Property Rescue Blog

The Treasury has announced big spending plans to reinvigorate the economy.  A total of £12.5 billion is said to be on its way to consumers but the question on everyone’s lips is, will it work?

The Chancellor, Alistair Darling, has announced that VAT will fall from 17.5% to 15% with effect from 1 December 2008.  This short notice has sent politicians and businesses into a spin (and doubtless caused a few headaches at HM Revenue & Customs too!) due to the changes that will need to be put in place when the new rate comes into force next Monday.  The 15% rate will mean that we can buy goods that would have cost £550 for just over £538.  Remember, this applies only to goods that are subject to VAT in the first place.  Goods that are zero VAT rated or rated in a lower band will remain unaffected by these changes.

There is no question that shoppers are feeling the pinch.  In fact ‘pinch’ may be an appropriate word as media reports show a rise in shop-lifting.  Some towns and cities are claiming that theft from stores is up by a quarter and it’s not the luxury goods that are disappearing; it’s everyday basics that people need but feel they can’t afford.  So will an approximate £12 reduction in a bill of £550 make much difference?  That’s just £2.50 in every £100 spent on goods carrying full rate VAT – hardly enough to get excited about.

There is also to be a new higher rate tax band for big earners, whilst those earning less than £20,000 will see National Insurance contributions cut.  However, the vast majority of people earning an average wage will have to pay 0.5% more NI in the next financial year – enough to cancel out the VAT decrease one would have assumed!  There are some other measures that will make life easier for a minority of the population but for the average ‘man on the street’ it is hard to find much cheer in the pre-budget speech, especially after such a big build-up. 

Bank lending restrictions, the short supply of mortgages and falling house prices seem much more significant in the current climate.  Mervyn King, Governor of the Bank of England, has this week hinted that the government may need to force banks to start lending again if the situation is to get any better.  Many lenders are demanding 25% deposits before they will grant mortgages and although property prices are dropping, that’s a level well beyond the reach of many first time buyers.

The VAT reduction may be welcome news in so far as it goes, but whilst house prices are coming down and the recession starts to bite, people will feel worse off and that will affect their spending patterns on the High Street. 

For families who are struggling, the pre-budget report is unlikely to bring about substantial changes to their circumstances.  If you are in danger of losing your home through repossession, talk to Property Rescue about their sell and rent back scheme.  Selling to Property Rescue would allow you to stay in your home as a tenant and get rid of the repossession threat hanging over you. 

There are many people trying hard to balance the books and stay on the right side of their bank and/or lender, but sometimes that simply isn’t possible.  Don’t let repossession ruin your life – talk to Property Rescue in complete confidence and without any obligation.