UK retail sales fall 1.4% in May

16 June 2011 Last updated at 16:04 The ONS said spending had been hit by worries over high fuel prices and job uncertainty UK retail sales fell 1.4% in May, official figures have shown, reversing the rise seen in April when sales were boosted by the royal wedding.

In April, sales had risen 1.1% on the previous month, reflecting a "spike" due to one-off factors, the Office for National Statistics (ONS) said.

However, May's sales figures were worse than analysts had expected.

The ONS said that food and fuel now accounted for more than half of all spending.

As well as the royal wedding, the warm weather, the timing of Easter and a run of bank holidays had helped to lift sales in April.

However, the ONS said that May's figures showed consumers were now cutting back because of the tough economic climate, worries about rising fuel prices and job uncertainty.

Various sectors had fared differently, with smaller retailers doing slightly better than larger ones, Joe Grice from the ONS said.

Food expenditure was down 3.5% in May - "a pretty direct result of the royal wedding and the April special effects," said Mr Grice.

This was the biggest monthly decline in food store sales since June 2008.

'Absolute stinker'

The figures chimed with warnings from major food retailers earlier in the week.

Tesco had said that UK sales were subdued, blaming high fuel costs and the "cautious consumer environment", while Sainsbury's also warned that rising fuel costs were reducing the amount of money people had available to spend.

Joe Grice of the Office for National Statistics reacts to the figures

Brian Hilliard, chief UK economist at Societe Generale, called the data "an absolute stinker".

"We were all expecting a pullback after the exceptionally strong month of April, but surveys hadn't prepared us for something quite this bad," he said.

"The basic story is clear: the consumer is not prepared to put their head above the parapet and the outlook is very soft.

"But the feature for growth this year is that we shouldn't be relying on the consumer. It's disappointing, but it's not the centre of anyone's forecasts on growth this year," he added.

Pressure

The British Chambers of Commerce (BCC) also said the figures were disappointing.

"On the basis of these figures we reiterate our forecast that GDP (gross domestic product) is likely to grow by only 0.3% in the second quarter of 2011, much less than the OBR [Office for Budget Responsibility] and other analysts are predicting," the group's chief economist David Kern said.

The Office for Budget Responsibility said in its March forecast that it expected the economy to grow by 0.4% in the second quarter.

Mr Kern also said that now was not the right time to raise interest rates.

"Given the pressures facing businesses and consumers, and with the government's fiscal austerity programme continuing to bite, it would be a mistake to raise interest rates in the near future."

Indebted households

Nida Ali, economic adviser to the Ernst & Young Item Club, said the figures reflected subdued consumer sentiment as real incomes were continuing to fall.

On Tuesday, ONS data showed that Consumer Prices Index (CPI) inflation remains at 4.5%, more than twice the Bank of England's target of 2%.

At the same time, research from Incomes Data Services suggests that pay settlements in the public sector are running at zero, while the median settlement in the private sector is 3%.

"Households remain heavily indebted and are eager to reduce, rather than add to their debt burden," Ms Ali said.

"These circumstances are unlikely to change in the near future and we would expect to see weak out-turns for retail sales in the coming months."

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Can't Be Sure of Credit Status, Even With a Scorecard

Humorist Mason Cooley once said, "Every path to a new understanding begins in confusion."

That quotation applies to e-mails I received from confused readers who recently ordered their credit scores to gain a better understanding of where they stood.

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In one case, a husband and wife paid for and got all six of their credit scores (one for each of them from the three major credit bureaus). The scores ranged from a low of 602 to a high of 712.

But when a mortgage lender pulled the credit scores not long after the couple did, some of their scores were significantly lower, ranging from 598 to 649.

"Why are our scores from the mortgage company different [from] the ones we pulled online?" the husband asked. "Shouldn't they be the same scores I pull from the three credit bureaus?"

A reader from Los Angeles wrote that his wife purchased her credit score online from TransUnion. The score she received was 864. Three days later, after applying for a home equity loan, the score the lender got from TransUnion was 775, a drop of 89 points.

"It doesn't seem plausible," the reader wrote.

There's nothing amiss here. Here's why.

Most of the credit scores you buy or get free online are not the exact ones used by lenders. The gold standard is what's called a FICO score, named after Minneapolis-based Fair Isaac Corp., which devised a mathematical model to predict the credit risk of consumers based on information in their credit report. FICO is the model most widely used by lenders.

Only in the past several years have consumers been able to purchase their credit scores, three-digit numbers that are generated using information from their personal credit files. The higher your score, the better credit risk lenders think you are. A high score often translates into better rates on the money you borrow.

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Car Buying Doesn't Have to Be Combat

I recently received an e-mail from Ryan Bachman, an operations manager at an automobile dealership in Louisville, who sincerely wanted to know the answer to some questions about car buyers.

Bachman, who hopes to become a fourth-generation owner of a car dealership, wondered why the relationship between car buyers and car sellers is so adversarial.

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For example, he was annoyed at me for encouraging consumers to demand to see the invoice for the car they want to buy.

"It bugs me that consumers feel it's their right to see the invoice price and to know exactly what profit you are making," said Bachman, who works at his father's dealership. "If we sell every car at invoice or under invoice, we obviously would not be able to stay in business."

Bachman then asked three questions that I think deserve an answer:

• Is there any other retail industry where customers know (or even care) how much profit the business is making on their purchase? Imagine purchasing a house, a TV or a gallon of milk and demanding to know what the seller paid for the commodity.

• Why is the perception of the car industry so different?

• Why does the word "profit" carry such a negative connotation?

These are good questions. Of course not everyone who sells a used or new car is an agent of Satan. There are many honest, hardworking people in the industry. Yet it is also true that there are lots of tricks to this trade, and an uninformed consumer can end up paying hundreds of dollars more for a car than is necessary.

Having said that, let me address the first two questions, which really ask the same thing.

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VIDEO: Fruit and food hit hard by inflation

14 June 2011 Last updated at 10:07 Help

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Watchdog targets landbanking firm

8 June 2011 Last updated at 15:55 The FSA has secured a number of injunctions for against unauthorised businesses Investors ploughed hundreds of thousands of pounds into plots of land that had little chance of being built on, the City watchdog has said.

Now the Financial Services Authority (FSA) has taken action against an unauthorised landbanking scheme which collected £3.9m from UK consumers.

But some victims are unlikely to get their funds back.

In the last year, the FSA has secured seven injunctions against unauthorised landbanks.

Action

The High Court has issued a winding-up order against Plott UK Ltd.

The business had been marketing plots of land as an investment opportunity. It promised investors a return of between 200% and 300% on their investment.

However, at least one of the sites was in a designated area of outstanding natural beauty, and so was highly unlikely to ever get planning permission to be built on.

Many customers invested a minimum of £10,000, with some investing hundreds of thousands of pounds. Plott collected £3.9m between May 2009 and April 2011, the FSA said.

The regulator was able to take action as Plott was operating an unauthorised collective investment scheme.

Freeze

Another operation, called European Property Investments UK Ltd, took over Plott's business once the FSA action against Plott began. It accumulated £639,000 in nearly two months from April.

The FSA was able to freeze £180,000 in the firm's account, but the rest was transferred out before the freezing order was obtained.

Meanwhile, the High Court issued an injunction that means the business will be breaking the law if it sells land or operates the collective investment scheme.

"Consumers are much better off not putting their money into these schemes since, by the time we can catch up with the operators, most of the money has disappeared and investors are left with land that has a value which simply does not reflect the money paid for it," said Tracey McDermott, of the FSA.

"In our experience, operators of unauthorised landbanking schemes do not work in isolation, they often work together and their schemes are evolving.

"Once the dust has settled, we hope to be able to repatriate remaining funds to customers of both companies, but it is likely that some people will not get any of their money back."

Investors are not covered by the Financial Services Compensation Scheme because the businesses were unauthorised.

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Warning over variable mortgages

22 June 2011 Last updated at 12:54 By Simon Gompertz Personal finance correspondent, BBC News Which? is concerned about the consequences when the Bank of England raises interest rates The consumer group Which? has accused banks and building societies of putting the squeeze on homeowners who have standard variable rate mortgages.

Which? warns that thousands will be pushed into financial difficulty when interest rates go up.

More than 40% of mortgage borrowers are now on standard variable rates, which kick in after cheap introductory mortgage deals expire.

The highest are around 6%, double the cost of the best value mortgages.

'Angry'

"They're just milking people," one homeowner from Peterborough, Mark Fellowes, complained to BBC News.

The interest rate on his Egg mortgage dropped by just 1.5% when the Bank of England cut official rates by 4.5% after the financial crisis, he said.

"I was very puzzled initially and then you just get angry."

Which? research suggested that 95% of lenders had failed to pass on cuts to standard variable rate customers in full when the Bank of England reduced interest rates.

Continue reading the main story Newcastle BS: 5.99%Birmingham Midshires: 4.84%Clydesdale: 4.59%Natwest: 4.00%Royal Bank of Scotland: 4.00%Nationwide: 3.99%Halifax: 3.99%HSBC: 3.94%

Source: Moneyfacts

Since then, 20% of lenders have actually put their rates up, while the Bank's rate has stayed at a record low of 0.5%.

'Recapitalising'

The Council of Mortgage Lenders said that the standard variable rate, or SVR, is dependent on the cost of attracting deposits from savers, rather than the Bank of England.

But its director general, Michael Coogan, told BBC News that lenders have been widening their profit margins after losing heavily during the crisis.

"I think what we have is the banks and the building societies trying to restabilise the system which was in shock in 2008," he explained.

"They are trying to recapitalise their organisations, deal with past losses, deal with the risk of future losses, and at the same time keep their customers as happy as possible through the economic cycle."

'Vulnerable' Mark Fellowes says he was initially puzzled that his mortgage interest rate did not go down

An increasing number of families with large loans are trapped on their lender's standard variable rate because other banks and building societies don't want their business.

These financially-stretched households could suffer badly if the Bank England starts to push interest rates higher.

David Hollingworth from the mortgage brokers, London & Country, said they should brace themselves for larger monthly payments.

"I think lenders will look to push up standard variable rates by more than any base rate increase," he warned. "That's where vulnerable borrowers really stand to lose."

Mark Fellowes' lender, Egg, said: "We strive to maintain good rates for all of our customers based on how mortgages are funded.

"Funding is based on wholesale market rates, specifically Libor, which are frequently at a premium to Bank of England base rates."

Mr Fellowes has managed to move to another lender, choosing a mortgage which does track the Bank of England's rate.

He is saving £120 a month.

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AUDIO: New jobs held back by red tape

5 July 2011 Last updated at 12:49 Help

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VIDEO: Paul Lewis explains pensions dispute

30 June 2011 Last updated at 10:15 Help

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Social care costs 'need capping'

4 July 2011 Last updated at 15:58 By Nick Triggle Health correspondent, BBC News Andrew Dilnot: "The government will be picking up a hefty bill"

Social care costs in England should be capped so people do not face losing large chunks of their assets, an independent review says.

Council-funded home help and care home places for the elderly and adults with disabilities are currently offered only to those with under £23,250 of assets.

The Dilnot report said the threshold should rise to £100,000 and a £35,000 lifetime cap on costs would be "fair".

But the Treasury is known to have doubts about the expense of the plans.

Just over £14bn a year is spent by councils on social care.

However, the changes would cost an extra £1.7bn a year if they were implemented now - and this figure could rise by 50% as the "baby boom" generation begins to retire.

Insurance

Last year the coalition government asked economist Andrew Dilnot to look into how the system of funding social care in England could be changed amid concerns it was getting harder for people to get access to state support.

The ageing population and squeeze on council budgets have led councils to impose stricter criteria on who can get help.

Continue reading the main story Ben Geoghegan BBC Political correspondent

"Now Gordon Wants £20,000 when you die".

That was the Conservative campaign slogan in 2010, the last time there was a serious attempt to sort out social care.

Then as now, the main political parties were talking about cross-party consensus.

Then as now, they insisted reform was needed so that old people didn't have to sell their homes to pay for their care.

However, their attempt to reach agreement failed and led to what Ed Miliband today described as "political bickering".

Might things end the same way this time round?

In Whitehall, officials are warning about the difficulties that lie ahead.

They insist this issue will "absolutely not be long-grassed", but politicians don't need reminding that - as one source put it - this will not be nice and easy.

It means while 1.8m are getting state funding, another 1m-plus either have to pay for support themselves or go without.

Mr Dilnot's commission has ruled out calling for care to be free.

Instead, it has recommended a partnership between the state and individual whereby the high costs are covered by the government - one in 10 people aged over 65 faces care costs of more than £100,000 over their lifetime.

But the individual should be liable for the first tranche of care with a cap in costs set at between £25,000 and £50,000, the report said.

It went on to suggest £35,000 as the ideal figure - a third of over 65s face sums above this amount.

Below the age of 65, the cap should be phased in. For young adults below the age of 40 to 45 it should be free - although in reality this makes little difference as hardly any pay now because those with care needs at that age have often not had time to accrue savings or buy property.

After that age, the cap should be gradually phased in by £10,000 each decade.

The hope is that with the state paying for the high-cost cases, the insurance industry would be encouraged to develop polices which would cover any care costs below the cap.

The cap will not include so-called "hotel costs" for food and accommodation. However, the report said there should be a standard charge which could be around £7,000 to £10,000 per year.

Means-testing should remain so that the poorest would not have to pay, the commission recommended, but the threshold increased to £100,000 for residential care to better reflect the rise in property prices seen over the last two decades.

The commission believes the cap and rise in the threshold will mean no-one will lose more than 30% of their assets paying for care.

Continue reading the main story Many councils in England have stopped providing support to those with low and moderate needsThe Dilnot Commission was set up in July 2010 to establish how to achieve an affordable care system for adults in EnglandWales and Northern Ireland both have means-tested systems which are similar to EnglandScotland provides free personal care, but in recent years has tightened the eligibility criteria for the same reasons as in EnglandMr Dilnot said the money would have to be found by making cuts elsewhere or raising taxes and he said any tax rise "should be paid, at least in part, by those of retirement age".

Launching the report, he added: "The issue of funding for adult social care has been ignored for too long.

"The current system is confusing, unfair and unsustainable. Individuals are living in fear, worrying about meeting their care costs.

"Putting a limit on the maximum lifetime costs people may face will allow them to plan ahead for how they wish to meet these costs."

The report also called for an end to the ever-tightening restrictions being placed on access, arguing there should be a national standard so everyone had the same access no matter where they lived.

The commission has already had talks with the Treasury about the proposals. It is understood that government officials voiced concerns whether extra money could be found in the current financial climate.

Social care is currently means-tested

Health Secretary Andrew Lansley acknowledged finding the money remained a challenge, saying such change would require "significant cost" and need to be balanced against other funding priorities.

However, he said despite this social care was still a "priority for reform" and the commission's report would be "carefully considered" before the government put forward its proposals next spring.

Labour leader Ed Miliband said he would be willing to have cross-party talks to try to reach a consensus on the issue.

The recommendations already have widespread support among charities and campaigners with many arguing it provided the blueprint for reform.

Michelle Mitchell, of Age UK, said action was long overdue: "Social care is at crisis point. Vulnerable people are going without care and that means their conditions are worsening and they are ending up in hospital and costing the government more. We cannot go on as we are doing."

Any overhaul of the system would take about four years to introduce.

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Tesco Bank 'unlocking accounts'

30 June 2011 Last updated at 13:58 Problems originated from an upgrade of computer systems Two-thirds of Tesco Bank customers who were locked out of their accounts throughout last week have now logged back in online, the bank says.

Some 1,650 of the 2,500 who were excluded owing to technical issues are now back in the system.

The remainder had been contacted and should be able to access their accounts using the information sent to them, a spokesman said.

The bank has already apologised after admitting it failed some customers.

The problems surfaced when the bank migrated all its online savings accounts from the Royal Bank of Scotland's system to its own computers.

Two technical failures last Monday and Tuesday left people who were online at the time unable to access their accounts until they took several steps to reset their security details.

Customers' frustrations were increased when many found they could not get through on the telephone to the busy customer service call centre.

"Tesco strive to deliver service of the highest standard and for a significant minority of customers we have failed to do that," Tesco Bank chief executive Benny Higgins told BBC Radio 4's Money Box on Saturday.

"We do apologise unreservedly. It's absolutely our focus to put this right."

Earlier in the week, the bank told the BBC News website that anyone who had incurred costs as a result of the problems would be refunded.

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VIDEO: Price rise for pay-as-you-go mobiles

1 July 2011 Last updated at 11:00 Help

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VIDEO: Number crunching public pensions

30 June 2011 Last updated at 19:06 Help

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VIDEO: Your Money: Hidden card charges

2 July 2011 Last updated at 14:38 Help

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