Banks to defy base rate
Nov 17th, 2008 by ctoop
News Week: 17th November 2008
Despite many shops experiencing a slump in sales, online retailer ASOS have defied the recession and have reportedly doubled sales, increasing profits by 68% in the past six months. This offers hope to other online retailers, who fear for their economic safety.
Japan has announced that they have officially entered a recession. Despite their country accounting for 7% of global output, Japan’s economy has been shrinking for two successive quarters.
Labour MP Peter Mandelson has predicted that tax rises will take effect when the recession is over to pay for a government hand out of £1,000 to poor families. The International Monetary Fund put pressure on government to help struggling families by providing this handout, however, the total amounts to £30billion.
Despite the debt that the country will accumulate for this hand out, it will benefit families and the money will be paid back by all when the country is in a better economic state.
The four Barclays directors have agreed this year to not accept their bonuses this year. This comes after the bank worked hard to keep itself out of governments control by securing overseas investors. Many UK investors feared that this was so that the huge end of year bonuses could still be given to the directors.
However, the move seems to have paid off as the bank simply seems concerned about keeping afloat and not going into public ownership which means that government is not responsible for all of the banks accumulated bad debt.
New studies have shown that despite the Bank of England lowering the base rate, many banks are putting up the cost of their overdrafts.
Moneyfacts have revealed that in the past year some banks have out up the rates on their overdrafts by more than 7%. This is bad news for the taxpayer as it means that some overdraft interest rates are now as high as 17%, this gross figure coupled with increased job loss will ultimately result in more people struggling to cover their expenses.
Last month despite fears that the housing market would be in trouble for years to come, mortgage lend was on the rise by 7%. This however is not a lot, but seeing as how for the past few months the housing market has been on the decline due to the banks reluctance to offer mortgages; this new occurrence offers hope for the future economy.
The treasury fear that Gordon Browns proposed tax cuts could put the nation into danger in the future as governments’ borrowing is soaring and the debt payments are reaching record levels. It is feared that Gordon’s plans to ‘jumpstart’ the economy again by offering tax cuts to create a short term release for the tax payer could be a reckless move and cause the taxpayer pain later.
Government claims to have ‘fixed’ the banks problems by issuing them with a lump sum of £37bn, this money is to allow credit to keep flowing and therefore support the economy.
However, the taxpayer is not seeing this money. It is still incredibly hard to secure a mortgage and interest rates, for those who have already borrowed money are constantly increasing.
By Charlotte Toop
