UK expats lose pension freeze appeal
About half of UK pensioners overseas are caught by the pensions free
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More than half a million UK pensioners living overseas will continue to have their pensions frozen after a European court decision.
Pensioners who moved to countries such as Australia and Canada only receive the level of pension paid at retirement – which might be only £6 per week.
The European Court of Human Rights rejected an appeal from a group of pensioners by an 11 to 6 majority.
The group wanted to receive increases in line with inflation.
The decision has saved at least £500m a year for the government, which said that its first responsibility was with pensioners living in the UK.
The expatriate pensioners say they have been fighting “tooth and nail” against the UK government in an eight-year court battle.
Pensioners who have moved abroad want their UK state pensions to rise in line with inflation each year.
Inflation-proofing only applies to UK pensioners who live in the European Economic Area or in 15 other countries, but not in some Commonwealth states.
Entitlement
John Markham, a pensioner living in Canada, said: “There is an image of people living well in the sunshine – but there are plenty of cases of real hardship.”
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 The applicants did not contribute to the UK economy, in particular, they paid no UK tax to offset the cost of any increase in the pension  European Court of Human Rights
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He said the decision was the end of the legal road, but they wanted to take the case to the “court of public opinion”.
He told the BBC News website that they would take 48 hours to consider the decision.
The campaigners argue that they paid into the pensions system when they were working and are entitled to the same benefits as those who remained in the UK.
For the oldest overseas pensioners, who retired in the early 1970s, the pension can be as low as £6 a week. Those who retired in the early 1980s are left on about £30 a week, and those who retired in the early 1990s get about £50 a week.
The current basic state pension is £95.25 a week.
‘First priority’
There are more than a million UK pensioners living overseas – with about half of them affected by the pensions freeze.
South Africa resident Annette Carson was among those who started the case
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If pensioners have moved to countries with a reciprocal arrangement – such as in the European Union or the United States – then they receive pension increases.
But if pensioners have emigrated to countries without any such agreement – such as Australia, Canada and South Africa – their pensions have been frozen at the level of when they moved overseas.
The Department for Work and Pensions welcomed the ruling and said the department’s first responsibility was to support pensioners in the UK.
“We note that the court has found in favour of the government. We do not therefore plan to make any changes to the current arrangements, which allow for the exportability and up rating of UK state pensions,” a department spokesman said.
“We will, nonetheless, study the terms of the judgment carefully to ensure that we continue to comply with our obligations under the terms of the European Convention on Human Rights.”
The department has said that pensioners who chose to move to a country without a reciprocal pensions arrangement would have been aware of what it would mean for their state pension.
Link
The case has seen a series of courts reject the arguments of pensioners including Annette Carson, who moved to South Africa in 1990.
After emigrating, she continued to make full contributions to her UK state pension and, on retirement in 2000, began to receive pension payments. But since then, the UK authorities have frozen the level of payments at £67.50 a week.
Judges at the European Court of Human Rights were the latest to declare that National Insurance contributions did not have an “exclusive link” to retirement pensions.
“As non-residents, the applicants did not contribute to the UK economy, in particular, they paid no UK tax to offset the cost of any increase in the pension,” a statement from the court said.
The court said that it was hard to draw any genuine comparison with the position of pensioners living elsewhere.
But Michelle Mitchell, of Age Concern and Help the Aged, said: “This ruling is bad news for half a million pensioners whose only fault is to retire to the ‘wrong’ country in the international ‘postcode lottery’ of pensions up-rating.”
The BBC asked for the public’s views on this story. You can find a selection of comments below, read expats’ stories here or join the debate here.
This is totally unfair. It in effect tells pensioners where they may live. Retired people should have the right to live wherever they choose.
Art Hampton, USA
It’s probably the right decision. People who have chosen to retire outside of the safety net of the UK or those countries with reciprocal agreements have taken a risk not only with potential currency fluctuations but have accepted a stagnant income in the face of decades of inflation. I feel sorry for those who face genuine hardship but the UK has enough to worry about without throwing £2.5 billion at citizens who abandoned her shores and no longer make any contribution to her economy.
Mark, Bath, UK
Again we the pensioners have been duped – no increase in pension and no health assistance. The big question could be if all the pensioners decided to return to the UK what would the cost be to the government? Not £500 million per year but possibly five times that including health costs.
John Leighton, Braslia DF Brazil
I have an English born great aunt who moved to South Africa as a child. She lived there until retirement age, paying absolutely nothing into the UK economy whatsoever for more than 50 years. After reaching retirement age she relocated back to the UK. Now she receives a full state pension, housing and council tax benefits and all other assistance as provided by the government. Although she is family, how can it be right that those who spent their working lives paying into and benefitting the tax system and the wider economy be entitled to less of a pension than someone who only came back to this country to claim what they may be entitled to, but are certainly not deserving of? The money that people like my great aunt claim should be reallocated to those who have paid their dues, regardless of where they decide to spend their retirement.
Anon, Nottingham, UK
“The campaigners argue that they paid into the pensions system when they were working” and what they paid in was immediately paid out again! When are people going to stop trotting this non-argument out? NI is not a bank or an investment fund. What I pay NOW is used to fund pensions NOW. When I retire, I will be funded, in turn, by those paying in at the time. As far as I know, the only relevance that my payments have is in the proportion of the pension I will eventually be entitled to receive.
Mike, Wisbech, UK
The European ruling is a start, maybe now we can move to a position where if you leave this country, you thereby give up your right to any state pension whatsoever! When the original calculations were done it was assumed that the pension money would be spent in this country and benefit everyone.
James Strachan, Peterhead, UK
I have been paying voluntary NI contributions for some nine years while living in Japan, so that I can receive a full state pension when I retire – irrespective of where I may be living. The argument that we expats do not deserve index-linked pensions because we do not pay UK tax is flawed. We do not send our children to state schools in the UK, benefit from UK law and order, drive on UK roads, claim any form of UK benefit etc. I want to also point out that unlike our pensions, our voluntary NI contributions DO increase with inflation.
David James, Kyoto, Japan
Viewpoint: GDP data
26 April 2012
Last updated at 19:00 ET
The UK economy has slipped back into recession, according to official figures released this week. They are an early estimate and highly likely to change. But the size and frequency of past revisions may have implications for economic policy, argues economist Richard Jeffrey from Cazenove Capital:
The latest UK GDP data clearly caught economists and commentators off guard.
Rather than showing an increase in activity of the expected 0.1% in the first quarter, they showed a decline of 0.2%.
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The implication is that the data just published will eventually prove at best highly misleading and at worst plain wrong ”
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Richard Jeffrey
Chief investment officer, Cazenove Capital
In reality, the difference between the predicted number and the outturn was relatively small.
However, the different sign, the minus rather than the expected plus, triggered a swathe of recession headlines across the press and other news media.
The so-called technical definition of a recession is two consecutive quarterly declines in GDP.
So, following a fall of 0.3% in the final quarter of 2011, that is what we have just had – or is it?
How reliable are the numbers that are first published by the Office for National Statistics?
The answer is: not very; they are based on limited information and can be (and normally are) subject to heavy revision.
Conflict of evidence
The reason that people were surprised by the latest numbers is that they seemed to conflict with other evidence of the current state of the economy.
Both independent surveys of activity and some of the ONS’s own data have been suggesting that the economy actually gained a little momentum in the first three months of the year.
Before we get too carried away, growth remains far below the pre-recession rates.
Nonetheless, indicators such as retail sales and trends in the labour market, imply that the economy is beginning to make progress.
Huge changes
I have been collating GDP data published by the ONS for over 20 years.
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“The preliminary estimate of GDP is produced due to user demand for an early estimate for the output of the economy… [It] has proven to be a good short-term indicator of the economy”
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Office for National Statistics
One comparison I make is between the growth estimate first published with the current estimate.
It can take quite a long time for revisions to come through, but eventually, they can be huge.
For instance, the first estimate of GDP for the second quarter of 2008 showed an increase of 0.2%. The current estimate for the same quarter shows -1.3%.
In contrast, the initially published growth estimate for the third quarter of 2009 revealed a decline in GDP of 0.4%, but now the ONS tells us there was actually an increase of 0.2%.
Taking a slightly longer-term view, the average absolute revision (i.e. ignoring the +/- sign) since Q1 2005 has been 0.4% (higher than the average growth rate, itself) – and that includes the most recent year or so, for which the revisions process has hardly started.
Different patterns
The implication is that the data just published will eventually prove at best highly misleading and at worst plain wrong.
The ONS says many revisions are very small
And it is not just that the data is revised, it is also that the pattern of the cycle actually changes.
So, prior to the recession, the economy was growing significantly faster than thought at the time, but then nosedived more steeply.
We also came out of recession earlier than thought.
Analysis of estimated year-on-year changes show similar problems with revisions.
As a ‘for instance’, the first estimate of full-year GDP for 1992 suggested that the economy contracted by 0.5%.
Currently published data suggests that it grew fractionally (+0.1%).
Implications
This is not just a statistical nicety – policy is based on growth estimates that may bear very little relation to reality.
Looking back, I believe it is possible that the path of interest rates in the period prior to the recession might have been significantly different, had we known the ‘true’ strength of the economy during certain years.
While we cannot be sure, this might have prevented some of the build-up in debt we saw during this period – a problem that is still weighing so heavily on economic activity today.
The ONS replies:
The preliminary estimate of GDP is produced due to user demand for an early estimate for the output of the economy.
At this point over 40% of total output is available, which has proven to be a good short-term indicator of the economy.
Since quarter one of 2007 the average revision between the first and third estimate of GDP has been -0.02 percentage points, with 15 of the 20 quarters only revised between +/- 0.1 percentage points.
As more data become available, methodological improvements are implemented and the three approaches to GDP – output, income and expenditure – are fully balanced, further revisions can occur.
However, when looking back over the last 20 quarters, between the first and most recent estimates, the absolute revision (that is, ignoring the +/- sign) is still only 0.4 percentage points.
Richard Jeffrey is chief investment officer at Cazenove Capital. He is an economist and strategist with 30 years investment experience.
The opinions expressed are those of the author and are not held by the BBC unless specifically stated. The material is for general information only and does not constitute investment, tax, legal or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Links to external sites are for information only and do not constitute endorsement. Always obtain independent, professional advice for your own particular situation.
Article source: http://www.bbc.co.uk/news/business-17854550#sa-ns_mchannel=rss&ns_source=PublicRSS20-sa
Costing less to see your garden grow
17 April 2012
Last updated at 08:43 ET
Lavender is proving popular as gardeners face a summer with a hosepipe ban
Gardeners across parts of England are putting away hosepipes as a ban begins ahead of a long, dry summer.
But while horticultural enthusiasts are trying to create more with less water, new figures suggest that costs are down for people who like watching their garden grow.
Inflation data, which charts the cost of living, shows that recreation and culture is the only sector in which prices were lower in March than they were a year earlier.
Within this sector, the Office for National Statistics (ONS) recorded a 2.6% fall in the cost of gardens, plants and flowers over the same period.
So, is mowing and potting on a Sunday the new way to save money?
Price competition
Guy Barter, chief horticultural adviser for the Royal Horticultural Society, says he is surprised by the figures.
Some of the raw materials for gardening have actually increased in cost
The exchange rate may have been favourable for some suppliers buying plants from overseas. However, peat and other materials used for potting, have increased in price recently, he says.
Meanwhile, fertiliser has soared in price in recent years and plastics used in greenhouses have become more expensive.
All of this is the result of the rising cost of oil – which has kept on pushing up transport costs in the wider economy, increasing frustration for drivers.
Instead, price promotions by retailers in an “intensely competitive market” have pushed down costs for gardeners, according to Mr Barter.
“A lot of places such as DIY superstores rely on a large volume of customers. They make very little per plant,” he says.
The competition has become keener, because there is a market of enthusiastic – but strictly amateur – gardeners to target.
Mr Barter says that last summer offered adequate rainfall and was followed by a mild winter and spring. This has encouraged people to get out on to their lawns and borders and visit garden centres and nurseries.
He adds that these retailers have also improved their game, creating shops that are much more of a family destination at the weekend, complete with coffee shops and restaurants.
Snap unhappy
A glance at the inflation data gives another clue as to why families might be paying more attention to their garden.
Cameras have dropped in price as retailers face a saturated market
Over the 12 months to March, only the cost of housing and household services has grown at a faster rate than food and non-alcoholic drinks.
Vegetables have gone up in price by 4.2% over the same period, pushing some people to try to grow their own and save on the family budget.
It is not just green-fingered families who are seeing the benefit of a fall in prices.
The ONS points out that there is pressure on retailers to attract consumers’ discretionary spending.
The biggest price falls in the recreation and culture sector over the past year were actually found among audio-visual equipment and related products, the UK inflation data from the ONS shows.
For example, the cost of photographic, cinematographic and optical equipment fell by 31.5% in the 12 months to March.
Discounting
Zhelya Dancheva, an analyst with GfK Retail and Technology, says that the prices of standard compact cameras have dropped sharply to typically just more than £80.
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“Demand has been declining, so there are lots of price promotions and discounting to try to attract more consumers,” she says.
Primarily, these cameras have suffered because many people simply use their smartphones to take pictures instead of buying a new camera.
Also, the vast majority of households already own one of these cameras, so retailers are chasing a relatively small replacement market, she says.
These retailers are concentrating on growth in more advanced cameras with stronger zooms, as people may buy a camera with facilities their phone cannot match.
Hanging baskets
Back in the garden, Mr Barter says that hard-pressed families are budgeting their water too, owing to the drought conditions in parts of England.
Geraniums have been near the top of gardeners’ shopping lists, an expert says
The hosepipe ban means the lack of opportunity to water plants has been top of the agenda during the Royal Horticultural Society’s National Gardening Week, which is in full swing.
Mr Barter says this has led to demand among gardeners for robust plants, such as lavender and rosemary.
Meanwhile, bedding plants and geraniums have been top of the shopping list for many enthusiasts, as have climbers – the intriguingly named Black-eyed Susan is proving popular.
But, even if prices have dropped, the rising cost of living in general means most families are very unlikely to be going on a spending spree that would allow the UK economy to bloom.
Article source: http://www.bbc.co.uk/news/business-17740841#sa-ns_mchannel=rss&ns_source=PublicRSS20-sa
VIDEO: Flanders explains GDP figure
The UK economy has slipped back into recession.
The latest output figures show there was a fall in growth of 0.2% between January and March 2012.
That follows a contraction of 0.3% in the last three months of 2011.
The BBC’s Economics Editor, Stephanie Flanders said, “We are in unknown territory; it’s worse than the ’20s and worse than the 1930′s”.
Article source: http://www.bbc.co.uk/news/business-17838653#sa-ns_mchannel=rss&ns_source=PublicRSS20-sa
VIDEO: Balls: ‘Osborne ignored our warning’
The UK has fallen back into recession after the economy shrank for the second quarter in a row between January and March.
A sharp fall in construction output was behind the surprise 0.2% contraction, the Office for National Statistics said.
The shadow chancellor, Ed Balls, told the BBC that George Osborne had “ignored our warnings” and that “this recession was made in Downing Street”.
Article source: http://www.bbc.co.uk/news/business-17841683#sa-ns_mchannel=rss&ns_source=PublicRSS20-sa
VIDEO: Osborne: Recession ‘disappointing’
The UK has fallen back into recession as the economy shrank by 0.2% between January and March.
A sharp fall in construction output was behind the surprise contraction, the Office for National Statistics said.
The Chancellor, George Osborne, said the figures were “disappointing” and blamed both the European crisis and Britain’s spending in the “good years”.
Article source: http://www.bbc.co.uk/news/business-17838652#sa-ns_mchannel=rss&ns_source=PublicRSS20-sa
Economy tracker: Unemployment
24 April 2012
Last updated at 13:18 ET
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Claimant count – December 2011
Latest news:
UK unemployment fell by 35,000 to 2.65 million in the three months to February, the first fall in almost a year.
The official figures, compiled by the Office for National Statistics, showed that the jobless rate was 8.3%, down from a 12-year high of 8.4% in the previous three-month period.
The claimant count – the number of people claiming Jobseeker’s Allowance – increased by 3,600 to 1.61 million in March.
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Understanding unemployment:
- A person is classed as unemployed if they are not only out of work, but also actively looking for work and available to start work within a fortnight
- Unemployment figures are based on a survey carried out by the Office for National Statistics. They show the average number of people unemployed over a three-month period
- A new survey is done every month, but comparisons are made between separate three-month periods, not overlapping ones. e.g. April-June v Jan-March, not April-June v March-May
- The ONS also publishes the claimant count which shows the number of people receiving Jobseeker’s Allowance (JSA) in a particular month. That figure comes from information supplied by the Department for Work and Pensions
- The unemployment figure is higher than the claimant count as many jobseekers do not or cannot claim JSA
- The two main measures can sometimes move in different directions. A change in benefits rules moving people onto JSA from another benefit, for example, would increase the claimant count without a corresponding increase in unemployment.
Background:
Unemployment is referred to as a lagging indicator because businesses will often delay laying people off as long as they can in difficult times.
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A few months after the start of the recession in 2008, unemployment started to rise sharply. When the global financial crisis hit, the unemployment rate was a little over 5% or 1.6 million.
Towards the end of 2009, with the UK coming out of its severest recession since the 1950s, it was almost a million higher at 2.5 million, or 8%.
Since then firms have continued to lay off staff as the recovery has faltered. Unemployment peaked at almost 2.7 million at the end of 2011, its highest level for 17 years.
The number of 16-24 year olds looking for work has topped one million, or more than 22% of the workforce. Excluding those in full-time education, the figure is closer to 20%.
The number of unemployed women has also hit a record in recent months, even as male joblessness has begun to dip. Economists says this mostly reflects the greater number of women in the workforce, but there are concerns about the impact of public sector cuts, where a higher proportion of jobs are done by women.
Unemployment began to level off towards the end of 2011, and the beginning of 2012 saw the first fall in almost a year. The overall number of people in employment has been going up, as has the number working in the private sector.
For some this is a positive sign of economic recovery. For others it is tied to the higher numbers of people working part-time, with record numbers only doing so because they cannot find a full-time job.
Article source: http://www.bbc.co.uk/news/10604117#sa-ns_mchannel=rss&ns_source=PublicRSS20-sa
Economy in double-dip recession
25 April 2012
Last updated at 07:30 ET
The UK economy has returned to recession, after shrinking by 0.2% in the first three months of 2012.
A sharp fall in construction output was behind the surprise contraction, the Office for National Statistics said.
A recession is defined as two consecutive quarters of contraction. The economy shrank by 0.3% in the fourth quarter of 2011.
BBC economics editor Stephanie Flanders says it “adds to the picture that the economy is bumping along the bottom”.
She said economic output was slightly smaller now than it was in the autumn of 2010.
Wednesday’s figure is an early estimate and is subject to at least two further revisions in the coming months. It is compiled using 40% of the data gathered for later revisions.
The UK economy was last in recession in 2009.
‘Catastrophic’
Prime Minister David Cameron said the figures were “very, very disappointing”.
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Ed Miliband: “Arrogant, posh boys just don’t get it”
“I don’t seek to excuse them, I don’t seek to try to explain them away,” he said at Prime Minister’s Questions.
“There is no complacency at all in this government in dealing with what is a very tough situation, which frankly has just got tougher.”
He said it was “painstaking, difficult” work, but the government would stick with its plans and do “everything we can” to generate growth.
Labour leader Ed Miliband said the figures were “catastrophic” and asked Mr Cameron what his excuse was.
“This is a recession made by him and the chancellor in Downing Street. It is his catastrophic economic policy that has landed us back in recession,” Mr Miliband said.
Construction questions
The ONS said output of the production industries decreased by 0.4%, construction decreased by 3% and output of the service sector increased by 0.1%.
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These figures are slightly worse than many expected, but the fact that the UK is now technically back in recession should not detract from the underlying reality, which is very much as predicted.
The UK economy has been bumping along the bottom for more than a year and is still struggling to gain momentum.
Many have questioned the dire numbers for the construction sector, which accounts for less than 7% of the economy, but has done much to pull the GDP figure into negative territory.
The sharp fall in output from the production sector is also at odds with recent business surveys (though manufacturing has not fallen as the sector overall).
However, this preliminary figure is consistent with the message coming from official and private data – that the UK was once again relying heavily on services and consumption by households. That suggests the recovery will continue to be weak, though whether we will see further quarters of negative growth is very much an open question.
- Read more from Stephanie
- QA: What is GDP?
It added that a fall in public sector investment had contributed to the particularly large fall in the construction sector.
Some have questioned the validity of the ONS’s figures, particularly on the construction industry, which has been volatile in recent quarters.
But Joe Grice, chief economic adviser to the ONS, said the construction data was based on a survey of 8,000 companies and had been carefully checked and double checked.
The latest figures supported the view that the economy had been “flattish” in the past few quarters, he added.
Over the last year and a half, the economy has fluctuated between quarters of growth and contraction.
Bank of England governor Mervyn King has previously warned that the economy will continue to “zig zag” this year.
He had forecast growth in the first quarter but then a contraction in the second quarter, when the extra bank holiday for the Queen’s Diamond Jubilee is expected to reduce output.
Shortly after the ONS data was released, the pound fell half a cent against the dollar to $1.6093, and half a cent against the euro to 1.2184 euros.
‘At odds’
“It is clearly not good news, the missing link in the economy has been confidence,” said Graeme Leach, chief economist at the Institute of Directors.
“These are relatively small falls, so we shouldn’t be too alarmist.
“[But] regardless of the figures, it is the message that comes out to business – to be cautious – exactly when we want them to be a little more aggressive in terms of recruitment and investment.”
However, some pointed to other recent business surveys, which painted a more positive picture of the economy.
“These figures are at odds with the experiences of many UK businesses, which continue to operate with guarded optimism,” said David Kern, chief economist at the British Chambers of Commerce.
He added that he expected the preliminary estimate to be revised upwards when more information became available.
The estimate for construction output is based on published data for the first two months of the quarter, and an estimation for the third month.
But the ONS pointed out that, while there was “a tendency for upward revisions” to construction, March would need to be “exceptionally strong” in the construction sector to produce growth in the quarter.
The first estimate of GDP for the last three months of 2011 showed a contraction of 0.2%, which was later revised to a contraction of 0.3%.
Article source: http://www.bbc.co.uk/news/business-17836624#sa-ns_mchannel=rss&ns_source=PublicRSS20-sa
Government hits borrowing target
24 April 2012
Last updated at 06:27 ET
The government met its borrowing target for the 2011-12 financial year
The UK government borrowed more than expected in March, official figures have shown, but still met its borrowing target for the year.
Public sector net borrowing, excluding interventions such as bank bail-outs, came in at £18.2bn in March, the Office for National Statistics (ONS) said.
However, previous months’ borrowing was revised down, meaning the government met its target of £126bn for the year.
On Wednesday, figures will show how the economy performed in the first quarter.
They will show whether or not the UK economy is in recession, defined as two consecutive quarters of contraction.
The economy shrank by 0.3% in the last quarter of 2011.
The annual borrowing figure marked a reduction of almost £11bn on the £136.8bn borrowed in 2010-11.
Tax increases, such as the rise in VAT from 17.5% to 20%, and government spending cuts were the main reasons behind the reduction over the year.
The government is aiming to eliminate the deficit by 2016-17. A Treasury spokesman said: “This shows that the government’s plan to reduce the budget deficit is working.”
But Labour Treasury spokeswoman Rachel Reeves said: “These figures show that last year George Osborne borrowed £9bn more than he planned to at the time of his spending review.”
‘Sigh of relief’
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Analysis
The Treasury was quick off the mark with interpretation of today’s higher-than-expected borrowing figures.
Officials pointed out that the data still brought the deficit for the full financial year in line with the £126bn forecast.
But eyebrows were raised in the markets at the scale of March’s borrowing, higher than the same month last year.
The low growth outlook for this year is unlikely to help the task of deficit reduction. And with total government debt back above £1 trillion, these are still challenging times for the chancellor.
Most analysts had expected borrowing of about £16bn in March.
But the higher figure of £18.2bn was more than offset by a £3bn downward revision to February’s data.
Borrowing for the period from April 2011 to January 2012 was also revised up by £800m.
The ONS said in its latest release that most of the revisions were driven by changes to central government data.
This included a £1.1bn upward revision to income tax by HM Revenue and Customs, consisting of repayments and recoveries relating to the introduction of a new PAYE computer system in June 2009.
Net debt, excluding the effect of government interventions, topped £1 trillion, the equivalent of 66% of gross domestic product.
Adam Chester, UK economist at Lloyds, told the BBC there would be “a small sigh of relief” at the Treasury.
But he added that the longer-term worry was that if market sentiment changed, the UK could see a “vicious” upward change in government bond yields which could increase the cost of borrowing.
These figures were backward-looking, he said, whereas the market was more concerned with how the economy performed in the future.
Tom Vosa from National Australia Bank agreed.
“The issue going forward is if growth remains weaker, which we believe it will do, than the OBR (Office for Budget Responsibility) forecasts, then how much further progress will the government make in consolidating finances?” he said.
Article source: http://www.bbc.co.uk/news/business-17822387#sa-ns_mchannel=rss&ns_source=PublicRSS20-sa
Economy tracker: GDP
24 April 2012
Last updated at 13:12 ET
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BBC’s Declan Curry explains just what GDP stands for and why we should care
The UK economy shrank by 0.3% in the last three months of 2011 (known as the fourth quarter), according to figures compiled by the Office for National Statistics.
It was the largest fall for a year and marked the continuation of an uncertain period in which the economy has zig-zagged between growth and contraction every three months since the middle of 2010.
Across the whole of 2011, the economy grew by 0.7%.
The figures also showed a fall in disposable incomes. Households now have on average 0.3% less to spend than a year earlier, largely because pay rises have been overtaken by higher taxes.
Understanding GDP:
- Gross domestic product is a measure of a country’s economic activity, namely of all the services and goods produced in a year
- It is based on a huge survey of businesses and government departments compiled by the Office for National Statistics
- An economy is generally considered to be in recession if it has contracted for two consecutive quarters
- The first figures for any quarter are known as the “flash estimate” as they are based on incomplete data. The figures is revised at least twice as more information is collected
Background:
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After 1992, the UK economy and average household incomes enjoyed a period of unbroken growth.
But in 2008, the global financial crisis plunged the UK into its longest and deepest recession since comparable records began in the 1950s.
More than a million people lost their jobs as businesses – from shops to manufacturers and banks – either closed or laid off staff.
Consumer spending had been rising in the years leading up to the crisis thanks to a buoyant housing market and cheap and easy credit.
But the credit crunch and job fears meant consumers cut spending, deciding to pay off debt and save instead.
A fall in demand at home, and from abroad, hit businesses. They also found that borrowing from banks – which most rely on – was harder or more expensive.
The recession ended in the middle of 2009, as the economy began to grow. But economists say the UK has not experienced a bounce-back as big as the ones seen after the recessions in the 1980s and 1990s.
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Over the past year, sluggish growth has been interspersed with quarters of mild contraction. This is expected to continue in 2012 in what the Bank of England has described as a “zig-zag” path to recovery.
It has been estimated that the output of the economy is now 10% smaller as a result of the recession and its aftermath.
Some surveys of businesses indicate they are expecting a brighter 2012, but consumer confidence is still weak, the ONS pointed out in its most recent commentary. on the economy.
This is because unemployment has worsened and wages have failed to keep up with rising prices over the past couple of years, putting a squeeze on household incomes.
Article source: http://www.bbc.co.uk/news/10613201#sa-ns_mchannel=rss&ns_source=PublicRSS20-sa
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