A round-up of the main news stories from this week.
Inflation Rises to 2.7% in October
There was a blow for consumers after the consumer price measure of inflation leapt by half a percentage point to 2.7% in October. The rise was attributed to higher food costs and the increase in tuition fees, which rose to a maximum of £9,000 at the start of the university year. The rise means that increasingly fewer savings accounts now offer returns that match inflation after tax.
Retailers Take VAT Case to Court
Electronics giant Dixons is heading a legal battle worth £70 million to reclaim VAT that has been paid on false credit card transactions. Retailers are arguing it is unfair that they have paid VAT on credit card transactions that have been proved fraudulent because their reclaim does not always cover this cost. The case is set to go to the European Court of Justice for a decision to be reached in 2014.
Pushing Loans Could Lead to More Defaults
There could be more defaults on loans and mortgages if banks are forced to lend more, a Bank of England member said this week. Speaking in Bristol, Michael Cohrs, the head of the Bank’s Financial Policy, said that pushing too hard on the lending theme would lead to defaults because more of the borrowers will not be creditworthy. The number of lenders participating in the Funding for Lending scheme doubled from 13 to 30 in October.
Banks Facing Further Mis-Selling Scandal
Banks are facing yet another mis-selling scandal, this time for unnecessary credit card insurance. The Financial Services Authority issued a record fine to CPP, a credit card protection firm, for selling insurance products that customers didn’t need. Banks helped to sell 4.1 million of these policies between 2005 and 2011, and could now face a collective compensation bill of £213 million. Andrew Tyrie, Chairman of the Treasury Select Committee, said he would seek answers from the FSA as to how further scandals of this sort could be avoided in the future.
MPs Slam Companies for Tax Avoidance
And finally: MPs slammed Amazon for sending an executive to a hearing on tax who failed to provide answers to questions on tax and revenue. MPs also interrogated representatives from Google and Starbucks on the issue of tax avoidance, and unveiled more about the truth of their operations. Starbucks attributed the company’s tax position in the UK to poor performance, which left the committee distinctly unimpressed. The company has paid just £8.6 million in tax in 14 years despite revenue in excess of £3 billion.
Also, on the Finance Blog this week:
- What Happened to Humanity? The Controversy Behind Hardship (see article).
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