…and what you can do to protect yourself.
What did you think of George Osbourne’s emergency budget? To some, the economic medicine has a sharp taste with the 2.5% VAT increase. But I’ve heard the view from some people that the VAT rise was expected and they feel that the budget’s main news is not as bad as they feared.
That’s because only one-fifth of the tough decisions have emerged so far.
The real blows of this budget are being delayed until after the Public Spending review. So the first delayed punch won’t be struck for three months at least…
#1. The Public Spending Review in October will detail planned cuts to specific public services.
That’s when we get to see how much these cutbacks hurt the nation. As well as cutting jobs in the public sector directly, there’ll be a knock-on effect on the rest of the economy.
Many private sector workers have reassured themselves that their jobs are safe. No one knows this for certain. The supply chain for the public sector reaches far and wide, and customers of customers could indeed see a downturn in orders.
It’s estimated that £23bn cuts in major projects could cost 500,000 jobs
Some of these will be offset by jobs created in expanding areas of the economy, which is great news. However, opportunities will favour those with specific training. As anybody who’s been out of work will appreciate, it’s not easy to turn around your career at the same time.
What’s the second punch? As well as public sector job cuts and knock-on redundancies, you’ll now get less of a safety net from the state…
#2. Benefits for the unemployed are being hammered
Unemployed homeowners can currently claim a generous amount of mortgage payment support — but that’s due to come down quite dramatically, in line with last year’s fall in base rates. On top of that, this budget also announced a three year freeze in unemployment benefit:
- Government Support for Mortgage Interest (SMI), currently £507 per month on a £100,000 mortgage, will be cut to £306 per month
- Unemployment Benefit, and also Child Benefit, won’t be increased for another 3 years
Meanwhile there are no exemptions to the VAT increase. It’s not until January, but this affects everyone who pays for goods. There’s an even bigger increase in Insurance Premium Tax: it goes up next year by one-fifth.
Is it all bad news?
I’m sorry if that’s what this story seems to be so far! We advisers tend to deal with people in changing financial circumstances, so I’m aware of how the loss or reduction of a salary can affect people, and indeed how often decisions like these are sprung on you with little warning from management.
But there’s better news: there are two ways you can protect yourself (find out more here).
The bottom line is that if you want to protect you and yours, in a time of shrinking support from the state, it’s possible, and it needn’t add to your monthly outgoings if you review other insurance costs at the same time.
It also doesn’t have to be long term: when you no longer need it, just cancel.
The crucial thing is that you act before these delayed punches hit home!
Regards,
Ian Le Petit
Tel: 01275 849059
E-mail: ian@spotonmortgages.co.uk
Related link: Two ways to protect your income and outgoings