only 19 per cent anticipating an amelioration in the situation.
“It may be summertime but the living is far from easy,” said Tim Moore, senior economist at Markit. “The decline in the index pours cold water on the tentative signs of improvement.”
According to the Office for Budget Responsibility (OBR), the independent fiscal watchdog, households will borrow more to maintain their living standards over the next four years.
By 2015, debt as a proportion of income will have jumped by 15 percentage points to 175 per cent, passing even 2007’s record 173 per cent level, the OBR predicts.
And research from the UK Institute for Fiscal Studies found that households face the biggest drop in real incomes for 30 years. They said that stagnant wages, increased taxes and high inflation cost the typical family more than £500 in lost real income over the past year.
The poor have suffered most from inflation in essentials such as food and energy costs and, apart from the very wealthy, have also lost most, proportionately, from tax and benefit reforms.
In his Mansion House speech, the Governor of the Bank of England, Sir Mervyn King, made the biblical allusion that the nation was in the middle of "seven lean years". The figures reflect that the UK may be in the grip of a true “Age of Austerity.”
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( 3 / 202 )The controversial decision to increase the state pension age to 66 and four months has been agreed on by Government ministers. However, due to a backlash of criticism the move has been postponed until 2024, instead of 2020, as originally planned.
In exchange for a delay to the changes being introduced, a higher pension age was finally agreed on. It is hoped that the delay will soften the blow of a sharp rise to the retirement age, allowing women in their 50s time to make plans for alternative retirement savings.
With retirement put back by as much as two years, it was estimated that for over 330,000 women who were born between December 1953 and October 1954, the increase to the retirement age would have had the biggest impact on their retirement plans as they would have faced the steepest rise in their pension age.
There has been wide acceptance that changes must be made to the state pension age due to the fact that life expectancy is rising and the burden it will have on the tax payer. However, many eyebrows have been raised at the rate at which it is rising.
Ros Altmann, the director general of Saga, said: “We have been inundated with letters and emails from women affected by these unfair changes and we believe that the Government's timetable for raising the state pension age should be adjusted.
“Some even said it feels as if the Government has gone into their bank account and robbed them of £10,000.”
Conservative Work and Pensions Secretary Iain Duncan Smith and Liberal Democrat Pensions Minister Steve Webb are understood to be “sympathetic” to the arguments.
A report published today by the charity Age UK says a worrying number of women are confused by the reforms. When asked when they will get their state pension, one in five women in their early fifties said the answer is 60.
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( 3 / 213 )According to a survey of IoD members, the proposed auto-enrolment pensions starting next year will cost employers huge amounts, with 57 per cent of them warning that the administrative burden will be high or very high.
The auto-enrolment scheme will start in October 2012 and will mean that all employers will be required by law to enroll their employees into a pension and make contributions to it on their behalf.
The employer’s contribution will be a minimum of 3 per cent of the employee’s salary and workers will have the chance to opt out if they wish. The move is aimed at cutting the ballooning private sector pensions deficit.
The survey also revealed that the burden is likely to fall hardest on small firms. Currently 95 per cent of firms that do not have any pension arrangements for employees into which the employer contributes are SMEs.
Commenting, Miles Templeman, Director-General of the IoD, said: “The Government shouldn’t underestimate the cost burden that auto-enrolment is going to place on small firms. Bigger businesses will mostly have pension arrangements for employees set up. Of course we need to improve retirement provision in the UK, but yet again it’s the small entrepreneur who is hit.
“Since the Government isn’t prepared to change course on what’s essentially a major piece of employment regulation, it needs to compensate for this burden with an equally significant deregulation elsewhere. Phasing in auto-enrolment buys us some time, but the private sector can’t be expected to bounce back and create new jobs in the longer run if the Government keeps dropping new cost burdens on firms.”
The survey found that a third of companies would freeze salaries to pay for the scheme, while 9 per cent would cut wages. Some 34 per cent said they would have to pay for contributions from profits, heaping financial pressure on already cash-strapped businesses.
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( 3 / 234 )Small businesses that use online trading platforms, such as Ebay and Gumtree, are being targeted by the HM Revenue & Customs (HMRC).
The tax affairs of businesses that use websites to trade online will be under the scrutiny of the taxman, who will be monitoring computer systems with a hope that they will recognise the businesses that are not paying “the right tax”.
The latest drive against tax evaders follows last year’s similar campaign against the medical profession, which was hailed as a success by the HMRC, raising £10 million from unpaid taxes and fines.
Dance and fitness coaches, private tutors, and cash-in-hand traders, who have the ability to hide second incomes, will also be targeted as part of the HMRC’s aim to recover £7 billion, which is lost to the Treasury each year.
The HMRC will also be on the lookout for tradesmen who are willing to work without charging VAT.
It is hoped that the campaigns will encourage dishonest traders to voluntarily declare their unpaid taxes. If businesses and traders are caught, the campaigns will see them being offered a partial amnesty with penalties capped at between 10 per cent and 20 per cent of their outstanding tax from the last five years.
However, those who fail to act will face fines of between 35 per cent and 100 per cent of the tax evaded.
Mike Wells from HMRC said: “We will use the information we gather to pursue people who choose not to use the opportunities we provide for them to put their affairs in order on the best possible terms. It will be more expensive if we come and find people, so I urge them to come forward and disclose voluntarily.”
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( 2.9 / 228 )A worrying picture was painted today of the state of the UK’s labour market with news that the number of people claiming Jobseeker’s Allowance in May rose at its fastest pace in two years.
However, according to the Office of National Statistics (ONS), unemployment figures fell by 88,000 to reach 2.43 million, which is the largest quarterly drop since summer 2000, taking the employment rate down from 7.9 per cent to 7.7 per cent.
The rise in the number of people claiming unemployment benefits, for the third month in a row, was unexpected. Analysts have cautioned that some of the rise may be due to changes in benefit rules.
The statistics also revealed that more people are entering into part-time work due to failing to find full-time work. The ONS said the number of “under-employed” increased by 46,000 in the three months to April to reach 1.21 million, which is the highest figure since records began in 1992.
According to the ONS, the number of people who left unemployment was almost matched by the number who entered new jobs with the employment total reaching 29.24 million.
Chris Grayling, Employment Minister, said: "This is another encouraging set of figures and a very welcome drop in unemployment. It's also good news that employment is going in the right direction with half a million more people in private sector jobs compared to this time last year.”
Private sector employment rose by 520,000 during the course of 12 months to the first quarter of 2011. The public sector cut numbers by 143,000, leaving left total employment up by about 376,000.
Howard Archer, chief economist at IHS Global Insight, said: "The labour market is currently showing resilience in the face of a struggling economy, but the key question is can it last? We have serious doubts about this and suspect that unemployment will head up in the second half of the year as public sector jobs are increasingly pared and private sector companies become more cautious in the face of persistently sluggish growth."
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