SSE the energy company has been fined over £10million for lying to potential customers to convince them to swap to them for their energy supply.
The occurrences were not isolated incidents; customers were routinely lied to in stores, on the telephone and by door to door sales people between October 2009 and September 2012, who all stood to gain commission for securing the contracts.
Ofgem, the energy regulator fined SSE £10.5million, which is the largest fine that it has imposed. SSE has also said that it will set aside around £5million for customers who wish to make a claim against the products they were mis-sold.
As the UK prepares to face another budget next week the mood is pretty bleak. According to Lloyds TSB 55% of the public expect to be worse off after Chancellor George Osborne reveals his budget plans for the next financial year.
Lloyds TSB suggests that consumer spending will remain weak in the next few months as people struggle to survive, adding even more pressure to the wider standing of the British economy.
The British public’s perception of the UK’s general financial situation has got worse, with the percentage of people thinking that the state of the economy is “not at all good” climbing to 43% during February from 39%.
The UK is almost certain to fall into a triple dip recession according to forecasters after the latest manufacturing figures showed a surprise slump. It had been hoped that manufacturing would receive a boost from the weak pound as exports picked up, but it looks like that hasn’t happened at all.
This could also affect the overall 2013 figures, so we may see those numbers revised down as well.
There were instantly announcements made and comments given by a whole range of people in the economics and finance fields, with Scotiabank’s Alan Clarke claiming “this is the penultimate nail in the coffin in terms of triple-dip – it’s pretty much game over now. Unless we have a stellar performance from the services sector, we’re almost certainly in a triple dip.”
The services sector is unlikely to give the required boost, and the construction sector has already announced a fall in figures. James Knightley from ING sums up the situation and the bleak outlook: “We have already has poor construction numbers for the start of the quarter so the prospect of yet another return to technical recession is very real.”
The Bank of England will not be injecting more cash into the economy following a meeting of the Monetary Policy Committee (MPC). The MPC meet regularly to decide what to do with regards to Britain’s economy and the flow of money from the bank, and one of the things they vote on is whether to continue the process of quantitative easing (QE) whereby the Bank buys back government gilts from investment banks in order to give them a cash injection and allow them to give out more loans.
The move has come as something of a surprise to some spectators as there have been indications from members of the MPC that they are worried about the way the economy is going. The Ernst & Young ITEM Club’s Nida Ali is one of these, saying she found the decision “a little surprising in light of the dovish comments made by several Committee members since the last meeting. There is a real sense of “if not now, then when?”. The MPC are sending mixed signals which are adding to the sense of uncertainty. We would be strongly in favour of looser monetary policy and had been encouraged by the MPC’s recent comments and by signs that they were starting to think outside the box. But talk is cheap and it is time that they delivered.”
Overall borrowing dropped in the first month of 2013, with a particularly bad hit taken by mortgages. The British Bankers’ Association (BBA) said that, when compared to January 2012, the amount of cash lent through mortgages was 14% lower. The average amount given out in each mortgage fell, as well as the total number of mortgages approved.
The number of loans and other forms of credit also dropped, with people spending less on credit cards and instead choosing to repay more debt than would otherwise be the case. This may be because of the looming threat of a triple-dip recession, but some people are just blaming the cold January this year, with overall economic activity also set to drop.
David Dooks, the statistics director of the BBA, attempted to explain the drop away in a fashion that would only prove temporary: “January’s severe weather impacted adversely on what was already a subdued picture of borrowing demand from households and businesses. While general economic growth stalls, low consumer and business confidence generates a natural tendency to restrain borrowing appetite, repay borrowing where possible and to build up cash and savings as a buffer.”
The continuing global economic crisis is hitting the poorest households in the UK worst of all as families continue to find the cost of living increasing above the rate their wages are. This means that they have to make up for the gap in their incomings and outgoings by taking on more debt, such as through a credit card or a payday loan.
With the economy looking like it will move into a triple-dip recession, there doesn’t seem to be much hope of this situation changing either. That means that people will simply find it harder and harder to stay ahead financially.
However, this picture isn’t true across the board. For households with higher incomes, the news is actually becoming more positive, despite the economic situation overall looking as if it will worsen. Why this is happening hasn’t been explained, but the continued squeeze on the poor looks set to increase whilst the rich are let off the hook, as senior economist at Markit Tim Moore makes clear: “There was no let-up in the squeeze on UK household finances during February, as higher living costs and muted wage trends combined to reduce cash availability at the fastest pace since mid-2012.
The Bank of England has been doing a dreadful job of trying to bring inflation under its 2% target and are now expected to announce that inflation will remain high in this quarter as well after a much-hoped-for drop in January failed to materialise.
The 2.7% inflation figure from December carried over into January as well, with increasing energy prices and food bills taking most of the blame. A poor winter and autumn for growers in the UK meant that more vegetables had to be imported, driving up food prices.
This isn’t a new situation for the Bank, as they have had to revise up their inflation forecasts again and again during the financial crisis. IHS Global Insight’s Howard Archer spells out how the situation appears to anybody who has been watching the Bank of England during this period: “Once again the Bank of England will likely have the dismal task of raising its consumer price inflation forecasts and cutting its gross domestic product growth projections.”
The Office for National Statistics has released a report demonstrating that there has been a big jump in the number of self-employed over 50s. As the estimated returns for many pension schemes fall ever lower and the returns on savings accounts drop as well, it’s unsurprising that people are resorting to working into their retirement. Those approaching their retirement are also finding that they need more earning opportunities, which self employment gives them.
Whilst younger people can deal with a lack of income, making up any difference with a pay day loan or credit card until they can earn more, this is less of an option for those in or approaching retirement who need the stream of revenue to be constant.
The chairman of the Federation of Small Businesses, which represents many self employed people, John Walker, commented on the findings, saying that they were positive but expected: “The rise in self-employment is not surprising as many people lost their jobs in the recession, and struggled to find another. However, it is good to see that a large proportion of the increase has come from over-50s setting up their own business.”
The banking industry has suffered another blow after the Financial Services Authority (FSA) ruled that the rate swapping deals they have been offering to small businesses for years have been mis-sold in 90% of cases.
The rate swapping deals that were offered to businesses were supposed to protect them against rises in the base interest rate set by the Bank of England. If the rate went up, the businesses would need to pay more interest on any loans that they had taken out with the bank, but these rate swaps were a safeguard against that.
However, many businesses feel they were not adequately warned of the downside of the deal, which meant that these businesses are now locked into a higher interest rate than they would be if they hadn’t taken the deal. The record low 0.5% rate at by the Bank means that businesses who get loans can do so at massively reduced rates, but the businesses who rate swapped can’t.
Only a third of councils around the United Kingdom have chosen to freeze their council tax bills, meaning that people across Britain who are already struggling to keep on top of their bills could suddenly find themselves out of their depth. Whilst some will be able to find temporary solace with payday loans or smart use of credit cards, others will have no option but to cut back on their spending or spend time working out what are the essentials and what are luxuries.
The last few years have been difficult for many households, but it had looked like things were beginning to improve halfway through last year, when the economy grew thanks to the Olympics and the Diamond Jubilee. However, that was short lived, and the recent news of contracting GDP and now this potential jump in council tax could see people fall back into the financial doldrums.
Communities Minister Eric Pickles has voiced his concerns over the taxes, saying that councils “have to man up. Be straight with people […] councils should also stop treating residents with contempt. That’s why we’re making sure local people have their say by lowering the referendum threshold for council tax.”