| On Monday 24th November the Chancellor of the Exchequer, Alistair Darling, delivered the Pre-Budget Report (PBR) to the House of Commons outlining Labour's plans to rescue the economy from the current financial crisis. The Chancellor revealed that the economy –which was predicted to grow at 1.75% next year- is now predicted to grow between -0.75% and -1.25%. This negative growth would officially then push the UK into recession. Inflation is also predicted to continue to fall, to 0.5% by the end of 2009. This means that prices will not be rising anywhere as quickly as they have done this year. There were lots of measures discussed in the PBR, however not all of them are going to come into force this year. Therefore, let’s have a brief look at how measures outlined in the PBR will affect you now. In terms of income tax the increase in the basic rate taxpayer’s allowance which was increased to £120 in May will be made permanent, with a further increase to be made in April to £145. This measure is expected to affect 22million taxpayers. One of the most talked about measures to be introduced from 1st December is the cut in VAT from 17.5% to 15% which is to last until the end of 2009. However, this cut in VAT will not make tobacco, alcohol and petrol any cheaper as the Chancellor is raising the duties on these products. This cut in VAT, which although will probably lead to small savings, might not affect you a great deal. With many stores holding “20% off for one day only” events, taking advantage of these offers might save you more. There is also good news for those of you with mortgages as the PBR announced that mortgage lenders will wait for 3 months after a borrower first falls behind with their repayments before seeking repossession. However, although this is good news, many lenders were already giving borrowers this 3 month “grace period.” If you are worried about repossession it is vital that you contact your lender as soon as you fall behind on meeting your monthly repayments. It is also worth getting free advice from charities such as Shelter or the Consumer Credit Counselling Service (CCCS). There is also good news for you if you own a small business as the government has deferred a planned increase in small companies' corporation tax. The PBR also announced the introduction of a temporary Small Business Finance Scheme to provide credit worth £1bn, and revealed that HM Revenue and Customs (HMRC) will allow firms facing difficulties to spread the payment of all their business taxes over a timetable they can afford, for as long as they need- thus helping to alleviate the problems many small businesses are currently experiencing. Let’s now review the other top money stories of the past week commencing the 24th November 2008. United Response launches ‘Making Money Easier' – United Response, a national charity that works with adults with learning disabilities, launched ‘Making Money Easier' today. Making Money Easier is a set of printed and online guides designed to make banking and other financial services more accessible and easier to understand. The scheme aims to enable those with learning difficulties to become financially independent. Bigger deposits required - Figures released by the Council of Mortgage Lenders (CML) suggest that the average deposit required to be put down to secure a mortgage is now 16% of the property’s value. However, the best rates can only be secured from the banks and building societies if customers can put forward a 40% deposit. This high level of deposit required to secure a mortgage is highly unrealistic for most first-time buyers. If you are looking to buy a house in the coming year, then it would be wise to try and save as much as you can to get a sizeable deposit together, so that you can get the best mortgage deal. As you’re saving it could end up benefitting you as experts predict that house prices still have further to fall. Credit card firms have agreed to help borrowers – Today representatives from credit card companies met with Lord Mandelson to discuss whether the interest rates charged on credit cards should be cut to help borrowers who are struggling to pay their debts. The credit card industry has agreed to come back to the government with a set of ‘fair principles' which are likely to include risk-based pricing. This means that the interest rates charged on balances are subject to the amount of risk associated with the customer. Card providers have also agreed to help struggling borrowers by suspending debt collections for 30 days if the borrower has been working with a debt advice agency to create a repayment plan. This is welcome news and it is vital if you are struggling to pay your credit card bill (or bills) to get in touch with an organisation such as the Consumer Credit Counselling Service (CCCS) who have a freephone number on 0800 138 1111 which is open from 8am-8pm Monday-Friday. More protection for savers – The Financial Services Authority (FSA) announced today that it is changing its compensation rules, giving more protection to savers. The new rule introduced today by the FSA means savers who have accounts with two building societies who then merge are covered for up to £50,000 in each of the merged societies. One example of this in practice is the merger between the Nationwide and the Derbyshire and Cheshire Building Societies, which means savers are protected by the FSA for up to £50,000 in each institution. The aim of the new rule is to provide some reassurance to those who may have considered moving their savings. Prepared for Moneybasics by Joanna Parsley, Advocacy Officer (Credit Action). |
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| How will the Pre-Budget Report affect you? |
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