Feeling ‘strapped for cash’
The news that 40% of households have experienced deteriorating personal finances doesn’t really come as a big surprise.
Almost everyone I know has been tightening their belts recently and trying to be just a bit more careful about how they spend their money.
Retired relatives with fixed incomes based on their pensions are suffering from the rising costs of food, fuel and home energy and yet their savings accounts are only paying low levels of interest.
So their wealth is being eroded by inflation as the cost of living soars.
Even my wealthiest friends are feeling the pinch. Those whose bonuses are based on shares and options have watched in horror as the recent stock market falls have torn chunks from their net worth.
Their savings are also being eroded by the demon otherwise known as inflation.
If you have young, but rapidly growing children, as we have then you know how much they eat and how quickly they grow out of their perfectly good clothes and school uniforms.
A trip to the supermarket is more expensive each week, no matter how carefully you shop.
So most people appear to be struggling a bit. Consumer confidence is low, given the turmoil in Europe and the UK and USA debt mountains. Property prices, that long held dinner party topic of conversation, are also stagnating, or even falling.
As a result we don’t “splash the cash” quite as much as we used to and collectively that attitude across the UK population can harm the economy, at a time when it is also in the doldrums.
If we are not careful we will sleep walk into that much predicted “double dip recession” and this time it will be harder for the government to bail out the economy as interest rates cannot go much lower and printing money would only result in yet more billions of national debt.
I blame the rise in VAT for a significant factor in the boost in inflation. It was only 2.5% more, but that means additional costs for transporting everything we, as a nation, consume.
So everything costs more and it all adds up significantly, particularly when you factor in the higher costs of oil and income tax hikes.
It would be a good move for the government to put VAT back down to 17.5% at the end of this year.
OK they lose income from falling VAT receipts, but they will gain from greater consumer spending and economic activity which boosts other taxes across the economy.
I bet the government doesn’t reduce VAT though. What do you think?