Posted by Hari on Thursday, December 01, 2016 with No comments | Labels: Roundup
UK living standards
squeeze 'will be worse than after global crash' over next 5 years
Analysis of Wednesday’s autumn statement by the Resolution
Foundation thinktank suggests average earnings are set to grow only half as
rapidly as in the austerity years after the economic crisis. At the same time,
living standards will be undermined by higher inflation and ongoing welfare
cuts. While the squeeze of the last parliament affected workers across the
income spectrum, the foundation says low-paid households are set to be hardest
hit over the next five years, because they are particularly affected by planned
welfare cuts. The chancellor, Philip Hammond, announced a modest softening of
cuts to universal credit in the autumn statement, but a £3bn cut in the “work
allowance” claimants can earn before their benefits are withdrawn will go
ahead. His predecessor George Osborne also previously announced a four-year
cash freeze in most in-work benefits, which will go ahead. The foundation’s
director, Torsten Bell, said: “Unlike the last parliament, it will be low- and
middle-income households who feel the tightest squeeze this time round.” The
foundation cites forecasts from the Office for Budget Responsibility (OBR), which
predicted a challenging fiscal climate in the face of Brexit and wider
international economic uncertainty. GUARDIAN
Bank governor Mark
Carney warns on rising household debt
The governor of the Bank of England, Mark Carney, has said
that consumers were borrowing more on their credit cards and other unsecured
debt. Figures from the Bank this week showed that credit card lending is at a
record level, up by £571m in the last month. Overall unsecured debt - which
includes overdrafts - is rising at its fastest pace for 11 years. The Bank's
Stability Report showed that the overall ratio of household debt to income was
133% in the second quarter of 2016. The Bank said that was high by historical
standards, although it was not as high as in the financial crisis. In general
the outlook for UK financial stability after the Brexit vote "remains
challenging", said the Bank's report. It said stability was dependent on
an orderly exit from the European Union, while it would take time to clarify
the UK's new relationship with the EU. Otherwise the greatest risks to UK
financial stability are slowing growth in China and the eurozone, the report
said. UK banks are particularly exposed to events in Europe. They provide more than
half of debt and equity issuance by continental firms, and account for more
than three quarters of foreign exchange and derivatives activity in the EU, it
noted. BBC NEWS
National Living Wage
'has not hit employment' says government monitor
The Low Pay Commission said it had found "no clear
evidence" of changes in employment or hours since the higher minimum wage
was introduced in April. It said employment had continued to rise even in
sectors most obviously affected, such as cleaning, hotels, horticulture and
retail. The finding contradicts warnings from economists over the wage's
impact. On Tuesday, the Organisation for Economic Co-operation and Development
said the UK should be careful with plans to raise the National Living Wage,
warning it could affect employment. The think tank's stance echoes the
widespread claims of business organisations in the 1990s that the introduction
of the UK's national minimum wage - which started in 1999 - would lead to
widespread job losses. Those fears proved to be groundless, with the number of
people in employment rising from 27 million then to nearly 32 million now. The
Low Pay Commission warned that "in some cases" employers may have
reduced other staff payments or perks to fund the higher basic wage, but said
it had found "no significant change" in levels of overtime and the
higher hourly rates paid for working on Sundays or bank holidays. The
commission also said that the higher National Living Wage could "present
challenges" for the social care sector, with many providers facing losses.
The National Living Wage came into effect in April this year, and was set at a
rate of £7.20 an hour for workers aged 25 and over, with the aim of increasing
it to £9 an hour by 2020. BBC NEWS
Government outlines
plans to make companies justify high levels of executive pay
Among the measures under consideration are pay ratios, which
would show the gap in earnings between the chief executive and an average
employee. Shareholders would be handed more powers to vote against bosses' pay,
but the government will not force companies to put workers on boards. Prime
Minister Theresa May has made tackling corporate excess a priority. Her
Conservative government is "unashamedly pro-business", but big firms
must earn and keep the public's trust, she said in the consultation plans. Chief
executives of FTSE 100 firms now have a median pay package of £4.3m, which is
140 times that of the average worker, according to the High Pay Centre. "There
may be some circumstances where that is defensible, but it should be for the
boards of companies and executives to justify that," Business Secretary
Greg Clark told the BBC. He said the UK was not alone in targeting pay ratios,
with the US set to report them at the start of next year. However, businesses
have warned it would be difficult to compare pay ratios across companies. By
comparing pay gaps, Goldman Sachs will look like a more equitable company than
John Lewis thanks to the very high pay of the average banker, which is around
£400,000. Other suggestions from the government include more frequent binding
votes by shareholders on chief executive's pay packages. "The right thing
is to give greater powers to shareholders to do their job in holding executives
to account," Mr Clark said. The proposals form part of the government's
Green Paper on corporate governance reform, which aims to increase public trust
in business. The paper also includes measures on: Ensuring the
"voice" of employees and customers is better represented on company
boards; Holding privately-held firms to the same corporate governance standards
as publicly listed companies. BBC NEWS
Government starts
review of low pay 'gig' economy
A team of four experts is preparing to tour the UK to
explore how the "gig" economy is affecting workers' rights. Mathew
Taylor, chief executive of the Royal Society for the Arts, was appointed last
month to lead the review into the impact of "disruptive" businesses
such as Uber and Deliveroo. New technology combined with new business models
has led to a rise in workers doing short-term, casual work. Many are not
eligible for the minimum wage, sickness or maternity pay. The review will
address questions of job-security, pension, holiday and parental leave rights.
It will also look at "employer freedoms and obligations". Mr Taylor
will be joined by the entrepreneur, Greg Marsh, who founded onefinestay, a
company which helps upmarket home-owners let their properties to visitors, Paul
Broadbent chief executive of the Gangmasters Licensing Authority and employment
lawyer, Diane Nicol. The team will be talking to businesses and workers across
the UK, including in Maidstone, Coventry and Glasgow. It will look into
practices in manufacturing and rural economies as well as the "gig"
economy. The government's Autumn Statement earlier this month indicated how the
"gig economy" is also beginning to affect budget revenues, as
self-employment and casual work reduce the amount of tax being paid. The Office
for Budget Responsibility (OBR) estimated that in 2020/21 it will cost the
Treasury £3.5bn. BBC NEWS
RBS fails Bank of
England “stress test”
The toughest stress test yet assessed how the UK’s seven
biggest lenders would cope with hypothetical scenarios including a recession, a
housing crash and a halving of the oil price. RBS, which is still 73 per cent
owned by the government after its bailout in 2008, has emerged as the worst hit
in the annual health check of the banking system. This means the lender must
take action to protect itself against a sharp slump in the economy. RBS has
issued a plan intended to bolster its financial strength by an estimated £2bn,
which has been accepted by the BoE. Barclays and Standard Chartered also
struggled under the test, however neither was required to submit a revised
capital plan. The test also covered HSBC, Lloyds Banking Group, Santander and
Nationwide.They did not reveal any capital inadequacies in the test, the BoE
said. Britain's banking system underwent a severe real-life test in June when
markets and sterling plummeted in response to Britain's vote to leave the
European Union. Banks could be required to change their business models to make
them more sustainable as they face a prolonged period of low interest rates and
uncertainty over Britain's future relations with the EU after it leaves the
bloc. INDEPENDENT
FCA may introduce price cap on
rent-to-own goods possible, following success of payday loan cap
Up to 400,000 people use rent-to-own firms to buy household
appliances, paying the money back over three years. After interest, they can
end up paying three times the original price. It follows a call for a cap from
Citizens Advice, which said restrictions imposed on payday lenders two years
ago had been a success. Citizens Advice also said there was a lack of affordability
checks in the industry, meaning that people signed up to agreements they could
not afford. And it said that rent-to-own firms did not always take a flexible
approach when shoppers got into debt. However, BrightHouse, the biggest
rent-to-own firm, accused Citizens Advice of producing a "misleading"
and "inaccurate" report. The FCA said that it would be prepared to
consider a cap in the rent-to-own market, but added that in the case of the
payday loan sector it had been a "last resort". "The price cap
is very much the thing we do when all other price measures don't look very
promising," Andrew Bailey, chief executive of the FCA, told the BBC. Since
January 2015, the FCA has imposed a cap on the amount that payday lenders are
allowed to charge their customers. Loan repayments are limited to no more than
0.8% per day of the amount they borrowed, and in total no one should pay back
more than twice the original sum. Since the introduction of that cap, Citizens
Advice says that the number of people with payday loan debt problems has
halved. So it wants similar controls on the rent-to-own market. Mr Bailey told
the BBC that catalogue lending and pawnbroking would also be considered. It is
important that people can still have access to credit, but the FCA wants them
to have it "on terms that are fair to them", he said. BBC NEWS
Line rental prices up
41% in just six years while wholesale costs fall by a quarter. Is it finally time
to clamp down on price hikes?
Households are being ripped off when it comes to landline
rental prices, damning evidence from Ofcom suggests. Telecoms providers have
been rising line rental prices consistently since 2010 largely blaming
'infrastructure costs' - but the watchdog says wholesale costs have actually
fallen by a quarter in that period. As a result, it has finally today launched
a review into the monthly cost faced by anyone who wants broadband, even if
they don't use the landline telephone. The watchdog says line rental prices
have risen between 28 and 41 per cent in real terms since 2010 – this, despite
providers such as BT, Sky, TalkTalk and Virgin Media benefiting from a 25 per
cent fall in the wholesale cost of providing a landline service. The rise in
rental prices have particularly hit those who rely solely on landlines, such as
the elderly and vulnerable, the watchdog says. Ofcom adds that the elderly and
vulnerable are more likely than most to have stayed with the same phone company
all their life. They also do not benefit from strong competition in the market
for 'bundled' communications – where landline, broadband and pay-TV services
are packaged together. DAILY MAIL
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