A Committee Of MPs Warn About Energy Price Rise Impact
Rises in gas and electricity bills in the near future will have serious consequences for millions of households, a committee MPs’ has warned.
It also said that thousands of jobs in manufacturing would be at risk if UK prices stayed higher than those faced by industry in the rest of Europe.
The Business and Enterprise Select Committee report said problems in the sector needed to be addressed imeadiatley.
But it found no evidence that major firms colluded to keep energy prices high.
The committee’s report, published on Monday, comes just a few days after EDF Energy became the first big supplier to announce widely-predicted summer price rises.
The committee decided on an inquiry after the “big six” energy companies announced double-digit price rises at the start of 2008.
The big six firms are: Npower, EDF Energy, British Gas, E.On, Scottish Power, and Scottish and Southern Energy.
The report voiced concerns that “the UK’s energy markets are not working as efficiently as they should”.
“Industrial consumers now face prices above levels seen across the rest of europe,” the report added.
“If these price differentials are sustained, they will affect the competitiveness of the UK economy.”
The inquiry addressed the issue of why there was only a very small difference in prices charged by the top suppliers.
It said that nobody brought any evidence of price collusion among the big six, simply that it was easy for each to predict what the other five were going to do.
“Just because we have found no evidence of collusion does not mean we have given the big six energy companies a clean bill of health - far from it,” said committee chairman Peter Luff.
“It is clear that there are very real problems in the energy markets at all levels … which need to be addressed.”
The committee was concerned about how the wholesale markets functioned, including why gas producers appeared unwilling to trade in the forward gas market.
The report was critical of the government for failing to act quickly enough to encourage investment in gas storage, as the UK becomes more dependent on importing gas.
It also warned that the potential takeover of British Energy could undermine the diverse market in electricity generation in Britain.
Fuel poverty
Energy regulator Ofgem, which is conducting its own inquiry into the market, was also criticised, with the committee demanding a “greater sense of urgency” in some areas.
On Friday, EDF raised gas prices by 22% and electricity prices by 17% for domestic and small business customers.
With all the major suppliers expected to follow suit in the coming weeks, the committee said there would be an inevitable increase in fuel poverty.
The government estimates that 2.5 million households are in fuel poverty - defined as when more than 10% of household income is spent on fuel bills - but watchdog Energywatch says the figure is more than four million.
“We believe that the time is right for a root and branch review of government policy on fuel poverty,” the committee said.
It said social tariffs failed to reach the vast majority of fuel poor customers, were inconsistent and confusing.
The committee wants the government to define the criteria for these tariffs and identify the customers who should qualify for the discounts.
It also wants more focus on improving energy efficiency in homes, to help cut bills, and called for an reversal of the funding cuts in Warm Front grants.
Halifax Cuts Mortgage Rates For a Third Time In a Month
Halifax the UK’s biggest mortgage lender, announced it is cutting some of its interest rates for new borrowers, the third time it has done so this month.
The changes, will come into effect on 26 July 2008, will cut the rates on 16 different deals by up to 0.3%.
the Bank of Scotland part of the Halifax is also cutting the cost of 29 different mortgages.
Halifax said the reductions were a response to the recent rate cuts by its competitors.
“We are just pricing in line with the market,” said a spokesman.
Some of the most popular sort of mortgages, those fixed for two years, are not being changed as their rates were cut the previous weekend.
But three and five-year fixed rates, and the bank’s two-year tracker rate, are coming down by as much as 0.18%.
House sales have slumped by 50% in the past year and are heading lower with mortgage approvals currently down 67% on a year ago.
Halifax denied it was desperate for business and said it still expected to account for 20% of the market.
It pointed out that it was not altering the size of the deposits it required from borrowers nor was it changing the up-front fees for each deal.
FSA Demands Tougher Mortgage Fraud Action
The (FSA) Financial Services Authority has told lenders to tighten up their defences against mortgage fraud.
This year alone it has banned or fined 17 mortgage brokers who have been implicated in making actual or potentially fraudulent applications.
The regulator says it is monitoring 200 more broking firms to ensure they have sufficient checks in place.
And it also warns that certain lenders may not be guarding themselves against fraud with sufficient diligence.
“The FSA continues to take very seriously the question of whether lenders’ systems and controls for dealing with mortgage fraud are proportionate to the risk,” said Philip Robinson, director of the FSA’s financial crime and intelligence division.
“We are likely to take particular note of cases where weaknesses in due diligence and customer checks - or in outsourced relationships with third parties - may have contributed to a heightened mortgage fraud risk,” he warned.
Easy Credit
The FSA’s call for tougher defences against fraud is targeted at the whole mortgage industry, including the British Bankers’ Association (BBA) and the Council of Mortgage Lenders (CML).
The regulator says the problem became widespread in recent years because of “easy credit conditions and a cut down application processes.”
The FSA is currently liaising with many police forces around the country in its efforts to stop criminals defrauding lenders by making bogus applications for home loans.
The CML’s director general, Michael Coogan, welcomed the tougher stance.
“People may not think of lenders as victims of crime, but unless fraudsters are tackled then honest customers are the ones who end up paying more,” he said.
“We expect that even more lenders will now participate in the voluntary initiative designed to identify and investigate broker fraud,” he added.
Tip Offs Wanted
Since 2006 the FSA has been asking lenders to report suspect mortgage brokers to it.
It has received more than 300 tip offs so far, but is disappointed that only 35 out of the UK’s 150 lenders have made any reports to the authorities.
It now expects the rest to fall into line.
Despite the downturn in the property market in the past year, and the slump in mortgage lending caused by the credit crunch, the FSA warned that the problem of mortgage fraud could revive along with activity in the market.
And it says it may require senior staff at mortgage brokers to become individually approved by the regulator, something which is not necessary under current regulations.
Rent to Buy Government Backed Housing Plan
A “rent now, buy later” scheme is leading a series of measures which the government hopes will breathe new life into the housing market.
The sample project, being announced by Housing Minister Caroline Flint, will be open to some in England with household earnings under £60,000.
They would rent the property at a discounted rate for two or three years, with an option to buy part of it.
First-time buyers have been among the hardest hit by the credit crunch.
Other plans being outlined include the location of new local housing companies which would see councils and developers using unused land for homes.
Tough Times
The squeeze on mortgages caused by the credit crunch has made it difficult for first-time buyers to secure a mortgage deal, even though house prices are falling.
A first-time buyer couple on low incomes must save a year’s worth of their take-home pay to buy their first home, the Royal Institution of Chartered Surveyors (Rics) said last week.
A couple in the bottom quarter of earners in the UK would need £27,738 to pay the upfront fees even before paying any of their mortgage, The Rics report said.
Under the government’s plans, households earning £60,000 or less would be able to rent at 80% or less of the going rate for two or three years in order to save up for a deposit.
They would have an option to buy 25% or more of the property at any time under the scheme, called Rent to Home Buy.
The government had previously extended the shared ownership scheme from key workers to those households earning £60,000 or less.
Bids will have to be made for the rent first, buy later scheme through registered social landlords, but there were no specific numbers as to the number that would be granted.
Building Plans
The government hopes that this scheme - only available in England - alongside others will help 75,000 first-time buyer households get on to the property ladder.
James Rowlands, policy officer at Rics, said the scheme did not go far enough.
“This measure will only have a limited impact on the wider housing market unless it is rapidly expanded to include all first time buyers,” he said.
Ms Flint was also announcing that Barking and Dagenham, Newcastle, Nottingham and Manchester will be the first areas to run local housing companies for housing developments on surplus council land.
The government has been warned by various groups that its target of three million new homes built by 2020 is under threat, with house builders cutting back on their operations in the current climate.
The Council of Mortgage Lenders is calling for construction projects to be tunned to the specific needs of different locations in the UK.
The glut of new city centre apartment blocks has led to criticism locally in some areas.
“The long-term need to provide more homes has not gone away. We have a growing and ageing population and will only see worsening affordability unless we increase the housing supply,” said Ms Flint.
“That means being ambitious, but also practical and realistic, acknowledging not only the difficulties faced by individuals and families, but for those who work in the house building industry.”
She said that funding, in addition to the £200m already announced, could be made available to buy unsold stock from house builders for affordable homes.
Using the Department of Communities and Local Government’s own house price figures, £200m would buy 916 average priced homes.
14% Rise in UK Fraud Rates
Fraud cases climbed by 14% in the UK in the first half of 2008 compared with the same period last year, according to fraud prevention service Cifas.
It said there were 104,548 confirmed frauds filed to its database from January to July, with London and the south-east of England being the most affected areas.
Bank accounts and credit cards remain the main targets for fraudsters, followed by loans and phone deals.
East Ham in London topped the list of areas with the most prevalent cases.
The group said that con-artists thought they could work more anonymously in cities owing to the population density.
“London is a city of stark contrast where extraordinarily wealthy and socially disadvantaged people often live in close proximity,” said Cifas research manager Sandra Peaston.
“This can both provoke and help to facilitate fraudulent behaviour.”
Asset finance, such as car purchases; communications, such as mobile phone contracts; and insurance fraud were all active in Lanarkshire and Coventry as well as London and the South East, according to Cifas.
The most commonly appearing postal districts when looking at all types of fraud were East Ham, Croydon, Peckham, Plumstead, Walthamstow, Barking, Willesden, Thamesmead, Forest Gate and Tottenham.
Kate Beddington-Brown, of Cifas, said that those engaged in mortgage fraud had gravitated to London owing to its high property prices.
“Add to this the growing financial hardship caused by the credit crunch and you have a dangerous and potent mix,” she added.
Hard times ahead for first-time buyers
A first-time buyer couple on a low-income must save a years take-home pay to buy their first home, say surveyors.
A couple in the bottom quarter of earners in the United Kingdom needs £27,738 to pay in advance fees, according to the Royal Institution of Chartered Surveyors.
Affordability has improved for those who are able to get on the housing ladder, the group said.
But the credit crunch has made it more difficult to climb the first rung.
“Access to the housing market has deteriorated as the credit crunch seized mortgage lender sector,” said RIC’s senior economist David Stubbs.
“With the decline in mortgage approvals, the situation does not look like improving in the latter part of 2008 and first time buyers will find their path to homeownership increasingly blocked.”
Mortgage Costs
Mr. Stubbs said that those who are able to find a larger deposit to benefit from a reduction in mortgage repayments as a result.
But he added that rising fuel and food bills means that household finances would remain strained.
The Council of Mortgage Lenders said that in May the average first time buyers mortgages stood at £113,500.
Rics believes that a low-income couple jointly earning £27,316 per annum after taxes, would need all of this for expenses such as a deposit and fees on a first home.
This was much higher than the 21% of their income they would have needed to get on the property ladder in 1996.
London is the most difficult area to enter the real estate market to low-income couples, followed by the south-east, east and south-west of England.
Scotland and the north-east and north-west England are most accessible.
Affordability
Larger deposits and the decline in prices means those low-income couples who have one foot was found that affordability has improved in April to July this year.
They should spend 34.5% of their take-home pay on mortgage repayments, down from 37.2% during the first three months of the year and lower than the record level of 46.5% at the end of 1989.
The figures come as Woolwich - the mortgage arm of Barclays - cut part of its fixed-rate mortgage deals by up to 0.3%.
Broker John Charcol also unveiled a two-year follow-up to deal with high-value mortgage loans with a record fee provision of up to £137,500.
Borrowers are offered an interest rate of 0.01% below the Bank of England base rate, available on mortgages between £ 500000 and £ 5m, but they must pay a fee arrangement 2.75% of the amount borrowed.
Thousands of new UK homeowners are facing negative equity
According to a CACI survey for the Daily Telegraph, one in eight of 1.2 million who bought a property, since then, owe more than their house is worth.
If a house loses its value is not necessarily a problem unless the owner has to move, re-mortgage, or can not pay the mortgage.
UK prices fell by 0.9% on average in June, according to recent figures nationally.
The increased risks
The CACI analysis also suggests that the holders of 360,000 mortgages could be negative equity in late 2008 if housing prices drop 20%.
A recent BBC report - based on data from the Council of mortgage lenders - revealed that more than 23,200 people who took 100% of mortgages in the year and March 31 could face negative equity.
In a rising market banks are willing to pay 100% of mortgages as there is little risk of not getting their money back.
But as prices have fallen, the risks have increased and lenders have been turning away borrowers if they do not have a deposit.
Last week Nationwide said house prices fell for the eighth month in a row in June, with prices now 6.3% lower than a year ago.
It said that the average home now costs £172,415 and is £13,629 cheaper than at the top of the market in October last year.
Help Claiming Back Unfair Bank Charges
Many people are now successfully claiming back the unfair bank charges from their banks.
If you feel you have been subject to unfair bank charges, there are things that you can do to get reimbursed.
You can write to your bank yourself detailing all the charges that are unfair requesting a refund.
Many banks however are now point blankly refusing to pay and instead insisting there customers make any claim via the small claims court in an effort to dissuade them from claiming due to the extra hassles involved.
So a lot of customers are now forgoing all this bother and just instructing a professional company such as Claims Financial to expertly handle them claim for them.
Whats more this is done on a no win no fee basis so theres no risk to you involved.
Claims Financial are also experts in claiming back unfair Credit Card Charges, Miss sold Payment Protection Insurance and Excessive Mortgage Exit Admin fees
Deadline Set On Unfair Bank Charges Case
A High Court hearing to decide the Legimacy of bank overdraft charges should now start before the end of the year.
The Office of Fair Trading and the eight major banks agreed the timetable under pressure from a High Court judge.
Earlier, Mr Justice Andrew Smith allowed the banks to appeal against his first ruling last month that the OFT has jurisdiction over the charges.
If that appeal suceded, then any separate decision on fairness would be made redundant.
Customer Wait
Last month’s ruling by Mr Justice Smith was a victory for the OFT, which has been seeking legal confirmation that it can rule if bank charges are fair or not.
The banks have been keen to oppose this to protect the estimated £3.5bn a year of income they generate from charging customers who go overdrawn without permission.
Under pressure from hundreds of thousands of customers suing them for the return of their overdraft charges in the county courts, banks agreed to a High Court test case in two stages.
The first was on the authority of the OFT under consumer contract regulations. The second will be on the fairness of the charges themselves, which the OFT has been investigating since April 2007.
“The judge has indicated he wants the OFT’s investigation to be wrapped up quickly, and that is a very positive move for consumers waiting in the wings,” said Chris Warner, a lawyer for the consumers’ association Which?
“But the banks are appealing and it will be some time before a judgement is issued in that hearing and so consumers are still some way away from getting their money back.”
The banks’ appeal is likely to be heard this autumn, but if either side then takes the issue to the House of Lords, the OFT’s jurisdiction in the matter is unlikely to be settled until next year at least.
Ever Since the two sides first agreed this long process of litigation last July, tens of thousands of claims for the refund of bank charges have been frozen in the county courts.
Earlier in the course of the High Court case management conference, Mr Justice Smith expressed his discontent at the OFT’s initial statement that it had no idea when its investigation would be completed.
“While the investigation is going on, we are asking the county courts to keep the litigation on hold,” he said.
“How long are they expected to wait?”
Later, however, the OFT said it would share its initial findings with the banks in mid- to late July.
The regulator and the banks agreed that if they could not agree on a fair level of charges, the issue would go to the High Court before Christmas for a ruling.
For the time being, unresolved cases before the county courts and the Financial Ombudsman Service will stay on hold.
“I don’t think this position should change,” said the judge.
“The reasons that these actions should not proceed seem as strong as they were, and will remain so until any appeal by the banks is resolved,” he added.
Help Placing Your Claim
Many people are now successfully claiming back the unfair bank charges from their banks.
If you feel you have been subject to unfair bank charges, there are things that you can do to get reimbursed.
You can write to your bank yourself detailing all the charges that are unfair requesting a refund. Many banks are now point blankly refusing to pay and insisting there customers make any claim via the small claims court in an effort to dissuade them due to the extra hassles involved.
So a lot of customers are now forgoing all this bother and just instructing a professional company such as Claims Financial to expertly handle them claim for them.
Whats more this is done on a no win no fee basis so theres no risk to you involved.
Claims Financial are also experts in claiming back unfair Credit Card Charges, Miss sold Payment Protection Insurance and Excesive Mortgage Exit Admin fees
Joseph Rowntree Foundation Says Single Brits Need To Earn A Minimum Of £13400 a year
A couple with two children need to spend £370 a week and a pensioner couple need £201 excluding housing and childcare costs, the charity says.
Cinema tickets, a bottle of wine and a bird feeder on the list of products people need to participate in society.
The JRF figures are higher than some estimates of the Government.
According to the report, which took two years to put together the purchasing power necessary to pay a basic but socially acceptable standard of living was higher than the official government figures calculate the poverty line.
Staying alive
The report combines academic study with a consensus of 39 different groups of people to reach a series of benchmarks for an acceptable cost of living in Britain.
The definition of a minimum standard of living is not just the amount of money necessary for survival, and includes “more than just food, clothing and shelter,” says the report.
“It is about having enough money to have opportunities and choices necessary to participate in society,” he said.
For a single person of working age including boots, a pay-as-you-go mobile phone and a bicycle. For all these “essential” items, or rent a modest house in the council, one person would have £13400 per year before taxes, said the JRF.
For a retired couple, a meal and a bird feeder are on the list, a single mother and needed £ 210 per week - excluding housing costs and child care - for items including diapers and baby a Christmas tree.
Families should have an opportunity to take a week of self-catering holidays in the UK, according to the report.
Needs do not want
The study excludes “an aspiration” issues, and JRF said that was aimed at initiating a debate on what was an acceptable standard of living.
“This research is designed to encourage debate and to start building a public consensus about what level of income anyone should have to live below,” said the director of JRF Julia Unwin.
“Of course, everyone has their own views about what items in a family budget are essential. But this is the best effort to date to allow citizens to discuss and agree on what all homes should be able to offer, “he added.
Experts ensure that the lists provide a proper diet and enough heat to stay healthy.
According to estimates, only one person working full time would earn £ 6.88 per hour to reach the minimum weekly - which is more than the current minimum wage of £ 5.52.
A single person on income support would get less than half this amount.
An out of work family would get the in benefits two-thirds of what the JRF regarded as the minimum requirement, but to pensioners Pension credit reached an acceptable level of income, the charity said.
Poverty levels
Jonathan Bradshaw, a professor of social policy at York University and co-author of the report, said that this was the first time that the question of how much was sufficient income had been addressed.
Official poverty measures have been based on family income data.
The official poverty line is a household with an income of 60% of the average UK household, with the poverty line adjusted for family size.
The government has used this measure as the basis for his promise to halve child poverty by 2010, and have been eradicated a decade later.
The report of JRF took in the views of people from a variety of social groups in rural and urban areas, before coming with an average of a cross section of society.
It concluded that a car was not bound by any social group, nor were cigarettes, but a bit of alcohol consumed at home is acceptable.
The JRF accepted that it could not be proved that all those living below their level of minimum income would be in “hardship”.
From Governments
A spokesman for the Department for Work and Pensions said: “This government is committed to a fairer, more inclusive society, providing opportunities for all. We have lifted 600000 children and about one million pensioners out of poverty.
“We have increased payments for heating in winter to 400 pounds for someone over 80 years and 250 pounds for 60 years.
“We welcome the important contribution of this study.”
