The Budget
- Brian Dixon
- Location: Dover
- Registered: 23 Sep 2008
- Posts: 23,940
22 April 2009 17:5019966and thats still better than japan and germany. - Ross Miller
- Location: London Road, Dover
- Registered: 17 Sep 2008
- Posts: 3,696
22 April 2009 20:1619974you were not meant to spot that Brian as it spoils the tory story"Dream as if you'll live forever. Live as if you'll die today." - James Dean
"Being deeply loved by someone gives you strength,
While loving someone deeply gives you courage" - Laozi - 22 April 2009 20:5019981i think that barry forgot to mention italy.
looks like we have finally beaten the axis. - Brian Dixon
- Location: Dover
- Registered: 23 Sep 2008
- Posts: 23,940
22 April 2009 21:3819985howard,is that that the axis of evil the goverment keep cracking on about.
- 22 April 2009 21:5219987Here is a link to the IMF summary report. http://www.imf.org/external/pubs/ft/weo/2009/01/pdf/text.pdf This summary is 195 pages, happy reading.
What you will notice is that the UK is one of only 5 countries out of 27 forecast a negative growth for next year (-0.4%)
Japan was mentioned, but next year unlike us they can be expected to grow 0.5%. As a trading nation specialising in highly cyclical goods it is hardly surprising that they contracted more than us last year.
Germany, the same really applies to them of course, the car industry is significant to them and being hampered by the Euro they have suffered pretty badly.
Spain are worse than us next year but did a lot better in previous years (including this) and therefore compared to us are in a much better position.
The fifth one, of course, is indeed Italy, but then they have always been an economic basket case and the Euro again is damaging them very badly.
To conclude, on this one measure of national output, in the latest figures only two nations in the world, taken over a three year period to encompass the peak to the end of recession, have done worse than the UK. That is Italy and Germany. You must look at this over this kind of time period because each copuntry enters recession, and emerges, at different times. It is not like a flock of birds all turning and weaving at the same time.
The world economy in fact is expected to grow 1.9% in 2010 when we have negative growth of -0.4%
As for 2009, this year the world economy will shrink 1.3% while the UK economy will shrink 4.1%
Why not go back further - 2008 the world 3.2%, the UK 0.7%
2007, the world 5.2% - the UK 3%
Start looking at other factors as well and we come out worse still.............
Look at it this way, consider borrowing. Brown's borrowing over the next two years will be more than the total amount borrowed by all the British Governments added together since 1613.... James 2nds reign I believe.
Add to that private debt being at record levels and poor levels of savings we are in an appalling position.
What the figures show is that yes we have a world recession but it has not hit all countries equally and some, like the UK are much more severly hit than others.
You cannot get away from the serious errors made by Brown that has made our situation a lot worse than it needs to be. I have listed these many times and range from his disasterous changes to banking regulation, to his excessive Government spending when he should have been paying off debt, to a serious flaw in his inflation brief to the bank of England. I could go on.
Just about everything Brown did was wrong, they dont call him Jonah for nothing.
oh - correction, credit where credit is due, he did do one thing right, he kept us out of the Euro. - 22 April 2009 23:3919992I am still studying the detail of the budget and will put together an impact assessment later. Mind you it is possible that you have read enough on it yourselves by now and know as much as any other member of this forum. Just so that you can chose whether to read my assessment or not bother at all I will post on a new thread called inflated opinion.
- Brian Dixon
- Location: Dover
- Registered: 23 Sep 2008
- Posts: 23,940
23 April 2009 07:0319996barryw,by keeping out of the euro was a wrong idea,many people are opossed to the euro but in the end it might be our savour. - 23 April 2009 19:4720042Ok I have been absorbing the budget and am here going to privide some information how it is going to impact on people. What am not going to do is repeat information that you will have read in the newspapers but, as I said earlier, report the issues and factors that will be influencing my broader generic advice to clients. The information that will influence the direction of what I recommend to people.
This is not about the few pence on ciggies and booze, its not about the 50p tax rate either come to that or even the messing around with pensions tax relief or the increased ISA allowances.
What this is really about is the matter that will most significantly affect all of us for years ahead and no, that is not the recession as such, but something much more significant, longer lasting and economically debilitating.
I am referring to the proposed levels of Government debt which will impact on your financial circumstances in the years ahead. So what does it really mean.
There is absolutely no doubt in my mind that inflation is set to soar in 18 months to 2 years time. One forecast, pre-budget, estimated it will reach 8% within 3 years. After the budget that is now likely to be in double figures, to levels not seen since the 1970's. High levels of inflation will lead inevitably to high interest rates in an effort to combat it and reign in money supply.
For a lot of years now we have all got used to living in a low inflation environment and we will have to re-adjust to a high inflation environment for several yeasr at least.
Lets look at how it will hit you, your friends and family.
First - retired people:
Many people who have retired will be on largely fixed incomes. At retirement they will have obtained level annuities from their pension funds as they provided a significantly higher level of income, relative to inflation, in the early years of retirement while at their most active and in need of cash. Their income is going to be eroded much faster than in recent years.
Most people who arranged increasing annuities in retirement will have done so based on a 3% increase. These will also be eroded but at a slower rate than level annuities.
People drawing pensions from their former employer's Occupational Schemes will not be immune. In 2005 the minimum rate at which these pensions should increase was reduced. Before then it was based on the lower of inflation or 5% but in 2005 it was changed to the lower of inflation or 2.5%. Their income is therefore certainly going to be eroded against inflation. That would be true even at the older more generous rate. Do not count on schemes offering voluntary additional increases as they may well be struggling to keep afloat.
Those people who are drawing Public Sector Pensions do have full inflation proofing and so should manage better. One word of caution for them,the burden of these pensions is so huge on the exchequer they are not long term sustainable. I would not be surprised if they have their benefits reduced, at least for those who nare pre-retirement whether that will affect existing pensioners is another matter.
For Pensioners bank deposits the higher interest rates that will accompany higher inflation will seem to be a benefit to them. But, the value of their capital will be eroded by the inflation. Even with the interest rolled up and not taken as income they are still likely to find the value of their savings falling in real terms.
Inflation is not all bad news for Pensioners though. Inflation will push up their property prices so it may become more viable to release equity from their property to help them out. Other asset backed investments, such as shares, will also benefit and those people who have invested and make good use of asset backed investment to generate an income flow will also benefit. Their income streams (and capital) over time should at least keep pace with inflation.
Next - Those of you of working age.
You may have pensions with old company schemes as preserved benefits. Occupational schemes have their benefits re-valued at 5% or inflation if lower (the 2.5% figure does not apply to revaluation). These will therefore be reducing in real purchasing power as a result of higher inflation. One way out might be to consider transferring these schemes to investment led pensions. This is risky though and should be done lightly and only with specialist advise.
The same basic comments I made in respect of pensioners deposit savings and asset backed investments (except equity release) applies here too. Inflation does provide an opportunity for those able and willing to take advantage of it.
Higher inflation and higher interest rates means higher mortgage payments. In many cases it would be wise for people to repay as much debt as possible while the going is good. Those people at particular risk are those with interest only mortgages. The mortgage market is difficult at the moment with lenders having tightened their criteria. Where people can get a low fixed rate then might be a good idea but should make sure, if they can, that it is a long term fix. One or two years is no good, 5 years at least would be best, even if not the lowest rate.
Children
Deposit based Child Trust Funds will be at serious risk from the effect of high inflation while equity based CTFs should do much better.
This is a long post and I should leave it there and just sum up. We are in for a difficult period and while I sincerely hope I am wrong about what is going to happen to inflation, I am convinved I am right. A change of Government will not be able to change quickly enough the fundamental problem we are now faced with but, hopefully, with firm action might be able to alleviate and reduce the impact of what might otherwise happen. The worse thing that could happen is a return to 29% inflation (or more), as happened in 1977, but without drastic and immediate changes to economic policy I fear it could get that bad.
As I have touched on financial matters I must make a regulatory comment.
Please do not, whatever you do, make any investment decision of any kind based purely on what you have read here. You should take professional qualified advice first based on what is best for you personally after a detailed fact find and research. - 23 April 2009 19:5320043Brian - the Eurozone is an economic disaster for many of its members. There is no basis for saying we should be in it, we would be in a much greater mess than now if we were.
- Brian Dixon
- Location: Dover
- Registered: 23 Sep 2008
- Posts: 23,940
23 April 2009 20:0020044actully they are recovering better than we are. - 23 April 2009 21:0520047nothing to do with the currency brian, they are going through much higher unemployment than us.
- Brian Dixon
- Location: Dover
- Registered: 23 Sep 2008
- Posts: 23,940
23 April 2009 21:1120048is that why more people are moving over there for a better life.evan the illeagles are moving back because they are better of. - 23 April 2009 21:5120051brian
if people live in the eurozone they come her quite legally. - Brian Dixon
- Location: Dover
- Registered: 23 Sep 2008
- Posts: 23,940
23 April 2009 21:5420052you no the ones i mean howard.