News Headlines – Monday 27th January 2014

Economics/Business
Businesses have accused Labour of being “anti-business” following their assertion they will reinstate the 50p rate of tax for high earners should they win the next election. The plan to revive the top rate of tax until the defecit has been cleared has been criticised by business leaders as well as former Labour ministers including Lord Myners. The Telegraph Leader accuses Labour of making the pledge for political rather than exonomic reasons stating that throughout most of Labour’s 13 years in office, the top rate of tax was 40p. It only increased to 50p just before the general election for populist reasons rather than economic ones – indeed, the move lost the treasury income. The pledge by Labour has also caused 17 business leaders including Sir Stuart Rose and Karren Brady to write a joint letter to the Telegraph saying the move will discourage investment into Britain, jeopardise the economic recovery and cause the loss of jobs. Telegraph, p.1, 23; FT, p.1

Employment/Recruitment
The economic recovery is widening the gap between London and other UK cities according to the latest Cities Outlook report from think tank Centre for Cities. London accounted for 79% of national jobs growth in the private sector between 2010 and 2012 with 216,700 jobs created over that period – 10 times more than the second fastest growing city, Edinburgh. The latest ONS data shows that London accounted for 22% of overall employment growth over the period, growing twice as fast as the national average. In contrast, towns such as Bradford, Blackpool and Glasgow have had job losses in both private and public sectors. FT, p,4

Property
David Cameron will today announce a drive to build thousands more homes by slashing building regulations. More than 100 rules applied to new homes will be cut to fewer than 10. The move will save developers £60m a year, equivalent to £500 for every new property built. Rules setting out minimum window sizes, the dimensions of rooms, the strength of front doors, and arrangements for lavatories, lighting, telephone lines and disabled access will be culled. It is hoped the move will result in far more homes being constructed. Telegraph, p.2

Personal Finance
Workers could increase their pension by a third in exchange for fewer guarantees about retirement income under a far-reaching pre-election shake-up of the industry. The Government will try to transform the pensions market by backing controversial occupational schemes commonly used in the Netherlands but previously rejected in Britain over fears the dangers were too great. Amid growing concern about falling pension incomes, ministers believe they can build enough safeguards into the proposed schemes to make them acceptable. Studies suugest the collective pensions could deliver returns of about 30% more than the occupational scheme currently used by most British employers. Times, p.1,2

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News Headlines: Monday 6th January

Economics

Calling 2014 “the year of hard choices” Chancellor Osborne will today set out plans to slash public spending, cap welfare and create a permanently smaller state after the 2015 election, saying that long-term recovery remains in the balance unless austerity is extended.  This comes as three major business surveys today (from Lloyds, Deloitte, and EEF) indicate that companies are optimistic about their ability to expand and create jobs this year. But in comments that will balance out the current optimism about the UK’s economic recovery, Osborne will highlight that the Government is still borrowing too much and paying too much interest on the national debt, requiring a fundamental change in the shape and nature of the State to enable Britain to once again be able to live with its means. This vision of a smaller state is also key to creating distance between the Tories and the other parties ahead of the election.  Osborne will say that the only way to permanently cut taxes is to permanently cut the spending those taxes pay for. (Telegraph front page, FT front page, Mail p.2, Guardian p.2)

Personal Finance

David Cameron has refused to guarantee universal pensioner benefits such as winter fuel allowance, free TV licenses and bus passes after 2015. Sources at No.10 have indicated that the PM is personally committed to the policy, but faces major opposition within his cabinet. Cameron has already pledged to keep the “triple lock” guarantee that state pensions will rise in line with inflation, wages or 2.5% if he’s elected, meaning that millions can expect an extra £1,000 a year in state pension by 2020.  But pensioner groups say this is worthless if energy prices keep on soaring. The National Pensioners’ Convention said the current £110.15 a week is the second lowest in the developed world after Mexico, arguing that add-ons are essential as British pensions don’t stretch far enough to cover travel on public transport or to heat homes.  (Daily Mail front page, Telegraph front page, Mirror p.2, Express p.2, Sun p.4, Times p.2, Independent p.4)

Property

The rising cost of commuting to and from London by train is eating into the mortgage savings made by living in popular commuter towns outside the capital, according to the latest research from haart.  The estate agents revealed that on average about half of the savings made by living in places such as Cambridge and Leamington Spa are lost on train tickets. The average mortgage saving by commuters was £10,799, compared with the £5,160 price of a season train ticket. Chief executive Paul Smith warned that people need to factor in the spiralling cost of commuting to London, “which may ultimately discourage people from moving out” (Telegraph B5, City AM p.3)

Recruitment

Business leaders have hit out at Labour’s plans to end the UK’s “chronic dependency on low-skill, low-wage labour from abroad”, as Ed Miliband vows to prevent companies from abusing loopholes in EU employment law to hire foreign workers through agencies at cheap rates, instead of British job-seekers. But CBI has claimed that the use of temporary agency workers is perfectly legal and has provided the flexibility needed to keep our economy going through the credit crisis. The Recruitment and Employment Confederation also said that agency workers gained all the benefits of permanent employees (including maternity leave and statuary redundancy pay), despite Miliband’s view that they are locked into a dangerous cycle of low wages, low skills and insecure jobs.  (Sun p.2, FT p.2, Guardian p.6, Times p.7, Independent p.15)

Wriglesworth Vlog: Paper Summary for 3rd January 2014

The key macro-economic, personal finance, property and recruitment stories from today’s papers, read by Wriglesworth Managing Director Laura O’Connell

Paper Summary: 20th December 2013

In Friday’s papers…

Economics

Businesses will be paid to cut their energy use on winter evenings next year, amid warnings from Ofgem of increased risk of power shortages by the middle of the decade. The National Grid will ask businesses to reduce electricity use between 4pm and 8pm – the peak demand period for households – forcing the government to deny that we are heading towards a sustained wave of blackouts reminiscent of the 1970s.  The cost of running the scheme however, is likely to fall on consumers’ energy bills, and the measures would also have serious ramifications for the nation’s productivity and economic recovery.  The fact that these measures are deemed necessary is being viewed  as proof that not enough wind turbines are being built to cover the fall in Britain’s electricity-generating capacity, as many coal and gas-fired stations are closed to meet government promises to cut carbon emissions. (FT p.1., Mail p.2, Guardian p.34, Times p.20)

Personal Finance

The Bank of England has highlighted the rate-setting dilemma facing the government as the economy recovers, warning that heavily indebted homeowners will be hard hit if interest rates start to rise before wages have picked up. Their research finds that if interest rates were raised to 3% from the current record low of 0.5% it would almost double the proportion of “vulnerable mortgagors” (who spend at least 35% of their pre-tax income on repayments) to 16%. The Independent claims that nearly 1 in 6 households would be at risk of losing their homes.  It comes as strong jobs data this week raised the prospect of an earlier rise in interest rates, but Carney has signalled he wants wages to pick up first. (Guardian p.33, Times p.49, Independent p.55, Telegraph Business p.1)

Property

Rents are rising twice as fast as wages, according to the latest buy-to-Let index from LSL Property Services. Rents are up 1.6% over the last 12 months, compared to only 0.8% annual growth in weekly earnings. David Newnes comments that “for many households, the dream of home ownership is still relegated to the imagination”, as the pressure on tenants’ finances make saving up for a deposit a real struggle. (Mirror p.62, Metro p.16)

The British housing market is ending the year strongly with mortgage lending rising by 30% in November, according to the CML.  The Mortgage Advice Bureau revealed that in November the number of mortgages being marketed to borrowers broke through 12,000 for the first time in four and a half years, more than three times the number on offer in April 2009. (Guardian p.33)