The Advertising Standards Authority (ASA) is looking closely at loan adverts and price comparison sites, saying that social responsibility is key in the midst of the current recession.

The watchdog has said that companies currently have many landmark rulings that they must refer to in terms of standards to adhere to.

It has also ruled against firms that have misled viewers or made consolidating debts seem trivial. It is also considering adverts encouraging consumers to put their various debts in one pot to pay off.

A Lenders trading body has said that the companies do take their responsibility seriously when dealing with customers.

The ASA says that the recession has affected the quality of advertising and kinds of appeals made to customers: “The economic downturn makes it even more important to protect consumers from being misled.”

The chairman of the ASA said the authority should be ‘vigilant’ for consumers sakes.

The adverts being looked at include many that are online. Price comparison websites are becoming increasingly popular and therefore need to be moderated.

Are Adverts Purposely Misleading?

The company has banned some adverts for financial products and price comparison websites such as the advert for Picture Financial Services in which a man plays football while being filmed by his wife who is also applying for a loan at the same time.

The report states that: “The ASA council found the advert to be misleading for implying that consolidating unsecure loans was a decision that could be taken lightly.”

Due to the steady rise in the number of people using price comparison sites, the number of complaints has also risen about adverts that make comparisons all over the place. This has increased 14% in 2008 compared to the previous year.

The report adds: “Our priority here is to ensure that ads do not mislead consumers and to help provide a level playing field where companies can make legitimate claims about their products and services,” also saying there have been issues with exaggerated or unclear price comparisons.

The ASA rules state that:

- Documentary evidence is needed to back up competitive claims

- Any compared products must be of very similar quality, and sale prices must be compared to other sale prices

- Customers must be given enough information to make any decisions themselves

- Exaggeration of length of time prices have been lowered should be avoided

The ASA predict more complaints this year.

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HM Revenue & Customs has had to withdraw a new leaflet which explains how tax credit works because of an error in its information.

The leaflet – entitled “Why do overpayments happen?” was published on HM Revenue & Custom’s website last week.

It mentions a tax credit claimant who failed to report that their income had risen from £9,000 to £20,000 per year would be paid too much tax credit. However, it does not mention that income can rise by £25.000 before any repayments are due.

A spokeswoman for the Revenue said that: “We agreed that the example used on page 2 of this leaflet concerning income is misleading and we have arranged for this leaflet to be removed from our website.

“We aim to have a revised version of the leaflet available for customers soon.”

The change in tax credit so that you had to be earning an extra £25,000 per year before it affects your annual tax credit assessment is known as the income disregard, and came about in 2006 when it was raised from £2,500.

Is the System Too Complicated?

Such a huge and sudden rise in the threshold meant that in its early years there was chaos surrounding the tax credit system and millions were overpaid and then had to be sent demands for repayments of thousands of pounds.

Some cases were caused by HMRC staff calculating tax credit incorrectly even with right original information from claimants, and other cases were caused by unawareness of claimants, or informing the Revenue too late leading to an overpayment.

Between 2003 and 2007, these overpayments totalled £7.3 billion and are currently still totalling around £1 billion a year according to a report by the MPs on the Public Accounts Committee.

Robin Williamson from the Low Incomes Tax Reform Group (LITGR) said the following: “So often we see cases of advice from the HMRC helpline that show that not even the people who are supposed to administer the system can fully understand it.”

According to the HMRC spokeswoman, the leaflet was only up for two days before the error was spotted and it was taken down. Around 250 paper copies had also been printed and sent out to HMRC offices which have also been withdrawn.

She said: “Although the example could have been better the underlying message still holds – keep HMRC up to date with charges in circumstances and changes of income to help avoid an overpayment.”

Leaflets will be re-published in mid-June mentioning income regard.

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The Government has launched a new campaign in order to retrieve millions of pounds of tax from people who own offshore accounts.

HM Revenue and Customs (HMRC) announced the new ‘offshore disclosure opportunity’ in Wednesday’s annual Budget

The scheme will run until March next year and is aimed to give people a chance to confess that they owe tax on their offshore bank account interest.

The HMRC ran this campaign back in 2007, targeting people with offshore accounts in the UK’s high street bank branches and were able to raise around £450 million from 45,000 people because of it.

Last year they ran a second campaign which targeted around 300 smaller banks and building societies that also have offshore branches.

The searches by the Revenue were not possible until a recent legal breakthrough that now means that banks must reveal the names of any UK citizens that hold accounts abroad. And since this change was made they have been working hard to make sure all those tax dodgers with overseas accounts are brought to a stop.

New Powers A Result of the G20 Summit?

They have also been in the process of investigating around about 300 rich UK citizens who have failed to pay tax on their Liechtenstein bank accounts. It is estimated that they owe around £300 million in tax on these accounts that have around £1 billion in them.

The HMRC have also recently signed agreements with the British Isles such as Guernsey, Jersey, the Isle of Man and the British Virgin Islands in order to achieve the same effects on people keeping accounts in these places.

From the accountants Saffery Chanpness, Ronnie Ludwig has said: “This is in line with the coordinated international approach being taken towards such bank accounts as outlined at the recent G20 summit meeting.

“The knowledge that they are much more likely to be caught than was ever the case before should provoke some more meaningful results from the latest disclosure opportunity.”

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From October of this year, people over the age of 50 will have the chance to top up their tax-free savings in Individual Savings Accounts (ISAs) as the limit is extended from £7,200 to £10,200.

The change will take place on 6 October this year for those over 50, however, everyone else needs to wait until April next year to see the same benefits.

The cash limit on the overall allowance will also be raised from £3,600 to £5,100 and the rest of the money can be invested in shares.

ISAs were introduced a decade ago by Gordon Brown who was then the Chancellor in order to try to encourage people to save money. Today around 18 million ISA accounts exist and around 5 million of those use the full allowance each year.

How Will This Affect You?

Until the changes come into force, you can currently have £7,200 in these accounts, and the maximum cash investment on this is £3,600. However, this will be increased to £10,200 and half of which can be a cash investment. This is expected to cost the Treasury £60 million in total by 2011-2012.

Many experts are welcoming this move. Catherine Ross for example has said that: “This is not a case of tinkering around the edges. For a lot of people a great deal of their savings will now fall outside od the tax net.”

However, Defaqto’s David Black has pointed out that unless interest rates start to rise again, the benefits this action could have are limited. Even at the best interest rates that are currently on offer, the change means that the increase in tax-free interest is only £54.15.

From the Building Societies Association (BSA), Brian Morris says that ISA providers will be given a little breathing space before making sure that they have applied the changes to their accounts. He said: “We will be checking with our members that six months is sufficient.

“The increase in the limit is very welcome and something that we lobbied for. However, we would have preferred for this to all come into force in one go,” he added.

What Do You Think?

A good move or a bad one? Will this change help people or will it have little effect? We would love to know your thoughts and opinions. Leave your comments here.

Chancellor Alistair Darling has announced in today’s Budget plan that there will be an increase of up to 50% in tax for those earning over £150,000 from next April.

This move is to try and save public finances after his announcement that borrowing will be higher than expected at £175 billion.

It is expected that the economy will continue to shrink by around 3.5% but is expected to begin to mend itself by the end of the year.

Among his announcements, the Chancellor also said that the £2,000 scheme for people trading in 10 year old cars or more for new ones has also been ended.

However, Conservative leader David Cameron criticised the budget saying that “Britain simply cannot afford another five years of Labour”.

The rise in the top tax rate has increased by 5% from what was suggested in the pre-Budget report. It has also been brought in a year earlier than it was initially planned in order to “pay for additional support for people now.”

What Else Should We Expect?

Other plans include an increase in the usual prices: petrol duty will increase by 2p in September and then by 1p per litre above inflation each April for the next four years.

From midnight tonight, alcohol will increase by 2% (around 5p a pint), and from 6pm tonight tobacco duty will also increase by 2%.

The Chancellor predicts that this alone will raise over £6 billion by 2012, which would help to pay for a boost in pensioners’ income (including grandparents that care for their grandchildren) and will also help savers who have ISAs.

Stamp Duty holiday will also be extended to properties that sell for less than £175,000 until the end of the year in order to try and boost the housing market.

Getting People Back Into Work

The Government has also made changes in order to get people back into employment as quickly as possible.

Anyone under 25 who has been without work for a year or more will be offered a job or training scheme place. The Government will also fund the creation or support for 250,000 jobs in deprived areas of the country.

An expansion in sixth form and other further education places will also come into effect, as well as measures to support investment in growth and green industries and help to rebuild the UK’s financial services.

The Chancellor also admitted that the Retail Price Index will likely fall to minus 3% by September, and that unemployment figures have already reached 2.1million – the highest since the current Government came into power in 1997.

Official figures also show that public borrowing has reached a massive £90 billion last year, nearly 6.2% of the national income and much higher than the £78 billion that was predicted in the pre-Budget report.

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Do you agree or disagree with these changes? Do you think they will help improve the financial situation or make things worse? Do you have any better suggestions? Leave your comments here.

The Pensions Regulator has warned that the recession may be putting pressure on the pensions scheme making it more prone to be at risk from fraud, dishonesty and risky behaviour from employers.

It is asking that trustees, advisors and members to use their powers to tip off anything that may be considered fraudulent.

They also say that though fraud and dishonesty are unlikely in this situation, it is still a risk and therefore people should be aware of employers trying to abuse the pensions scheme.

Joanne Segars of the National Association of Pension Funds (NAPF) said: “It is important to make clear that the vast majority of schemes are well run by dedicated managers and trustees working on behalf of members.”

Dishonesty Could Jeopardise Peoples Benefits

The regulator’s chief executive has also said that he wants to hear from people that can give any information about this that may be suspect. He said: “The economic downturn may accentuate the vulnerability of some schemes to certain actions which give us cause for concern.

“We encourage all those who might be aware of behaviour that would give cause for concern to contact us.”

The TUC have welcomed the announcement saying that “this is a helpful reminder that those involved in running pensions should remain alert to the potential for rare cases of fraud or dishonesty that could jeopardise members’ benefits.”

The regulator’s alert has highlighted two particular areas of concern: “scheme members may be targeted to access their pension assets through trust-busting or pension liberation activities.”

Increase in Fraudulent Claims

It also gives some potential examples of employers that play fast and lose their pension schemes, including “avoidance of employer debt, inappropriate transfer for individuals from under-funded schemes that would not subsequently have the resources or adequate employer support, as well as employer-related self-investment and poor practice associated with transfer incentive exercises.”

The regulators spokesman said that there had been a slight increase in examples of people reporting breaches in the pensions laws in the past financial year: “there has been a marginal increase in the number of whistle blowing cases reported.”

Just a couple of months ago the regulator warned employers not to use the recession as an excuse to cut pension contributions if they could pay dividends to shareholders, after it had already warned that pension scheme finances were being undermined by falling investment returns and higher risks of employers going bust.

From the law firm Sackers, Peter Murphy said: “unusually, the regulator specifically refers to the possibility of dishonesty and fraud affecting pension schemes.”

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Lenders have warned that lack of equity in the housing market will cause as many as 2 million homeowners to either have negative equity or too little equity to afford to move.

The research conducted by the Council of Mortgage Lenders (CML) also warned that these problems could lower the number of houses on sale.

It also found that two thirds of 900,000 that fall into the category of negative equity’s shortfall is by less than 10% - around £6,000 of these are first-time buyers, and around £8,000 are other homeowners.

Head of research at CML, Bob Pannell has said: “Although negative equity has resurfaces as house prices have fallen, one big difference from the early 1990s downturn is that it is less concentrated among young, first-time buyers, and more evenly spread across wider age groups and those at different points on the housing ladder.

“Negative equity will contribute to subdued property turnover, but otherwise should have few adverse effects for the majority of households affected.”

As Bad As The 1990’s Crash?

Lenders are still restricting their lending due to lack of mortgage funds, few are prepared to accept a 10% deposit from anyone buying a house.

According to other recent research conducted by Moneyfacts, there are currently only 106 mortgage deals that require a 10% deposit or less. On the other hand, two thirds of deals – 1,485 – require customers to have a deposit of at least 25% of the cost of the home they intend to buy.

This will have a huge impact on those planning to move home, even if they have limited equity of less than 10% they are unlikely to be able to afford to move.

CML have predicted that around 600,000 mortgage holders will have less than even 5% equity on their homes. It also thinks that around 500,000 have equity of between 5% and 10%. Therefore it believes that around 2 million homeowners could not sell their own homes in order to raise the equity to put down a deposit on a new home.

House prices have already dropped around 18% since mid-2007, already outstripping the national price drop of the early 1990s price crash. However, the estimated 900,000 people suffering from negative equity now is still a lot lower than the 1.5 million thought to have been in negative equity in the early 1990s.

Only a Problem If You Want To Move?

Of those that are currently in negative equity, about 270,000 are thought to have a loss of around 10-20%, and around 30,000 are believed to have a deficit of over 20%.

In the worst cases the negative equity averaged £28,000 for first-time buyers, and £37,000 for other homeowners.

The CML say: “payment problems are typically associated with unexpected spending commitments, reduced income and changes in household circumstances.

“Negative equity, on the other hand, only surfaces as a problem if households need to move, or are also experiencing repayment difficulties.”

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It seems that the recession has driven people to desperate measures in order to get some extra cash in.

Figures have been gradually on the rise for the last four years, but around 107,000 false claims were filed in the last year claiming a total of £730 million according to the Association of British Insurers (ABI). This is up 30% on the year before.

The ABI claims that fraud is “more of a temptation” during a recession. This is shown to be likely as one motorist went so far as to push his car over a cliff in order to claim insurance on it.

The detection of fraud has risen, but the ABI still believes that the actual number of fraudulent claims in the home and motor insurance areas has also increased.

Fraudulent house insurance claims for either false or exaggerated claims is thought to have risen to around 55,000 people in the last year.

However, fake claims on motor insurance are thought to be at their highest value of £360 million worth. This includes a man that claimed his car had been stolen from a car park but later admitted pushing it off a cliff in order to use the insurance money to clear his debts.

Recession Making People Desperate?

One person holidaying in West Africa, went so far as to claim “recovery expenses”. This was however declined when it was found that some of these expenses included services at a local brothel.

Nick Starling, the director of insurance at the ABI said: “Fraud thrives in a recession, so insurers are intensifying their crackdown on insurance cheats.

“Fraud adds an extra £40 a year to the average premium, which is why the harder we make it for cheats, the more competitive premiums will be for honest customers.”

According to the ABI’s figures, in 2004, the amount of fraudulent claims would have cost £260 million in total, in 2005 this rose to £410 million, rising again to £470 million in 2006. In 2007 the figure stood around £560 million.

Norwich Union fraud investigator Sue Cowes says however that the majority of insurance claims are genuine. She is still on the lookout for suspicious remarks, how many claims the customers have previously and how long ago the policy was taken out.

She did admit that people were telling half-truths however, saying that: “unfortunately people are exaggerating some types of claims.”

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Though mortgage lending activity is still weak compared to how it used to be, it did rise a little in February.

The number of new mortgages submitted was 4% higher in February than the previous month according to the Council of Mortgage Lenders (CML). However, they have also warned that though this is an improvement, mortgage lending is still at a “very low level historically.”

The director general of the CML said: “We are not convinced that underlying trends have shifted sufficiently to change our forecasts for mortgage market activity in 2009, but there are some positive signs for later in the year.

“Some large banks are making more funding available through enhanced lending commitments, which is helpful but will not satisfy consumer borrowing demand on its own.”

One Small Step for the Economy?

The number of home loans completed for all buyers increased slightly month-on-month even though the value of these homes is still at £3.1 billion.

These figures do suggest an improvement on recent months, however, compared to recent years, it is still quite severely low.

The number of completed mortgages was running at around a third of the average February total – 76,000 loans for house purchases between 2002 and 2007.

There was however, a 20% decrease in the number of remortgaging deals, from 44,000 in January to 35,000 in February.

The group also found that the choice mortgage at the moment is the Standard Variable Rate (SVR).

Low Value Equals Low Equity

Equity is also a problem at the moment. With house prices falling, as is equity which means that people are excluded from the best deals which require large deposits.

However, now that the Bank interest rates are unlikely to fall further, people are asking for fixed rate deals as opposed to those that rely on the Bank rate. This can be seen in the fact that in February of this year, 56% of new home loans were fixed rate mortgages, compared to 49% in January.

First time buyers are also finding it increasingly tough as the typical deposit to now find yourself is 25%. This has led to only 9,400 home loans being completed.

Michael Coogan of CML said: “Such amounts remain out of reach for all but the most affluent buyers, for example people returning to home ownership after a period of renting, divorcees, or those who get financial assistance from their family.”
Mortgage lending is up 7% from January, though this is not seasonally monitored. It is traditional that there is a lull at the beginning of the year.

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According to the results of a study based on official figures, big cities outside London have seen the most job losses in the past 12 months.

The worst rise can be seen in the Midlands, in Birmingham, where the number of people unemployed and seeking benefits for this, rose from 5.3% to 7.3%.

They also found that the likes of Leeds, Glasgow, Sheffield, Hull, Manchester, Bradford, Kirklees, Liverpool and Bristol also saw a big jump in the number of unemployed.

The Work Foundation conducted the study, using official figures covering the 12 months leading up to February of this year.

Policymakers Ignoring Local Problems

They saw that the most increases of unemployment were found in the North of the country, but also the West, the Midlands, and Scotland suffered a lot as these areas are dominated by the manufacturing industry.

The major player however, was Birmingham. The number of people collecting jobseekers allowance here has risen from 33,274 people in February of 2008 to 45,657 people this February.

However, the biggest increases in terms of percentages comes in council areas which saw no benefits of the ‘boom’ in the economy before the recession began. For example, those in Wear Valley saw an increase from 2.9% jobseekers to 6.2%.

According to Naomi Clayton, a senior researcher at the Work Foundation: “Policymakers ignore how recessions play out locally at their peril.

“It is to be hoped that the forthcoming Budget focuses more attention on the large cities – Manchester, Leeds, Birmingham –that can drive the recovery, as well as recognising which areas need the most support to survive and prepare for better times.”

What Previous Statistics Have To Say

In March, the unemployment rate in the whole of the UK rose to over 2 million, the highest it has been since 1997 according to the Office for National Statistics (ONS).

In February this year, those claiming jobseekers allowance in the UK reached record highs of around 1.39 million people.

The ONS has also found that between November and January, the rate of unemployment rose by 6.5% in total.

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