Spend Your PPI Refund!

Did you know? 0.4 per cent of British consumer spending could be coming from the banks this year.

To figure out why, all you have to do is look at the recently announced pay-outs on the Payment Protection Insurance sold by UK banks. As much as £9bn could be winding its way to the pockets of British consumers. Though, as UBS notes, the amount is likely to be somewhat smaller.

Here’s what analysts Andrew Hughes, Adam Cochrane and Isabel Green say:

Clearly this is a one-off benefit compared with the ongoing pressures faced by UK households. In addition, not all of the anticipated £6-9bn may be received by policyholders. Some may be deceased, some may not claim, and others may decide that it is worth paying the 25% (+ VAT) that seems to be the going rate for expert groups handing claims on a “no win, no fee” basis. To the extent that there are arrears on the original borrowings, we would expect some of the PPI rebate may be offset against this. Some may well be saved. Below, we assume a net figure of £4bn.

…

Total consumer spending in the UK in 2010 was c£900 billion (source ONS). If we assume net PPI receipts will be c£4bn, then this would account for 0.4% of consumer spending over a full year. Some areas of expenditure, however, will see very little income elasticity. These would include, for example, petrol, utilities and food, which are current exerting downward pressure on other areas of spending as commodity prices rise.

And here’s where they think the money will be spent:

The cash will start to be repaid from August onwards. Given that the summer holiday season will have passed, we think that a large proportion may be spent on household goods. If one third of the assumed £4bn is spent in this category, we estimate it would add 3% to sales for the full year, or almost double this in the second half. We believe this could add to any benefit from weaker comps in the run-up to Christmas.

Major beneficiaries are likely to be those with a high proportion of UK sales – preferably in the household goods sector – and high operational gearing. These are likely to be those hurt in the spending squeeze over the last few years, such as Home Retail, Dixons and Carpetright, where we think the EPS upside could be significant.

Thank you banks For millions of spanking-new rugs and assorted furniture.

All bought with PPI Refunds thank you very much!

David Cameron is likely to scrap the 50p top rate of income tax after being presented with figures showing that the higher the rate, the less people pay.

Sam Coates Deputy Political EditorLast updated August 5 2011 12:01AMDavid Cameron is likely to scrap the 50p top rate of income tax after being presented with figures showing that the higher the rate, the less
people pay.Treasury projections suggest that taxing those earning at least £150,000 at a rate of 45p may generate 70 per cent of the revenue that would be
earned by the 50p rate. Senior figures said that this made it much easier to reduce the top rate of tax to 45p because it did not leave a huge
hole in public finances.This analysis was helping to shape the argument, a senior Tory source said. “The decision is whether to do it in 2012 or 2013. By 2014, it’s too
late to have an effect before the next election.” The Treasury signalled its scepticism over the 50p rate at the time of the Budget and
commissioned an assessment by HM Revenue & Customs (HMRC) to see how much tax the increase generated in its first year.George Osborne also said recently that he wanted to end “very high tax rates that only damage growth and enterprise”, widely seen as a reference
to the 50p rate. However, a Treasury spokesman said that the HMRC review had not reported yet and that no decisions had been taken.The top rate was announced by Gordon Brown and Alistair Darling in the 2009 Budget for introduction the next year, and has been a minefield for
the coalition. Many Conservatives are keen to abolish it, seeing it as a drag on growth and enterprise. Boris Johnson, the Mayor of London, has
caused anguish within Tory ranks by publicly calling for it to be axed.But polling suggests that the measure is politically popular since it affects only 300,000 people. The Liberal Democrats have been hostile to the
rate and hope to secure further concessions in return for supporting abolition.Vince Cable, the Business Secretary, said yesterday that the tax “would need to be replaced with something else — primarily something associated
with wealth or high-value property”. Nick Clegg has suggested that he wants to look at the way council tax and stamp duty are structured.Senior Tories want to be able to argue that the tax rise has not generated revenue for the Exchequer, making it pointless and punitive.The projection that only 30 per cent more revenue is generated by a top tax rate of 50p, rather than 45p, comes from forecasts by the Treasury in
2008 and 2009. A more recent written parliamentary answer confirmed the imbalance. The Treasury estimates that next year it would raise £1.7
billion more if it put up the top rate from 40p to 45p, adding only a further £1.1 billion by increasing the rate to 50p.Robert Chote, the head of the Office for Budget Responsibility, has already suggested that the 50p rate would raise no revenue — and could even
cost the Treasury money — in his previous job running the Institute for Fiscal Studies. Senior Tories think that the HMRC review could find that
the tax brings in much less the Treasury has forecast.The move is likely to be presented as part of tax simplification package. Senior Tories believe the public should be reminded that the top rate
of tax is on top of national insurance, which is 13p, giving a real top rate of 63p.One Tory source said that the politics of the decision were difficult. “It is no secret we want to do this. But it’s the kind of decision that’s
made just before a Budget, and requires the politics to be aligned in the right way. You can’t claim there is a secret plan that we are all
considering now.”