Unemployment levels rose by 281,000 to 2.38million in the three months to May according to the Office for National Statistics (ONS). This is an increase of 7.6%, the highest for over 10years.

The number of people claiming unemployment benefit rose by nearly 24thousand in June, reaching 1.56million. This, overall, is still less that was predicted by analysts.

Young people have been particularly hit as companies cut back on intake in order to reduce costs. Unemployment in the under24s is at a 16year high of 726thousand.

The number of people that have been looking for work for over a year also increased to 528,000-an 11year high.

The general secretary of TUC said: “It’s particularly worrying that over half a million unemployed people have been out of work for at last a year, including 133,000young unemployed people.

Crisis Not Over

“With a new generation of school and college leavers soon starting to look for work, our unemployment crisis will get even bigger.”

An independent survey says that two-thirds of people across Britain know at least one person that has lost their job due to the recession.

According to another study, two-fifths of people also worry about losing their job in the recession.

The economy may be stabilising, but economists still expect unemployment to continue to increase.

Capital Economics’ Vicky Redwood explained how the figures show there to be “conflicting signals about whether conditions in the labour market are getting better or worse.”

Rise In Earnings?

The new total of unemployed in the three months leading up to May is the biggest quarterly rise since records began in 1971.

On the other hand, the rise in claimants for unemployment benefit is less than the expected 39,000.

Vicky Redwood said: “The claimant count measure of unemployment in June posted its smallest rise in a year. However, the wider ILO measure posted its biggest rise on record.”

The government are using the ILO figure of 2.38million unemployed because it apparently takes into mind a more comprehensive indicator of the job market.

Unemployment may be at a high, but so are earnings including bonuses. They rose by 2.3% in the quarter leading to May which is the highest since December.

3.1Million Peak Next Year

But it seems that bonuses are making all the difference. When excluded, average earnings only increased by 2.6% which is the lowest rate since the data began to be collected in 2001.

The chief economist for the British Chambers of Commerce said that the figured were “grim reading.”

He said: “On the basis of these numbers, we reaffirm our forecast that unemployment will peak at around 3.1million next year.”

Unfortunately, as unemployment rises, the number of job vacancies falls. In the three months leading to June, vacancies were down 30,000compared to just the previous quarter.

There is also a gender difference. The number of unemployed men rose by nearly 200,000to reach 1.46 million, compared to a rise of 84,000unemployed women, which makes a total of 107,000.

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Tax Rises To Cover Deficit

The net government will have to raise taxes and cut spending in order to balance out the deteriorating state of public finances according to think tank group Centre for Economic and Business Research (CEBR).

The group proposes a programme be put into effect in order to put £100 billion back into the economy and repair the UKs public finances. It says that by 2014/15 the government need to get the UKs budget deficit down to £50 billion.

In 2008-2009, the UKs budget deficit was a record high of almost £90 billion.

According to CEBR, if the Conservatives win the next general election as expected, the deficit will be stopped by £20 billion in tax rises, and another £80 billion in spending cuts.

More Economic Contraction Still To Come

If Labour, on the other hand, stay in power, it’s predicted there will be £40 billion in tax rises and £60 billion in spending cuts to bridge the gap.

CEBR chief executive, Douglas McWilliams says: “It is likely that any government – particularly a new one – will be forced by political necessity to announce its fiscal consolidation programme early while it is still possible to blame the need for it on the previous government. And it will look to achieve most of its results within a parliament.”

The group believes that the economy in the UK will continue to contract by 4.1% this year, which is a little more pessimistic than the official Treasury estimate of 3.5%. However, the CEBR also predict an eventual 0.6% growth for 2010, and another 0.9% rise in 2011.

Mr McWilliams says he believes that the recovery will be quite slow, which will mean lower tax revenues and more money needing to be spent on unemployment benefits.

What Do You Think?

Whose figures do you trust more – the governments or an independent groups? Are things going to begin to look up as early as next year? We want to know your thoughts and opinions. Leave your comments here.

Some of the UK banks have begun screening customer transactions in an attempt to stop what they call “boiler room” fraud.

It is estimated that up to 30,000 people are losing hundreds of millions of pounds each year to such share scams according to the Financial Services Authority (FSA).

This is when criminals call potential investors to sell shares which are effectively worthless. But banks such as Barclays and HSBC said they have suspended such transactions if they are being paid to known boiler room firms.

Saving Customers Millions!

Together, the banks use a warning list that has been published by the FSA containing the names of hundreds of companies. The FSA says these companies aren’t authorised to pose a high risk to customers.

According to Barclays, there have been around 150 transactions blocked since the introduction of the screening scheme in February, thus potentially saving customers millions.

It adds that around 90% of customers choose to cancel such transactions once warned that the company they are paying is on the warning list, but 10% still go through with the transaction.

HSBC has been using the screening procedure since 2006, and also claims to have saved customers millions.

Most Customers Follow Banks Advice

A spokesman from the bank explained: “If we receive requests for payment to any of these companies we will delay payments until we have checked with our customers to ensure that they are aware of the company’s activities.”

“Usually, when customers realise that the companies in question are on the non-authorised list, they want to stop the payment.”

The FSA and police from Operation Archway in London have been working together for years to track boiler room fraud.

According to officers, the fraudsters are usually persuasive, getting customers to shed out tens of thousands of pounds.

Detective Superintendent Bob Wishart said: “We’re having some notable successes. If we can help them identify potential fraud and a bank is 100% happy that it is a potential fraud, then it can take the appropriate action.”

More Measures Needed

Jonathan Phelan of the FSA agrees that banks are making an important contribution to the effort to stop such frauds, but screening can’t be completely successful alone.

“We are in discussion with banks. It is a very difficult area. There’s a certain amount of intrusion about it, so one has to be careful about promoting it too much.”

The FSA and police say they have had some success shutting down some operations and prosecuting the criminals involved. The FSA claim to have recently closed down 6 boiler room agents, recovering nearly 3 million pounds of investors money from 4 boiler room operations.

Operation Archway officers also say they are involved in a dozen major boiler room investigations.

What Do You Think?

Have you been the target of one of these operations? Do you have any advice for others? Are banks, the FSA and the police doing enough to track down these criminals? Have your say here.

Between April and June this year the number of profit warnings by UK-listed firms fell to their lowest ever second quarter level since 2003.

The report conducted by Ernst & Young said that there were 63 warnings issued by listed firms on the London Stock Exchange last quarter, which is 36% less than a year ago.

Ernst & Young said this may add to the feeling that the worst of the recession is behind us, but the economy still has a ‘difficult road ahead’

Economy Appears More Stable, But Still A Difficult Road Ahead

Keith McGregor of Ernst & Young said: “Many companies have withdrawn profit guidance due to a difficult forecasting environment, while three successive quarters of negative growth have diminished market expectations.

“Add in hamstrung banks and a lingering credit crunch, and it’s apparent that although the economy appears more stable and the outlook brighter than at any time in the past year, the UK plc still has a difficult road ahead.”

The report also found that profit warnings in the support services sector increased from 12 earlier in the year, to 17 this quarter. Ernst & Young said that they did not find this surprising due to the sectors size and “exposures to the vagaries of the cycle.”

Support services includes the recruitment sector, and is the largest FTSE industry grouping and makes up a very big part of the economy.

Only six media companies put out profit warnings in the quarter, compared to 13 firms a year ago. However, Ernst & Young believe this does not necessarily mean that the media recession is bottoming out.

It says that media companies have “cyclical challenges” including advertising and consumer spending cuts.

Unlikely To Be A Rapid Increase In Profit Warnings

Mr McGregor believes the number of profit warnings is unlikely to rapidly increase even if there is further contraction of the economy.

“In this scenario profit warnings should stay relatively low. However, if markets become buoyed by optimism too quickly, then we may see a further correction later in the year,” he said.

“But, still countering our ability to predict the outlook for profit warnings is the ongoing trend for companies to limit or stop their profit guidance.

“Whatever companies decide on public guidance, it still does not remove their obligation to report material events that may impact profit as soon as possible to the market.”

What Do You Think?

Is it too soon to assume this is a good thing for the economy? We would love to know your thoughts and opinions. Leave your comments here.

For the fourth month in a row the bank of England have decided to keep their interest rates at 0.5%.

It says it is not planning on extending quantitative easing, but will continue with the current plan of spending £125 billion in order to stimulate the economy.

This lack of intervention means that economists can accurately assess the economic data.

Without permission from the Treasury, the Bank’s Monetary Policy Committee (MPC) could easily have increased quantitative easing by £25 billion, but the Bank says it hasn’t done so this month to assess if the current measures are working.

Head of global markets at HSBC, Bronwyn Curtis said: “I don’t think they know yet [whether quantitative easing is working]. The other thing about pausing is that they can always do more if the economic data deteriorates again.”

Measures Had Enough Time To Take Effect?

The BCC thinks that the surplus money should still be used for the economy: “Quantitative easing is not yet fully effective and there is a strong case for raising the proportion of private sector assets that the MPC purchases.

“It is important to significantly increase the programme’s size, so as to underpin business confidence,” said their chief economist David Kern. He also said that the Chancellor should increase the scheme to £200 billion.

CBI’s Ian McCafferty says it is still too early to calculate the effects of the quantitative easing, agreeing also that more help was needed.

He said: “A further extension through the autumn is needed, and clear communication of the Bank’s intensions throughout will be critical in order to prepare the markets.”

Good News For The Pound!

Deciding not to increase quantitative easing did mean that the value of the pound sterling increased. It rose 1.2% against the US dollar to $1.6253. Its value against the Euro also increased by 0.4%, meaning one Euro is now worth 86.1 pence. This is said to have caught the market off guard.

“However,” says Currencies Direct’s Mark O’Sullivan, “if poor economic data continues to be released we would expect the Bank to announce further funds to help ease liquidity problems.”

Gilt prices decreased due to the news that the Bank was not going to buy any more government bonds.

It was widely expected that interest rates would remain at 0.5% however. Hetal Mehta, the senior economist of Ernst and Young believes the 0.5% rate will remain until the middle of 2010.

She said: “It can barely go lower and… an increase at this stage is out of the question.”

At the beginning of the week the BCC said that the worst of the recession of the UK was over, but that talk of recovery was still too premature for this stage.

What Do You Think?

Is pausing quantitative easing a good idea or not? Is the worst of the recession over? Have your say! Leave your comments here.

Proposed reforms of the financial system will mean tougher regulations for banks, and more protection for consumers.

Chancellor Alistair Darling outlined new rules that oversee financial stability but keep the current system of regulations.

However, Shadow Chancellor George Osborne believes these are an “inadequate response to the economic crisis.” He says the Conservatives would tear the current pieces to shreds and start again, giving supervision powers to the Bank of England.

Darling reinforced the tripartite regulation system between the Bank of England, the FSA and the Treasury, but the Conservatives say: “We will put the Bank of England in charge of the prudential supervision of banks, building societies and other significant financial institutions.”

In Alistair Darling’s statement to the House of Commons, he said the financial system needed more robust regulations, and that banks and financial institutions should be better managed.

What Would Change?

His proposal included the following ammendments:

- More help for consumers-a strengthened deposit protection scheme and a national money advice line funded by the banks;

- More Competition-using the FSA and the OFT to ensure new people can enter the banking market;

- New Council for Financial Stability-regular meetings between the FSA, Bank of England and Treasury to report systematic risks and financial stability.

Mr Darling says he wants to “make sure that in the future when the Bank of England or the FSA or anyone else starts flagging up threats to the economy there is a formal statutory body that has to consider these warnings and then do something about it.”

He added that “We need a change of culture in the banks and their boardrooms, with pay practices that are focused on long-term stability, and not on short-term profit.

“The FSA now has power to penalise banks if their pay policies create unnecessary risks and are not focused enough on the long-term strength of their institutions.”

The current system is meant to work by the three primary bodies communicating with each other, sharing information between them, and take care of their own specialised areas. The new policy would help this.

‘Champagne Corks Popping’ As It’s ‘Business As Usual’

However, the system doesn’t make clear who would be in charge if another such crisis should occur.

Vince Cable, Liberal Democrat Treasury spokesman said: “This is not so much a White Paper as a blank paper.

“Mr Darling should have used this opportunity to assert his authority over the banks – instead he is maintaining his passive role in [the government’s shareholding body] UKFI, which is just not good enough.

“There will be champagne corks popping all over the City this afternoon. The chancellor’s statement proves it really is business as usual.”

The British Bankers Association (BBA) said: “We believe appropriate and effective regulation, capital applied according to risk and good quality supervision are the cornerstones of a vibrant community.

“We welcome moves to create better coordinated financial stability jointly with the FSA and the Bank of England.”

What Do You Think? Leave your comments here.

Use Them Or Lose Them!

Around 300,000 HSBC customers find their cheque guarantee limit on their debit cards cut as a new measure to tackle cheque fraud and discourage heavy debts.

Customers could see a maximum cheque limit of £100 attached to their debit cards as opposed to the current £250 that most people have. However, debit card payments of up to £250 will still be guaranteed.

My mid-2011, all banks hope to have phased out cheque guarantees associated with banks.

In fact, most retailers no longer accept cheques as a form of payment for goods.

HSBC claims it has suffered from no particular problems of card misuse among its 10 million current account customers but says: “It is about reducing risk from a mechanism that allows a customer to continue to make purchases from their current account when they know they don’t have the funds or an approved overdraft.

“Customers can certainly still write cheques for more than £100, but the cheque guarantee only covers cheques up to that value.”

In the UK around 88% of all cheques already have a guarantee limit of £50 or £100.

Are Cheques Still Used Today?

The majority of HSBC customers whose cheque limit will be decreased are typically those who have asked for a larger guarantee limit in the past. Such people were warned last year that changes may be made when the banks moved debit cards from Maestro to Visa.

This changeover has been slowly taking place, in batched, since the beginning of the year.

The cheque saw its 350th anniversary since the day the first cheque was used. However, their use, by value, has been steadily falling since 1999.

They are still a popular method of paying bills to utility companies and paying tradesmen and such, but last year only £7.1 billion was spent using cheques in High Street shops and shopping online. This is just 3% of total spending.

On the other hand, the use of debit cards has increased greatly over the last few years.

One man says that guaranteed cheques are still useful however – “The problem is, I do very occasionally deal with a retailer or a restaurant which doesn’t take a credit of debit card.

“A restaurant along the coast that I use just takes cash or cheques – if I went in there with a family of four, £100 is not going to cover the bill.”

What Do You Think?

Are cheques outdated? Is the increase in the use of debit cards to do with financial safety since the introduction of Chip and Pin? We would love to know your thoughts and opinions. Please leave your comments here.

A Help Or Hinderance?

A spending watchdog advises that the pay in the public sector should be severely restrained, or preferably frozen in order to rebalance finances in the economy.

Steve Bundred of the Audit Commission said those in the public sector would tolerate modest reductions as they have done well recently.

Chancellor Alistair Darling agrees that payment between public and private sectors needs to be fair. But when a policy to limit public pay rises to 2% last year happened, many people walked out of their jobs.

“At a time when inflation is likely to be between 2% and 3%, a pain-free way of cutting public spending would be to freeze public sector pay or at least impose severe pay restraint,” Mr Bundred said.

“This is especially true if real wages in the private sector are still falling.”

Cuts In Health And Education?

He added that in doing so, £5billion of the £50billion needed that would otherwise come out in tax, would be found, also emphasising that health and education spending shouldn’t be shielded from efficiency savings.

“Don’t believe the shroud-weavers who tell you grannies will die and children will starve if spending is cut. They won’t. Cuts are inevitable and perfectly manageable.”

Mr Darling also commented: “Public sector pay obviously has got to reflect prevailing conditions in particular inflation has come way down.

“Of course we have got to be fair with regard to people who work in the private sector, many of whom have seen their pay conditions somewhere near freeze. It has got to be fair to people who work for the public sector just as we have to be fair on the private sector.”

Public sector pay has always been an issue of debate within parliament. The 2% cap in 2008, at a time when living costs were rising harshly were criticised and walkouts ensued.

The Great Debate

Unison general secretary Dave Prentis, said that the government should be focusing on tax evaders and City bonuses, not public sector pay: “Freezing public sector pay during a recession is not the way to steer people through it.

“Let’s be clear, the recession was caused by bankers and speculators and the lack of regulation.

“Low paid public sector workers, who will be helping communities through the recession, shouldn’t be expected to pay.”

Ken Clarke – shadow business secretary, also had something to say about the public sector pay: “When that is put to you by somebody like the head of the Audit Commission, you look t it as an option but you have got to put it alongside other options.

“Look for constraint, you have got to decide whether it is really the best and fairest way of going about it.”

Liberal Democrat Treasurer spokesman Vince Cable also agrees that across-the-board pay freezes in the public sector don’t make a “great deal of sense” due to different contractual obligations.

What Do You Think?

We would love to know your thoughts and opinions. Leave your comments here.

Lord Turner believes his report regarding future pensions was not radical enough, arguing that the age at which people should receive pensions should be raised more quickly.

He also suggests that those in the public sector should have more flexible pensions.

Four years ago the government used the same report to plan their current policy.

In the coming decades, the age at which people can start collecting their pensions is getting later according to the recommendations in Lord Turner’s Pensions Commission.

People will still be able to retire earlier than the legal pension age, but will not be able to seek state pensions until this point.

In 2024 men and women will have to be 66 in order to receive state pensions. In 2034 this will change to 67, and in 2044 this will rise again to 68. Each rise will be phased-in over two years.

Pension Stability Must Be Solved

However, according to Lord Turner, there are arguments for the state pension age to go up to 70 by 2030.

He said: “If I was redoing my report I would be more radical, arguing for an even faster increase in the state pension age.”

There were also other recommendations made in the policy that are set to become law. This includes the view that increases in state pension age should be linked to rising life expectancy, as well as the idea state pension be linked to average wages, not prices. Also, the introduction of ‘personal accounts’ for those who can’t access a company scheme.

Current economic problems have also forced the strength of company and public sector pension schemes into view.

Deficits are mounting and numerous household name companies have had to close their final salary schemes to new and existing members.

This has led to questions about public sector pensions, but unions and staff argue workers were paid less than jobs in the private sector so decent pensions are part of their employment package.

Public Sector Pensions Fair?

Lord Turner says public sector employees may have to commit to a scheme that’s based on retirement income on an average of their career salary, not their final salary.

“We have to make it sustainable and we have to make it fair. I think it should move to average salary from final salary,” he said.

Life expectancy is important in making pensions fair to different generations as we are unaware now of any major medical breakthroughs that may happen in the future that increase life span.

A Department for Work and Pensions spokesman said “Our bold changes to the state pension system respond to the demographic changes in society. They will ensure the state pension system is sustainable and affordable for the future.

“We have also taken steps to reform public sector pensions to ensure they are affordable into the future. These include ensuring new entrants to the civil service enjoy a pension based on a career average and a retirement age of 65.”

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The Joseph Rowntree Foundation calculates the cost of living for those living on minimum wage is rising faster than inflation.

It believes the cost for a single household on its low-income budget is up 5.3% this year. Pensioners and couples with children budget rose by 5%. This is primarily thought to be due to higher funds needed for food, fuel and public transport.

A quarter of households are thought to fall below what Rowntree calls the ‘minimum income level’ and the report warns that benefits paid to workers are below minimum income standards.

It does however, show that pensioners getting the full amount of pensioner credit receive enough to meet the minimum income standard.

The group created the baseline measure last year to determine the income people need in order to reach a ‘minimum socially acceptable standard of living’. This includes having ‘what you need to in order to have the opportunities and choice necessary to participate in society’.

These figures come from a survey distributed among the public about expenditure and essentials. The preliminary findings show that, despite the recession, the public still believe the ‘minimum standard of living should allow people in Britain not just to survive, but to play a full part in society.’

Singles & Lone Parents To Suffer

The group also notes that many people are worried that their incomes may not be enough to get them through the economic downturn while still meeting the minimum acceptable standard of living.

It also warns that people losing their jobs will have to survive on half of that minimum standard. On this, the survey showed that the average single person of working age will only receive benefits worth 42% of the minimum income needed. Lone parents with a child could receive 67% of the minimum.

It suggests the national minimum wage would have to be increased by £1 per hour to provide enough money to raise a single-earner household out of relative poverty.

The report attempts to raise debate about the level of what is considered relative poverty in the UK to above the government’s current poverty line of 60%. It also comes as the government prepares legislation to cut child poverty in half by 2020.

The report also suggests that relative poverty is likely to decrease or stabilise this year because of the recessions’ effects.

“This apparently beneficial effect on the poverty figures does not represent a real improvement in the living standards of people on low incomes,” it says. This is due to the cost of living increasing faster than for the average family.

It also says the standard of living could fall if the rate of inflation for those on minimum wage continues to be higher than general inflation rate. But people responding to the survey believe everyone should have access to items that meet key social needs, but there was scaling down when it came to how much should be spent to get these.

What Do You Think?

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