Friday, 15 February 2013

Banks not giving adequate investment advice, says FSA

The Financial Services Authority has released a press statement about the quality of investment advice given by UK High Street banks.

It  has been reported that the FSA claims that Banks are not giving adequate investment advice. However if you actually read the details of the research it appears that the opposite is true.

75% of the mystery shoppers were given good advice and only 25% were given advice rated as not adequate but out of that only 11% received advice described as bad.

So 90% of customers were not receiving bad advice - surely that is a good situation and a relative success were 90% of customers advice was not bad can be reported as "Banks not giving good avice" which seems to be the opposite of the actual findings!

Sunday, 3 February 2013

UK Debt Deficit Budget Explained in Real Money

How does the UK Budget and Deficit Compare to an Household's Income and Spending?

The numbers for the UK economy and budget deficit are huge but do we really understand what a billion pounds is? How does a £10 billion compare to anything else? Maybe equating the numbers to a household budget would make them more understandable.

The 2012 UK Government Budget

  • UK Income (Taxes)  Total:  £589 billion 
  • UK Spending Total :            £710 billion (2011 = £691bn, 2010=£669bn)
  • Outstanding Debt:                £1040 billion

Key number Spending minus income is £99 billion - so we are spending £99 billion more than we get in

Lets try that with more manageable numbers that are more comparable to a family income:

If the UK Government was a family their income and spending would be:

Income £30,000

Spending £36,000

So this year the government "family" would be running up an overdraft or credit card debt by spending £6000 more than they earnt every year. Yet that isn't the end of the story. The family also has outstanding debt of £52,000 on their overdraft and credit cards, nearly double their annual salary and rather than paying down their outstanding debts it is increasing by 10% a year.

Even back in Victorian days Charles Dickens remarked on managing budgets:

Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.

Spending more than you earn is not sustainable and has to be dealt with sooner or later!

Saturday, 2 February 2013

Greece vs UK Austerity Compared

The IMF have recently said that austerity in Britain was too much and that cuts should be reduced to promote growth. This is the same IMF that have imposed budget cuts on Greece that have led to a recession and contraction of over 25% of GDP in the last 5 years with a current year drop of 7%.

Yet the UK is around the 0% growth mark with budget deficit of over £100 billion and debt growing past the £1000 billion level.

How can UK austerity be considered too harsh by the IMF in those circumstances when Greece is inflicted with far worse cuts by the IMF themselves.