UK Economy Shrinking Faster Than Previously Thought

The Office of National Statistics (ONS) has revealed that the UK economy is shrinking faster than earlier figures. The growth figure for the 1st Quarter of 2009 has been downgraded to -2.4% from the previous -1.9%. Not only is the economy shrinking faster but the ONS has revised 2008 GDP figures to show that the economy started shrinking earlier than previous indications. This means that the UK recession began in Quarter 2, 2008 rather than Quarter 3.

The good news for Chancellor Alistair Darling is that with such poor figures for early 2009, it may well be possible to show that the economy is growing by the time Labour calls the 2010 General Election.

HMRC Wrongly Fines Taxpayers

Britain's tax office, the HMRC, have wrongly fined 20,000 taxpayers for late submission of their 2007-8 tax returns.

UK taxpayers are fined £100 for failing to submit their returns by midnight on 31st January. Due to complaints from professional accountants the HMRC have admitted they have made mistakes. Indeed I am one of the victims. The problem I suspect is that the HMRC's computer systems cannot cope with requirement for taxpayers to make their submission online.

In my own case I tried to submit my return on the evening of 3oth January only to find the system rejected the password the HMRC had supplied me with. The following day an HMRC helpdesk operative got me to try using various browsers and computers without success. As a result of the systems failure I was given an extension. It took more than a week - until 12th February - before the HMRC could confirm that my return had been received.

Shockingly, 3 weeks later I received a letter informing me of my fine for late submission. The HMRC letter was dated 2 weeks prior to my receipt of it. I wrote back next day but have today (12th March 2009) received another letter (dated 5th March 2009) charging me with interest.

My only hope is that the revelation that thousands of taxpayers have been wrongly fined will lead to some form of amnesty.

Marks and Spencer Still Cutting VAT

There's been some debate about the value of the temporary reduction in VAT. Recent reports in the newspapers have even pointed out that some retailers have quietly managed to forget it and have moved prices back to their pre-December levels.

One retailer, however, is still keeping honest. Marks and Spencer. Today, I was cutting through my local branch on the way to the Post Office when I noticed that polo shirts were back in stock. These were labelled at £5 each. I couldn't resist buying one. At the till I presented my £5, only to be given 11p in change. This is just a tad more than the 2.13% reduction the VAT change should have made. Good old Marks and Spencer.

Bank of England Cuts Interest Rates to 0.5%

The Bank of England today cut its minimum lending rate to 0.5%. Another record low, since its foundation in the 17th Century. Given that in that time we've had two Jacobite rebellions, fought two World Wars, seen off Napoleon and built and lost a global empire, the record low interest rate gives a measure of the current crisis. So much for Gordon Brown's claimed ending of the business cycle.

At the same time, the Bank will also pour £75 billion worth of extra currency into the nation's monetary supply. This represents 5.4% of GDP. Poor old Milton Friedman and Sir Alan Walters must be turning in their graves.

The implication for the financial services markets has yet to be assessed. You can still get 3 or 4% on your savings. And very few people are benefiting from super low mortgage rates. Interestingly at this precise time the FTSE is showing a fall of 3.0% against last night's close.

Sir Fred Has Little Prospect of Enjoying His Millions

Poor Sir Fred Goodwin. Sitting smugly up in Scotland contemplating the largesse of English tax payers. Sir Fred has got it all wrong. If he had any sense he would immediately return the £23 million he filched from the tax payer as part of his compromise deal for the greatest financial failure in corporate history. He is finished. He has as much chance of enjoying his retirement as Al Capone. For the rest of his life Fred will be as welcome as a leper. Al Capone made it to 48. Fred is already 50. The UK citizenry have paid him 40p each. They will want their pound of flesh. As the most despised person within the UK he has money but no personal credibility. Don't be surprised if Fred succumbs.

Bankers Pension Row Rumbles On

Six months after being told that the politicians were going to crack down on greedy bankers, the public realise that these same politicians stood by as the bankers helped themselves to more money.

We are gradually finding out that even in failure these superstars of the banking crash were being handed million of £s at the very time the politicians were claiming to be cracking down on city salaries and bonuses. Fred Goodwin of RBS wasn't alone in being heaped with largesse. Fred's £8 million - up to £16 million according to some analysts - pension uplift may be the biggest pension top-up. But out there several more high profile bankers were rewarded with multi-million £ pension pot contributions just to give up their jobs. Jobs that had been done so well that their organisations were driven to record levels of bankruptcy.

The latest character to come to public attention is Peter Cummings. He was head of corporate lending at HBOS. Seems poor Mr. Cummings has to get buy on a pension pot £5.9 million. Now according to reports, much of this pension pot was agreed as a condition of his departure. Who were the idiots that dreamt up such huge rewards for such atrocious performance? Seems the politicians and their civil servants were blinded by the city slickers.

Kent's Hidden Value as House Prices Slide

The Land Registry has published data that confirms that the value of UK housing continues to slide. Land Registry data is based on actual completed transactions and so measures prices slightly behind the Nationwide House Price index, which is based on mortgage approvals. In addition, The Nationwide represents just a sample of UK housing, whilst The Land Registry is a census. Lastly, the Nationwide report used data collected up until the middle of February, whilst the Land Registry's cut-off is 31st January.

Anyhow, according the the report UK house prices fell 15.1% over 12 months, with the average house transaction being £153,753.

At a more current level, I am definitely seeing more "sold" boards in my locality, Kent. Indeed some of these houses have been well above the average as my local postcode has an average transaction value of £450,000. Maybe Kent, and Ashford in particular, is a special case. Compared to the home counties at large, Kent has always represented value for money. Indeed on the basis of drive time and commuting distance from central London, Kent housing represents real value for money.

The environment for Kent house builders is also looking quite positive given the development of its transport links. Last week Ashford International Station saw the reintroduction of its Eurostar Brussels service and an increase in services to Paris. Secondly, and perhaps more importantly, South Eastern Trains have announced the early introduction of the high speed rail service to London St. Pancras. The 36.5 minute service (yes 36.5 minutes) will reduce fstest peak time journey times by 30 minutes. Powered by Japanes Hitachi trains and running on a dedicated high speed line, the new service will mean Ashford is as accessible to the capital as most towns on the M25 belt, whilst it is situated in the lowest densely populated area of the south east. This will make Ashford and the stations connecting to it a magnet for London's highy paid commuters. Prices for homes in the area can only go up - despite the general malaise elsewhere.

House Prices Fall 17.6%

According to the Nationwide House Price Index, UK house prices have fallen by 17.6% in the 12 months to February. The fall during the month amounted to 1.8%. According to the building society average house is now worth £147,746. This is a fall of £31,612 against a year previously.

The Nationwide data conflicts with some of the anecdote emerging from the housing industry, that there has been an upturn in buyer interest. Much of the data suggests that the market has bottomed out and that for buyers with sufficient funds the market represents great value.

The market for housing market is currently hamstrung by the need to raise a much larger deposit than has traditionally been the case. First time buyers have typically entered the market with a deposit of 5 or 10%. However, finance providers have been reluctant to lend on this basis given the risks presented by negative equity.

A more positive sign is that the UK government-owned Northern Rock is back in the lending market. Prior to its demise as an independent business, Northern Rock was famous for its 125% mortgages. This time round, Northern Rock will require a 10% deposit.