Credit Action News Round-up (7 October 2011)

Bank of England holds base rate and pumps £75bn into economy: The Bank of England has this week announced that it will hold the base rate at 0.5% - a historic low – for the 31^st month in a row. It has also been announced that the Bank will pump £75billion extra into the economy through quantitative easing (QE). This move follows figures released earlier in the week that showed the economy grew by just 0.1% between April and June. Business leaders have welcomed the decision. Santander chief economist Barry Naisbitt said: “With weak economic data recently both in the UK and in some of its main export markets and GDP growth in the second quarter now shown to have been just 0.1%, further quantitative easing is seen as one mechanism to boost economic activity and confidence." 

Government puts extra £300m towards childcare costs: New government plans to make parents on low incomes who are working less than 16 hours a week eligible for childcare support are to come into operation from 2013. According to ministers, removing the minimum working hours limit for childcare support will benefit 80,000 families. Poorer families will be able to recover childcare costs of up to £175 a week for one child and £300 for two or more children, under the new reforms. Work and Pensions Secretary Iain Duncan Smith told the BBC that “the childcare support will be a huge bonus to them”. He noted the complexity of the current situation in which families receive credits to cover 70% of their weekly childcare costs provided that they work more than 16 hours a week. The amount provided depends on income level, but couples with an income of up to £41,000 can qualify. This did not help women who wanted to return to the workplace but were limited by the number of hours they could put in, said Duncan Smith. Charities have welcomed the proposals, but have urged for more to be done to make childcare affordable.

Cheapest energy bill rises above £1,000 for the first time: Following Scottish Power’s withdrawal of its £990 internet tariff and similar moves by other energy providers in recent weeks, the cheapest domestic gas and electricity deals available to UK households have broken the £1,000 barrier. All of the “Big Six” energy providers have now announced increases in prices for household tariffs. Across the industry, these have included price rises of up to 18%. According to Mark Todd of price comparison website Energyhelpline, the cull means that domestic customers with average energy use can no longer get any deals for under £1,000. “This is the first time that had been the case and emphasises in start terms how bills are reaching historic levels”, he said.

Petrol consumption cut by 15%: A study by the AA has shown that petrol sales in the first six months of 2011 were 1.7bn litres less than in the same period in 2008. This means that since the credit crunch and the recession, drivers have cut their petrol use by 15%. Businesses have also been cutting back due to the high cost of petrol. The AA noted that whilst one result of the fall in sales has been lower emissions of exhaust fumes, another is that the Treasury has been deprived of nearly £1bn in fuel duty between January and June this year. Tesco has reported that high petrol prices have hit people’s spending power.

UK pensioners pay £100 a week in tax: According to new analysis from MetLife, the average UK pensioner household pays 27% of its income to the taxman through both direct and indirect taxes. This is equivalent to £100 a week and adds up to a total annual tax bill of more than £34 billion. Overall, direct taxes (for example income tax and council tax) make up 11.4% of the 27% tax burden. Indirect taxes (which include VAT, duty on tobacco, alcohol and petrol) make up 15.7%. The MetLife research showed that an average pensioner household with a gross income of £18,834 would have to pay out £5,124 in taxes. Dominic Grinstead, Managing Director of MetLife Europe Limited UK said: “Tax does not end when you stop working and it is a major factor to consider when planning for retirement.”

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