Money blog: New state pension from April revised after wage data (2024)

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  • New wages data may cost chancellor £100m in pension hikes - as new weekly rise revealed
  • Oil price drops significantly after newspaper report on Israel's expected attack on Iran
  • Unemployed people could be given weight loss jabs to get them back into work
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17:39:01

WFH-friendly Vauxhall orders staff back into office

Staff at Vauxhall have been ordered back to the office.

It's a big change for one-time working-from-home champion Stellantis, which also owns Fiat, Citroën and Peugeot.

The change means workers must come in three days a week on average - and more if their work is urgent.

Employees previously enjoyed a 70-30% balance in favour of remote working.

The firm's HR boss Xavier Chéreau told Bloomberg: "Given what the situation is today, I feel the need to be with my teams more often, to reassure, to communicate, to help make sense of things."

He further explained: "We need to be pragmatic and we are recalibrating.

"If there's a difficult project that needs attention, then it's all week in the office."

16:44:01

Economic inactivity and long-term sickness to be targeted by 'biggest reforms in a generation'

Economic inactivity and long-term sickness will be targeted by the "biggest reforms to employment support in a generation", the work and pensions secretary has said.

Data shows inactivity is up by 713,000 since the pandemic.

Liz Kendall said: "To get Britain growing again, we need to get Britain working again.

"Millions of people are locked out of work due to long-term sickness.

"This is not good for them, for our economy or for the taxpayer."

Reforms will include overhauling job centres, and delivering a "youth guarantee" so every young person is either learning or earning, as well as new work, health and skills plans to tackle inactivity.

15:51:24

NatWest announces mortgage rate hikes

NatWest has become the latest lender to announce mortgage rate hikes.

Industry insiders suggest uncertainty over what could be announced in the budget on 30 October could be playing a part.

If investors were to react badly to a round of tax rises, the mortgage market could see a period of instability.

NatWest's hikes will add 0.3% to some of their rates.

In comments supplied to Money by Newspage, Ben Perks, managing director of Orchard Financial Advisers, said: "As the autumn budget looms, mortgage rates have been put into a spin.

"After a few months or so of reductions, lenders are now starting to raise rates and many borrowers will not know which way to turn.

"NatWest are the latest lender to announce increases and it looks like they'll be joined by many more lenders over the next few weeks.

"We need to get this budget over and done with and, for the sake of borrowers, get back to falling rates and better times."

It's not just budget speculation that's having an impact.

Swap rates - which dictate how much it costs lenders to lend - have risen over the last week or two amid fears an Israeli attack on Iran might prompt a surge in oil prices, which could be inflationary.

This might disrupt the path down to lower interest rates (rates are kept high by the Bank of England to squeeze people's spending power, encourage saving, and thus slow price rises).

It is yet to be seen whether a significant drop in oil prices (see 8.14 post) today could calm things down.

14:53:01

Recruiter cuts 700 jobs amid dwindling vacancies

A shortage of vacancies has prompted one of the country's biggest recruitment firms to cut more than 700 jobs in the last year.

The headcount at Robert Walters has dropped 734 to 3,466.

The latest jobs data shows vacancies fell by 34,000 to 841,000 in the three months to September.

This is the lowest level since 2021.

Robert Walters CEO Toby Fowlston said: "Global hiring markets remained challenging during the third quarter, bringing the period of rebasing following the 2022 post-pandemic peak to around two years.

"Our assumption continues to be that material improvement in client and candidate confidence levels will be gradual and not likely to commence until 2025."

13:40:01

What is the national debt and why does it matter?

You might have seen the news in September that national debt had hit 100% of GDP (the value of the country's annual economic output).

It was the first time this has happened since the 1960s, according to theOffice for National Statistics (ONS).

But what is national debt and why should you care? Well, basically...

National debt is the total amount of money the public sector owes. The public sector includes central government, local government, the Bank of England and other public corporations.

How big is the national debt?

Public sector net debt was £2.77trn at the end of August.

You may also see some analysts and officials use the figure £2.55trn, which is debt excluding the 8% held by the Bank of England.

This is because the Bank is part of the public sector, meaning interest paid on government loans technically never leaves the public sector.

The Bank-owned debt - worth £222bn - largely represents loans taken out by the government in the wake of the 2008 financial crisis and the COVID pandemic.

Why is debt expressed asa percentage of Gross Domestic Product (GDP)?

If an organisation borrowed £10m and earned £100m in the same year, its debt (10%) would be considered more reasonable than one that borrowed £50m (50%).

Instead of earnings, GDP is used as a measure as that is the total value of everything the UK produces.

Wealthier countries are able to sustain a higher level of debt.

Who do we owe money to?

The majority of UK debt is owed to the UK private sector, especially insurance and pension funds.

The Bank of England, as we just mentioned, also owns 8%.

Overseas investors hold approximately 25% of UK debt, the second highest in the G7, according to a report by the House Committee of Public Accounts in March.

Limited information is held by the Treasury or the government'sDebt Management Office on those investors.

This is because government bonds are traded multiple times by different investors.

Bonds themselves are a means of turning debt into a financial asset that can be traded. It effectively represents a promise by the government to pay back whoever owns the bond - and any interest accrued.

Interest

Public sector debt comes with interest that needs to be paid every year.

The more debt, the bigger the interest payments, and most of these are made either by central government or by the public corporations sector in relation to funding pension schemes.

In 2024-25, the Office for Budget Responsibility (OBR) expects interest spending to total £89bn, or 7.3% of total public spending.

How do other countries compare?

According to the International Monetary Fund (IMF), there are 16 countries with a higher debt as a percentage of GDP than the UK.

Among them are Japan (255%), Greece (159%), Italy (139%), the US (123%), France (112%) and Spain (106%).

At the other end of the table is Sweden (36%), Switzerland (37%) and Norway (38%).

Read other entries in our Basically series...

12:14:47

New wages data may cost chancellor £100m in pension hikes - as new weekly rise revealed

The government is facing an extra £100m bill for state pension hikes next April following this morning's wage data, it has been suggested.

Under the triple lock guarantee, the state pension increases each April in line with whichever is highest out of average earnings growth the previous July, inflation the previous September or 2.5%.

Wage growth is likely to be the highest this year.

The figure for July had been published as 4% by the Office for National Statistics (ONS).

However, today this was revised to 4.1% - and a former pensions minister says this could be costly.

Sir Steve Webb said the additional 0.1 percentage point could add around £100m to the state pension bill

"A slightly higher rate of increase is welcome for pensioners, though will be an unwelcome £100m extra cost for the chancellor as she prepares her budget," he said.

"The rate of the new state pension will now be close to £12,000 per year, very near to the £12,570 tax-free personal allowance. This is likely to put extra pressure on the chancellor to take action on tax allowances in the coming years."

What will new pension be?

The revised wage growth figure means that the new state pension, for people who reached state pension age after April 2016, could rise from £221.20 per week to £230.30.

The old basic state pension could increase from £169.50 per week currently to £176.45 next year.

12:13:01

Bank of England now more likely to cut interest rates in November, analysts say

The Bank of England is more likely to cut interest rates after figures showed wage growth at its lowest level in four years (see 7.21am post), economists have said.

Money markets are now betting there is a 84% chance policymakers will cut Bank Rate from 5% to 4.75% at the next meeting in November.

Ashley Webb, UK economist at Capital Economics, said: "The further fall in wage growth in August, together with some signs that the labour market continued to loosen gradually, adds further support to widespread expectations that the Bank of England will cut interest rates."

Jake Finney, economist at PwC UK, said the quarter-point cut seems "most likely", given the signs wage growth is moderating.

Yael Selfin, chief economist at KPMG UK, said the "encouraging labour market data clears path for an interest rate cut".

She added: "With the economy set to slow in the coming months, this is likely to add further downward pressure on labour market activity. We anticipate it will enable the MPC to cut interest rates in the upcoming November meeting."

11:20:01

Northern Rail passengers could get compensation after it broke its own fare evasion rules

Commuters might receive compensation after Northern Rail broke its own rules to prosecute some railcard users.

The train company has confirmed all prosecutions of people accused of wrongfully using a 16-25 railcard to get a discount before 10am are being withdrawn.

Thousands of previous cases will also be reviewed, it said.

"With regard to recent reported cases involving use of the 16-25 railcard with fares under £12 before 10am, we are withdrawing any live cases and will also look to review anyone who has been prosecuted previously on this specific issue," it told The Telegraph.

"We are actively engaged with government and industry to simplify fares to help customers.

"We understand that fares and ticketing across the railway can, at times, be difficult to understand, and we are reviewing our processes for ensuring compliance with ticket and railcard terms and conditions."

Railcards give users a third off ticket prices, but most of them are only valid after 10am and subject to a minimum £12 fare.

Under the National Rail Conditions of Travel, a passenger who purchases a time-restricted ticket and then boards a train on which it cannot be used should be charged the difference between the fare they have paid and the lowest valid ticket price.

But some passengers were immediately subjected to threats of prosecution instead of being offered the chance to pay the difference.

Our cost of living specialist Megan Harwood-Baynes spoke to one of those passengers, Sam Williamson, last week.

He was threatened with prosecution after he mistakenly bought an invalid £3.65 ticket using his 16-25 railcard. The full price of the ticket was £5.50 - £1.85 more.

The ticket he bought was the cheapest available on the app, and was for the 10.29am train - but was listed as an "anytime day single".

Sam used this ticket to board a train just after 7am, not realising that under the fine print of the railcard terms his ticket was invalid.

Speaking to the UK Tonight on Monday (video below), he said: "These kinds of cases regarding railcard misuse before 10am should never have been going to court in the first place.

"Whilst I am very glad we are seeing Northern scrap any potential future cases going to prosecution, that is a great start, I think it is equally urgent that we review the previous cases and make sure that people get justice and get some of these convictions overturned.

"And ideally also receive some financial compensation, because people were on the hook for hundreds in fines which is really significant and completely out of proportion with the difference in fares."

10:30:01

Councils to get £68m to build thousands of homes on brownfield sites

Councils will be given £68m to build thousands of homes on disused brownfield sites, the government has announced.

The money will be spread across 54 local authorities in England and is expected to deliver 5,200 homes on sites such as former industrial land and car parks that can be difficult to build on.

Labour's manifesto pledged to build 1.5 million homes over the five years of this parliament.

Sir Keir Starmersaid the new funding shows how the government is "rolling up its sleeves and delivering the change the British people deserve".

Read the full story here...

09:24:56

Unemployed people could be given weight loss jabs to get them back into work - health secretary

Unemployed people living with obesity could be given weight loss jabs to help get them back into work, the health secretary has said.

"Our widening waistbands place a significant burden on our health service," Wes Streeting wrote in the Telegraph.

Mr Streeting wrote that obesity costs the NHS £11bn a year - more than smoking - and that related illness resulted in people taking four extra sick days a year.

"Fears of being labelled 'nanny state' have meant nothing has been done and the problem has only got worse," he wrote.

It comes as the government announced a £279m investment from Lilly, the world's largest pharmaceutical company. This will include real-world trials of weight loss jabs impact on worklessness.

"For many people, these weight-loss jabs will be life-changing, help them get back to work, and ease the demands on our NHS," Streeting wrote.

"But along with the rights to access these new drugs, there must remain a responsibility on us all to take healthy living more seriously.

"The NHS can't be expected to always pick up the tab for unhealthy lifestyles."

Money blog: New state pension from April revised after wage data (2024)

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