This piece first appeared in Saga Magazine in November 2003
The text here may not be identical to the published text

 

Money News

Council Tax - The average bill has risen by 94 per cent

Notes: RPI April; pension and council tax rates from April of that year. All figures set to 100% in April 1993.

Council tax in England has almost doubled in the last ten years, rising by 94 per cent. But in the same period pensions have only increased by 38 per cent. Now some 200 -pensioners in the West of England are threatening not to pay this year’s increase – and will go to jail rather than pay the full tax.

In Devon council tax rises exceed 18%, taking the average paid per dwelling to more than £1000 throughout most of the County. The leader of Devon Pensioners Action Forum Albert Venison told Saga Magazine "What we’re saying is enough is enough. My council tax is £1500 and my water rates £500. That’s £2000. So we will not pay the increase this year. We are all paying last year’s tax plus 1.7% for inflation. Now we’re waiting to see what the councils do. All of us would go to jail if need be but if any council tries that we will all descend on that court I can tell you."

A look at this month’s graph shows why they are so angry. Since 1993, the average council tax in England is up 94 %; in Scotland the rise in 81% and in Wales it has grown by a massive 155%, though the tax there is still considerably less than in other parts of Great Britain (in Northern Ireland they still pay rates). This average masks a range of increases from 30% in the London Borough of Wandsworth to a massive 324% for people living in Wellingborough, Northants. Compare this with the rise in pensions. Since April 2000 – when the pension rose by the derisory 75p – the Government has raised state pension ahead of inflation. But the 38% rise in the pension since 1993 is no match for the rise in the average council tax bill.

The average council tax paid per dwelling is now £908 in England, which is nearly a quarter of the state pension of £77.45. Of course, anyone living on a low income below £102.10 can get their tax paid for them in full through council tax benefit and those on slightly higher incomes can get more of it paid. But many pensioners on quite modest incomes get no help in this way and they must find the full tax out of incomes that are rising much more slowly

For details of how to get help with council tax see my October column

Debt spreads
Debt is no longer just a problem for the younger generation. The debt habit is climbing up the age scale as pensions fail to keep up with hopes for a worry free retirement. The insurance company Prudential estimates that 700,000 people aged 65 or more have personal debts – apart from mortgages – totalling more than £1 billion, an increase of 71% since 1996. Their survey also found large debts among the soon-to-retire population with an estimated 332,000 people aged 55-64 having individual personal debts of more than £10,000 each; 60,000 of those owed more than £50,000.

These debt figures came at the same time as the Bank of England was warning that borrowing in the UK among all adults was reaching record levels. Leaving aside mortgages, Britons owed £165 billion at the end of July on credit cards, bank loans, payment plans and overdrafts. Another £722 billion was owed on mortgages and other debts secured on property.

Debt has been fuelled by the lowest interest rates for almost fifty years. A few months ago they were expected to fall further. But now experts in the City are predicting that the next change in interest rates will be up – good news for savers but not for borrowers.

But another reason for the growing debts which older people are taking on is that they are feeling the pinch – almost half of Britain’s pensioners say they have had to cut back on spending in the last three months. Almost one in four women and about one in six men over pension age say they are struggling to meet their financial commitments. More than two million retired people have gone back to work, and half a million say that was only because they needed more money. Prudential even claims that more than 200,000 older people have considered breaking the law to boost their income – or have actually done so.

Not worth the risk
If you live beyond 90 where should you invest your money? Economist Charles P Kindleberger, who died recently at the age of 92, said his own funds were in certificates of deposit, money market funds and bonds. He said that even the cautious advice of subtracting your age from 100 and putting that percentage of your assets in shares, was too risky.

Kindleberger, who worked for the United States Federal Reserve during the Wall Street crash of 1929 and wrote a classic study of stock-market bubbles, confessed that after a lifetime as a practical economist, "I should be able to forecast the course of share prices over the next few years. I cannot."

He recommended that older people should choose Government bonds and cash deposits. "Income is likely to be limited – one is tempted to write derisory – but the risk of dying in a financial crisis with losses in risky assets for heirs [to deal with] is broadly eliminated. For investors at the ages of 80 or 90 I strongly recommend risk aversion."

eBay's $billion profits
Seventy five million users are expected to push sales on eBay - the world’s largest online car boot sale – to over $20 billion this year making it one of the fastest growing companies in the America.

Its founder Pierre Omdiyar has made $7 billion (£4.5bn) in eight years making him the second richest American under 40. Sales growth has been boosted by eBay’s purchase of PayPal, effectively an online bank which enables people all over the world to buy and sell directly with each other in any currency. Though sellers in the UK should take care about fraud – PayPal’s guarantees on sales only apply in the USA. Wait until the money is in your own bank account before sending out the goods.

The company was recently ordered by a US court to pay around £20 million in damages to an engineer who claims eBay infringed his patents. But eBay is appealing and the global bring and buy continues. Selling costs very little. While traditional auction houses will charge you 15% or more to sell your stuff – and charge the buyer a similar amount, eBay makes no charge to buyers. Sellers pay no more than 5.25% of the sale price. The more expensive the item the less the percentage charge. If you sold something for £100 eBay would take £3.42. Find out more on www.ebay.com or www.ebay.co.uk

That's rich
Remember the Waltons? They were the poor country folk in the TV series set in 1930s America. Not any more. The real Waltons are America’s richest family, occupying five of the top ten places in the latest Forbes list of America’s wealthiest. They own US shopping chain Wal-Mart – and Asda over here. Between them they are worth $87.5 billion (£55 billion) – about as much as the UK government spends in a year on education. Now that’s wealth.

November 2003


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