This is Money Blog

Web Week: Parents rush for tax rebate

Every penny counts. And now the recession is official our readers are keen to recoup money in any way – especially if it’s from the Government.

The most read story, by a very long way, was a deadline warning for thousands of parents to claim Children's Tax Credit Relief. It could pay as much as £1,049, but disappears for good in less than a week (January 31).

Pensioners should push for their own rebate with a 'con' on pension credits. The State assumes pensioners receive 10 per cent interest on savings when means-tested credits are calculated. With the base rate at 1.5 per cent, savers earn nothing like that. A pensioner with £16,000 tucked away could be losing £850 a year from this error. Pension credits have long been unpopular with our readers.  Danny from Essex wrote: ‘Gordon Brown can dole out hundreds of millions to his banker buddies to protect their jobs…but he is too mean to increase the state pension to a living level!’ Have your say at thisismoney.co.uk/pension-credits.

Following last week’s bank bailout II and the descent of RBS to penny status, we also explored the impact of a multiple banking failure on public finances and the UK’s £50,000 savings compensation guarantee. Despite assurances that bankrupt Britain remains an unlikely scenario, readers have learned to expect the unexpected in this crisis: our poll showed only 16 per cent still have total faith in the UK savings guarantee.

- Andrew Oxlade, Editor, This is Money

Most read stories of the past week...
1. Childrens Tax Credit Relief: How to claim
2. Pensions credit 'con' punishes 550,000
3. Banks shares crash on RBS £28bn loss
4. Financial crisis: The impact on UK banks
5. 'Sterling finished' claim after 6 cent slump
6. New £200bn bailout for UK banks
7. Peter Oborne: We're a nation on the brink of going bankrupt
8. How to escape the big savings trap...
9. Lloyds down 31% amid taxpayer stake threat
10. UK officially enters recession as GDP falls 1.5%

'We're talking ourselves into recession'

In a week where sterling fell 10 per cent against the dollar and UK shares sank to a fresh five-year low, one question dominated - are we in recession?

Technically, no - that would require two consecutive quarters of the economy shrinking. It was static between March and June and then shrank 0.5 per cent between July and September.

But forget the technicalities, Gordon Brown, dubbed ‘Crash Gordon’ on our forums, and Bank of England governor Mervyn King now expect recession and most economists think we’re already in one. So the real question is, how deep will it be?

And that, folks, is down to you. Rates will be slashed, probably to 2.5 per cent next year, to make debt cheaper and encourage spending. But Britons may wisely prefer to pay down mortgages and credit cards or boost savings.

Our polls show only five per cent of readers plan to spend more next year while 85 per cent think Britain is already in recession and 91 per cent expect it to last until 2010.

‘John L’ from Manchester dreamt of retiring to Devon before his investments crashed from £70,000 to £35,000 and he was stuck with an unwanted property. He understands none of this was his fault. He also understands the delicate situation: ‘I think the world has talked itself into this problem.’

It's a fair bet John will spend less. And the less John – and you - spends, the longer the recession. No pressure.

- Andrew Oxlade, Editor, This is Money
(A version of this post also appears in the Mail on Sunday as Web Week and aims to reflect readers' views)

Most popular articles published in the past week

1. No guarantee of Icesave cash by Christmas
2. House prices 'heading for 35% drop'
3. Pound and shares plunge as Brown admits recession 'likely'
4. Where are the experts investing now?
5. Sterling's beauty contest with ugly sisters dollar and euro
6. Five ways to save £2,000 in just one week
7. Two million face trap of negative equity
8. £125bn black hole: Public borrowing to rocket as tax receipts plunge
9. ING in £7bn Dutch bailout
10. Midas: So little choice over Santander

Web week: We're now all losers in the crisis

Last week, the banking crisis deteriorated into an economic nightmare and the stock market went into meltdown. It has impacted the wealth of everyone.

Millions of personal pension holders now face a poorer retirement. Those five years from their carriage clocks are worst hit as their money is only shifted from shares to lower risk assets in the final years of the plan.

Meanwhile savers, shell-shocked by concerns about the safety of deposits, now face a spell of lower returns in the face of higher inflation -  the UK bank rate is now expected to fall as low as 2.5 per cent next year because of the slump.

And once again, there was bad news for homebuyers. New mortgage costs remain punishing despite the Government's gamble of a £500bn rescue package aimed at encouraging more inter-bank lending, which would make credit cheaper for consumers. It has so far failed. Higher future taxes are also likely to bankroll the bailout.

The only bright spot was plunging commodity prices - cheaper oil will eventually feed through to slower rises in the price of goods.

The outlook is the gloomiest in a generation. While consumers desperately search for reassurance about even Britain's biggest banks (see top stories below), they fear the worst - 65 per cent in a poll believe we're headed for a repeat of the 1930s Depression.

This financial shock is causing a shift in entrenched attitudes. Even Thatcher's economic legacy of deregulation, long popular on our online forums , is being challenged. The love affair with free markets has turned sour. And banks are now hated more for losing money than when they lost it - they were named in a poll of our readers as most culpable for the state we're in.

- Andrew Oxlade, Editor, This is Money

Most read articles published in the past week

1. Your guide to banks' safety and strength
2. How safe is...Nationwide?
3. 300,000 UK savers face claims for Icesave cash
4. How safe is...RBS-Natwest?
5. What now for Icesave savers?
6. How safe is...HSBC?
7. How safe is...HBOS?
8. How safe is...Lloyds TSB?
9. How safe is...Barclays?
10. How safe is...Abbey?
11. How safe is...Alliance & Leicester?
12. How safe is...ICICI Bank?
13. Darling guarantees Icesave savers 100%
14. ING buys up bust Kaupthing's UK savings
15. How would I make an Icesave claim?
16. Kaupthing Edge begins to crack
17. Bank shares crash on £50bn bail-out leak
18. How safe is...Anglo-Irish Bank?
19. How safe is...Britannia Building Society
20. How safe is...Bradford & Bingley
21. How safe is...Yorkshire Building Society
22. 300,000 UK savers face claiming for Icesave cash
23. ING buys up bust Kaupthings UK savings
24. Has your mortgage rate been cut?
25. UK savers shut out from Icesave as Landsbanki is rescued
26. How safe is...West Bromwich Building Society
27. How safe is...First bank of Nigeria
28. The survival guide for worried savers
29. All savers deposits secured up to £50,000
30. UK bank shares shaken as fears grow

Web week: Credit cards to disappear into a black hole

In the week the world faced disappearing into a boffin-created black hole it was apt a Tomorrow's World-style money story attracted attention.

Like the cheque book and video recorder, the credit card is apparently on the way to extinction - to be replaced with paying for items with mobile phone, watch, key fob or fingerprint.

Credit card giant Barclaycard is pouring millions into contactless payment systems, that will do away with the card aspect altogether.

Whether the concept of paying by watch, fingertip, or even eye recognition, becomes the next iPod or the Sinclair C5 depends on the fickle public, but you can be sure banks' ambitions behind contactless payment are to get us to spend more.

That desire also lay behind the latest offers by struggling housebuilder Barratt, which stepped in where the Government feared to tread, in offering to pay stamp duty for buyers and even said it would insure homebuyers against a loss of up to 15% on their new property.

This is Money readers said that would not be enough to get them to buy a brand new home. Looks like it may be back to the drawing board for housebuilders' futures.

This post also appears as a column in the Mail on Sunday

- Simon Lambert, assistant editor, This is Money

The most read articles on This is Money this week

1. Credit cards will be extinct in five years
2. New plea for Brown to save house market
3. Barratt to pay stamp duty for new homes
4. Whistleblower: RBS trains staff to lie
5. The best - and worst - UK banks revealed

Web Week: Car buying and debts lead top stories

Car sales are tumbling as the cost of motoring soars and Britons struggle to find credit in the crunch. However, with the ‘58’ plate released tomorrow readers are still interested in whether to buy new or used.

One worrying development is the decline of leasing. These popular schemes, where customers can hand the car back for a pre-agreed price after three years, are being ditched in the US where car makers have been caught out by tumbling second-hand car prices. The same may happen here.

Elsewhere, a new British debt map caught readers’ attention. Unsurprisingly people in affluent Richmond in south-west London owe the most at £53,000.  But the average person in TW9 owns a house worth more than £500,000 and earns nearly £50,000 a year. More inexplicable were the mixed loan debt hotspots led by less affluent Chester-le-Street, County Durham, and buoyant Milton Keynes, Bucks.

Debt always stokes debate between big borrowers and the cautious. One reader from Yorkshire used a quote coined during the American boom and bust of the Twenties: 'Don't buy things you don't need with money you haven't got to impress people you don't like.'

According to search engine Google, that quote is republished 5,000 times on the internet – the sentiment resonates with today's cash-strapped consumers.

- Andrew Oxlade, Editor, This is Money
(This blog post also appears as a column in the Mail on Sunday)

1. Should you buy a new car or used?
2. Lock up your cash before rates drop
3. Worst house prices fall for 18 years
4. Middle-class areas lead the debt league
5. Bank details of 1m customers sold on eBay
6. Beat the credit crunch: Boost your income
7. Dragons Den: The rejects that got rich
8. Housing giant suffers massive land hit
9. Mortgage dilemma after base rate hint
10. Bank urged to cut rates as economy stalls
11. Website reveals what your colleagues earn
12. Mortgage respite - but only for the well-off
13. Buy-to-let failure rate doubles in a year
14. Savers despair over plunging with-profits
15. Sterling and shares dive on banking fears
16. Downturn will break families, says Bank
17. Savings accounts beat share returns
18. Midas share tips: China will dazzle again
19. Is my big win just a scam?
20. Britain is facing an 18-month recession
21. Convert your car to LPG and cut fuel costs
22. Just two workers for every OAP by 2060
23. Broker tips best commodity stocks to buy
24. Look beyond the rate ruse for best deal
25. Pension shake-up:  Will you benefit?

Web Week: What history tells us about stamp duty

From the moment house prices began falling, a stamp duty row was inevitable. This was a tax that previously felt painless, swept into mortgage debt and made palatable by soaring values. The harsh reality is now dawning - like mortgage debt, tax is a real cost to be paid.

Until 1997, 1% was levied when buying £60,000-plus properties. A new Chancellor then ordered one of the easiest revenue-raising measures in history, increasing duty to 1.5% on £250,000-plus homes and 2% on £500,000-plus.

With the average home at just £60,000 and amid New Labour's media honeymoon, the proposals sailed through. A confident Gordon Brown even repeated the trick in 2000, tweaking the top bands higher to 3% and 4%. The annual tax take soared from £830 million in 1997 to £6.5 billion by 2007.

But rising resentment and falling prices has spurred the Government to consider a suspension - a trick the Tories used to briefly stabilise the market before re-election in 1992. This week, our poll showed eighty per cent of readers were initially in favour (the result was then diluted by an influx from housepricecrash.co.uk).

But comments suggested abolition is preferred to deferment. As Stephen from Leicester says: 'Isn't suspension just like a loan - and exactly what got us into this mess in the first place?'.

- Andrew Oxlade, Editor, This is Money
* This column also appears each week in the Mail on Sunday newspaper

>> 1.2m readers in July - see what they read

>> What happened the last time stamp duty was temporarily suspended (including more on the history of stamp duty)

Most read stories (published in the past week)

1. House prices may rise 30%, says forecast
2. Chancellor considers scrapping stamp duty
3. Ice bound: Iceland's banks
4. 200,000 lose out in buy-to-let crisis
5. Banks shock as RBS faces a £1.5bn loss
6. Put road tax rises in reverse, say MPs
7. Bank of England holds interest rates at 5%
8. Buy-to-let hit as rents fall by 20%
9. No interest rate cuts this year, warns IMF
10. Crunch brings out the Dog funds
11. Halifax: House prices down 11% in a year
12. High price of fixed rate mortgage safety
13. Norwich Union windfall payout: What happens next?
14. Sunday newspaper share tips
15. Thomson offers holidays at £2 a night
16. Oil giants not passing on price cuts
17. Midas share tips: Santander and Rexam
18. Newspaper and magazine share tips
19. Market report: Tuesday latest (FTSE up 134)
20. The B&B 'cashless' take-up option
21. Beware poor internet savings traps
22. 10 bargain getaways
23. Diversify to protect your investments
24. Stamp duty dithering to bring property jam
25. Gas prices are actually falling, not rising

Top five blogs

- So what will really happen with stamp duty?
- What's happening to the property market near you?
- New starters earn £45,000 at Aldi
- Gas prices are rising?... Actually, they're falling
- How buy-to-let property could stage a comeback

Top five polls

- Should stamp duty be suspended?
- What will happen to rates at the next meeting?
- Could one of our big banks go bust?
- Are buy-to-let landlords facing disaster?
- What change in house prices do you expect in the next year?

Web Week: Gas and oil prices down; House prices up(?)

The scatter-gun messages of gloom have left us all firmly gripping our hard hats: property market down, the oil price is up, the era of cheap food is over.

I will try to inject a little cheer. Yes, British Gas is to hike gas bills by 35%, but wholesale gas prices – the cost to utility companies – have nearly halved in the past week, undermining the case for higher bills.

Also, crude oil is down from a peak of nearly $150 a barrel a few weeks ago to less than $125. Even food price inflation could ease – sugar and wheat is trading well below year-highs.

But the good news is bad – prices are falling because the global economy is weakening and demand may fall. That will eventually undermine wealth for all.

So what about house prices? Research from the National Housing Federation, made up housing associations, suggested a lack of homes would spark a 25% surge in values within five years. Consider that the NHF,  which exists only because of property shortgages, forecast last August that prices would rise 40% by 2012. The optimism was short-lived: Nationwide building society ended the week by reporting a record 8% annual fall in prices. Keep your hard hat handy.

- Andrew Oxlade, Editor, This is Money

(This post is also published as a column in the Mail on Sunday)

Most popular 25 stories published in the past week

1. House prices to rise 25% in five years
2. Norwich Union policyholders to get £1,000
3. Record 8.1% fall in house prices
4. British Gas raises gas prices by 35%
5. Tesco takes on banks after RBS buyout
6. House prices to plunge a third by 2010
7. Norwich Union windfall payout: what happens next?
8. Isa delays: Cash Isa chaos explained
9. Foreign banks hit back on savings
10. House price optimism in short supply
11. Mortgage freeze set to last 2 more years
12. Are bank shares a good bet?
13. A&L profit wiped out in £209m assets hit
14. What is the best way to invest my inheritance?
15. Lloyds 70% profit drop bodes ill for rivals
16. My property predictions, by Foxtons man
17. Millions face £200 jump in power bills
18. Get the best digital TV football deal
19. How to survive if the storm strikes
20. Banks vs building societies: Who's best
21. Stock markets: A history of boom and bust
22. House prices fell further in July
23. Five stocks to beat tough times
24. Why millions are just 11 days from ruin
25. Was I ripped off on my Halifax Regular Saver?

Web Week: Time to buy bank shares?

The most read stories focused on the property market, with buyers making derisory offers to distressed sellers, and inflation, with the official consumer price index rising faster than expected at 3.8%, further eroding rate cut hopes.

But banks were also on the agenda. Spain's Santander announce d a takeover of Alliance & Leicester, sending  the shares up 52%. That sparked a flurry of reader comments about whether other bank shares might bounce. Jon in London was bullish: 'In three or four years time, people will wonder what all the panic was about and those who swam against the tide will make a killing.'

Wise investors make their own calls measured against time-tested wisdom. Billionaire investor Warren Buffett said: 'Be fearful when others are greedy and greedy when others are fearful.'
Sir John Templeton, the legendary American stock-picker who died aged 95 earlier this month, urged investors to buy only 'when there is blood on the streets'.

Bank share prices have plunged an average 60% from their peak in April 2007.  So is it time to buy? Those willing to dive in should remember another Buffett adage: 'You only find out who is swimming naked when the tide goes out.'

- Andrew Oxlade, Editor, thisismoney.co.uk

Top 25 most read stories published in the past week

1. Sharks move in as home sales hit new low
2. Should you stick by the bank shares fans
3. Inflation at nearly twice Banks target rate
4. Diary of a house sale disaster
5. A&L bid: Shareholders urged to sit tight
6. Nationwide cuts mortgage rates
7. Tenants squeezed as rents rise sharply
8. Santander confirms £1.25bn bid for A&L
9. £64,000 is the most desired joint income
10. How to invest £300,000 for income
11. Ryanair grounds quarter of its planes at Stansted
12. Stamp duty could be cut to boost homes
13. Darling scraps 2p fuel duty increase
14. Brown rejects 50% tax on high earners
15. Sunday newspaper share tips
16. Rush for extended mortgages
18. Help: I've been paying TV licence twice
19. Banks wobble as shares nosedive
20. Banks £152 a year from each customer
21. Could Kaupthing Edge be the next Rock?
22. Santander buy-out lifts banking sector
23. Drivers win 94% of parking fine appeals
24. Midas share tips: Telecom Plus and Carrs
25. Dollar and shares dive as global worries grow

Web Week: A review of the top stories of the week

'Why is everyone so bloody miserable?', asked Transport Minister Tom Harris (pictured) this week. He claimed Britons should appreciate their relative wealth, saying our spending would have 'made our parents gasp'.

Readers were unimpressed by the financial lecturing a day after Chancellor Alistatir Darling pleaded with workers to accept low pay settlements depsite being squeezed by rising prices. Mr Darling wants us to grin and bear it. Mr Harris wants us to grin and compare it.

His comments were insensitive to cash-strapped and over-taxed families, but they reflect the mood. Polls on This is Money forecast a bleak year: oil will hit $200 a barrel this year while interest rates climb from 5% to 5.5% or 6%; inflation will nearly double to 6% by next summer and property prices will fall further than during the early Nineties crash.

Mr Harris calls it pessimism but readers of financial newspaper pages and websites call it caution. TiM readers, for example, typically started a pension aged 20 to 25, have more than £50,000 in savings accounts and clear their credit card balances each month. Caution has helped them focus on their finances. A little more of it would have helped us all avoid the crunch.

Other top stories this week included news that inflation rose from 3% to 3.3% in June, that some Brits are coping with the credit crunch and how a care-free Michael Winner is coping with £6m debts. That helped lift the gloom.

- Andrew Oxlade, Editor, This is Money.co.uk

(This post also appears as a column in Financial Mail on Sunday)

1. No rate cut for a year as inflation hits 3.3%
2. How to survive the credit crunch, by Michael Winner
3. Brits shaking off credit crunch worries
4. Minister tells boom generation to cheer up
4. House price slump to last four years
5. Fixed mortgage rates hit ten-year high
6. Kings grim warning on pay and bills
7. 'My husband moved our money in secret'
8. Halifax offers stunning '12%' on savings
9. Cautious savers inherit the wealth
10. Card limits frozen - even for the wealthy
11. NS&I: The sure-fire way to beat inflation
12. Hundreds added to the cost of a holiday
13. Sunday newspaper share tips
14. Pay rises have fallen behind inflation
15. 10 accounts to keep your money safe
16. Housebuilders hit by gazundering
17. Ten essential tips for buying homes abroad
18. Airline surcharges: are they just a rip-off?
19. How's this for a £75 council flat
20. Newspaper and magazine share tips
21. Gieve sacrificed by Whitehall spinners to bury bad news
22. Savers in limbo over Isa transfer delays
23. Inflation and petrol fears as oil price soars
24. Spreading risk in fund-of-funds pays off
25. Driving holidays: Spain is Europe's bargain

Web week: Pensions vs mortgages

If you have the luxury of a little extra money, should you pay off your mortgage or invest in a pension? This is Money pensions correspondent Philip Scott posed the question. The view of readers was virtually united. Of 20 comments only one reader dare to admit he had confidence in regular pension saving.

So why the cynicism? Reasons vary but most centre around trust, or lack of it – in Government tax rules, in independent financial advisers, in the stock market (or the managers who invest in it on our behalf).

But the common theme is that people want control of their finances, and they get that by paying down their mortgage rather than entrusting money to professionals who may have let them down before. Instead, many are squirreling money away in high-rate bonds and assiduously watching for the next best-buy account to exploit.

And it’s understandable amid the current economic uncertainty. As 'Ashwin from London' says: 'If I were to lose my job and have cashflow problems, the bank is more likely to grant me a payment holiday on my mortgage. The pension won't pay my mortgage.'

Also this week, readers were worried by a dramatic about-turn in interest rate forecasts. Economists had been expecting further cuts this year but heightened inflation fears spurred the markets to predict a rise from  5% to 5.5%, or even 5.75%. Paying down mortgage debt and investing in top-rate accounts is about to become even more attractive.

- Andrew Oxlade, Editor, This is Money

Top 20 most popular stories, published in the past week

1. Halifax offers stunning 12% on savings
2. Property market is toughest for 30 years
3. Homes crunch: Revenge of the gazunderer
4. Pay off the mortgage or add to a pension
5. City bets on imminent interest rate rise
6. Production costs to tip UK into stagflation
7. Thousands face negative equity crisis
8. Higher fuel cost drives cars off the roads
9. Banks get safer as investing risks tumble
10. B&B: What does it mean for you?
11. CBI boss: oil crisis to spell economic chaos
12. Sunday newspaper share tips
13. How secure is your savings safety net?
14. Will my tenants bad debts affect me?
15. Market report: Wednesday latest
16. HBOS rights issue could fall £800m short
17. 10 accounts to keep your money safe
18. Newspaper and magazine share tips
19. 15 months of gloom ahead, says RBS chief
20. Merger windfall for Catholic BS members