Tuesday 23rd September 2008
by Bob Bardsley
Know Your Money Editor
Alistair Darling may have come under fire recently for painting a bleak picture of the UK economy, but he is standing by his assertions. In this week's presentation to the Labour Party conference in Manchester, he told delegates: "It's my job to be realistic." He went on to say that "times are hard" but that there remain elements of the economy to view in a positive light. Even where conditions are worsening, he suggested that things are still not as bad as they have been in the past.
For many people though, relatively high inflation on key items such as food and fuel, coupled with rising unemployment, could make the chancellor's comments sound hollow. So just where are those silver linings of which he spoke and what action is the government taking to make sure that the cloud of the credit crunch itself does not rain on the UK's ten-year parade of positive economic growth?
Energy bills
One of the issues making headlines recently has been energy bills - while in previous years only eco-conscious Brits may have seen the need to reduce energy consumption, now many households are tackling their usage as a cost-cutting exercise. Chancellor Darling commented on the potential for the UK to become a low-carbon nation as part of an ongoing commitment to cutting energy consumption, as well as the more immediate measures the government is taking to help out the worst-hit families.
In the long term, he claimed that authorities are helping households to improve their energy efficiency, meaning winter heating costs may be lowered. The energy industry regulator offers a range of advice for consumers looking to do so - including the option of calling the Home Heat Helpline on 0800 336699. This can give guidance on issues such as obtaining grants for energy efficiency home improvements, as well as paying providers by alternative methods which could prove more effective.
On a more immediate basis, the chancellor noted that the Winter Fuel Allowance - which pays out to vulnerable households - has been boosted in 2008 to help cover more of the cost of heating a home. Elsewhere in the fuel market, duty on petrol has been frozen, he added, which could mean driving costs are a little more consistent unless the petrol retailers put their prices up at the pumps.
Tax needn't be taxing
The government's assertion that "tax needn't be taxing" could be taking on a new meaning as the chancellor pointed out the ways in which the government is relieving the tax burden faced by many Britons. In terms of income tax, the abolition of the 10p rate has been backtracked in the form of six months of rebates for those impacted by its removal.
As previously announced, this means a one-off payment of £60 in low-paid workers' September or October pay packet, followed by six monthly instalments of £10 starting from October. By the end of the process, the government claims that the average £120 lost by those affected by the tax band's removal should have been paid back in full.
Meanwhile, the stamp duty threshold has been increased to £175,000 for 12 months, up from its previous cut-off of £125,000. This means that anyone buying property within the £50,000 range can now avoid paying the property tax completely, with September 2009 the intended date for it to default back to the earlier level.
What else is wrong?
It's not all sunshine and roses - the chancellor did mention some areas where direct action may still not be taken, but stressed that conditions are still favourable in historical terms. Employment levels were among these, where he conceded that unemployment has begun to increase following turbulence throughout the UK economy. "We still have near-record numbers of people in work," he commented, using the conference's setting of Manchester as an example of where regeneration has resulted in an increased number of jobs available to the local workforce.
On inflation, he admitted that the current rate is "too high". But again he looked to recent years as an indicator of the long-term strength of the economy, claiming that the rate has been comparatively low over the past decade and is expected by the Bank of England to peak within the next year or so and begin to fall back towards its previous levels.
He stressed too that the credit crunch has "not been the only shock" to the global economy as a number of commodities have continued to rise in price worldwide, coupled with 40 per cent increases in agricultural costs and a 160 per cent hike in wholesale gas. In light of the widespread effects of international trade, he asserted that individual governments can no longer be expected to tackle issues - but that a time for worldwide collaboration may be upon us.
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