UK Growth - More Than Meets The Eye

Figures from the Office for National Statistics this week have shown that the UK's economy grew by 2.6% last year.

 

The blue corner (and I guess yellow as well) will tell you that this is the fastest pace of growth since 2007 and up from 1.7% in 2013. Chancellor George Osborne said the figures showed the economy was "on track".

 

All good then?

 

Well......as the red corner have been very quick to point out, the economy grew by 0.5% in the final three months of 2014, which was a slowdown from 0.7% growth recorded in the previous three months. Shadow chancellor Ed Balls said the slowdown in fourth-quarter growth was a concern, and that "Tory claims that the economy is fixed will ring hollow with working people" whose "wages are down by £1,600 a year since 2010 in real terms".

 

Economists were mixed over whether the loss of momentum in the final quarter might be temporary or prolonged. However, the deceleration is not surprising in view of the flatlining of the UK's main trading partner……the Eurozone.

 

One thing is for sure……the fourth-quarter figure hardly set the world alight and it's clear that the UK economy is slowing.

 

The biggest cloud looming large on the horizon is the general election as there is no clear favourite and this creates uncertainty.

 

Just don’t expect politicians to tell you that there is political uncertainty though!

Greece Is The Word

At face value, the Greek people could be seen to be incredibly ungrateful for the €240 billion in bailouts they've had from the Eurozone and International Monetary Fund since 2008.

 

The current state of the country was caused in large part because its government had taken on excessive debts it couldn’t afford. However, as a condition of the bailouts, significant public spending cuts and austerity were imposed on Greece. It’s fair to say that austerity has certainly hurt them……a lot.

 

But has it worked to get Greece's debts down?

 

To the contrary……Greek public sector debt was €265 billion in 2008, €330billion in 2010 and was €316 billion in 2014.

 

Although the economy started to grow again in Greece last year, at the current annual growth rate of 1.6% (which may not be sustained) it would take longer than a generation to reduce national debt to a manageable level.

 

Little wonder therefore that a political party (Syriza) campaigning to end austerity and write off debts has enjoyed an overwhelming victory in the general election. Their message was clear……if austerity is not reducing debt, end austerity!

 

The message could not be any clearer coming out of Athens to Brussels.

 

Which all begs the question……what was the point of it all in the first place?

 

The Greeks made pointless human and economic sacrifice all because Germany would not allow them a rescue plan that gave them a fighting chance of crawling out from beneath its colossal debts.

 

What was the point?

 

 

The Public Has Spoken

The latest survey commission by gocompare.com has revealed the Top 15 tips UK consumers would recommend to save money in 2015. It would appear that the seemingly endless self-publicity campaign that is ‘Martin Lewis’ is having success in changing people’s habits.

 

The results:

Rank	Top 15 Money Saving Tactics For 2015	%
1	Use vouchers, coupons, money off apps to get discounts	48
2	Use loyalty and cashback schemes	43
3	Shop around for cheaper car insurance	31
4	Shop around for cheaper home insurance	30
5	Turn the thermostat down to reduce heating bills	30
6	Cut down on takeaways and ready meals	28
7	Switch energy provider for a cheaper tariff	27
8	Switch to a cheaper supermarket	26
9	Cut out takeaway coffee/coffee shop treats	26
10	Draw up a budget and stick to it	26
11	Reduce the amount spent on holidays	19
12	Review or cancel satellite/cable TV subscription	17
13	Leave car at home and walk or use public transport	15
14	Review or cancel mobile phone contract	13
15	Transfer all credit card debt to a 0% card	8

 

Perhaps most worryingly……the analysis revealed that many are continuing to experience a ‘cost of living crisis’ with 15% admitting to being seriously worried about their finances and 8% saying that they have to rely on credit cards to make ends meet.

 

The survey also concluded:

 

34% of those surveyed said that they needed to reduce their outgoings in 2015.

 

17% tend to run out of money before the end of the month.

 

13% expect to have a credit card debt for most of 2015.

 

All very worrying……let’s hope the next Government budget is more about ‘budget’ and less about ‘vote winning’.

 

We shall see.  

Royal Fail

I voiced my anger at the privatisation of Royal Mail last year. The opening share price that was obtained for the company was well below market value and to date, nobody has been made accountable.

 

There have been clear winners from the lower price though. For example……

 

George Osborne’s best man (Peter Davies) heads up a hedge fund which has secured profits in excess of £30 million from the privatisation of Royal Mail in under six months. He sits on the management committee of Lansdowne Partners, which snapped up shares at the offer price of just 330p. They are now trading at around 500p……some 50% higher.

 

The Government has been slammed by the National Audit Office for an under-priced sale which saw City firms walk off with two-thirds of the public asset while 40,000 ordinary individual investors were excluded. If the city and certain ‘friends’ are the winners, then taxpayers are the losers.

 

This is the actual quote from business minister Michael Fallon in April 2014:

 

“I can state categorically that we have no intention of selling off Royal Mail cheaply. We will sell shares in Royal Mail at a fair commercial price that represents value for money for the tax payer.”

Well here’s the thing…….when the share price increases by 50% in the first 6 months, achieving a fair commercial price has not been achieved.

 

The result of all of this is that there could have been more coffers in the public purse. This would either lead to better public services or a reduction in tax.

 

Perhaps more concerning is that to date, nobody has been held responsible for this mess.

 

Another one for taxpayers to take on the chin.