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RUTH SUNDERLAND: The human cost of national debt

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Four years ago, while making a documentary in Italy about the country’s debt-ridden economy, I was struck by an unusual phenomenon: Most of the people I met were childless. 

Given this was the land of big families, mother worship and adored bambini, I was curious to know why. 

One middle-class northern Italian in his early thirties explained that the economy was so precarious, couples felt having kids was too much of a risk. 

Holding the purse strings: Chancellor Rishi Sunak does not have a bottomless well on which to draw

Holding the purse strings: Chancellor Rishi Sunak does not have a bottomless well on which to draw

Holding the purse strings: Chancellor Rishi Sunak does not have a bottomless well on which to draw

He despaired, he said, of being able to find stable employment so he could marry and settle down. The young man spoke of his individual sadness, but on a wider scale the collapsing birthrate in Italy is a sign of economic and social distress. 

Why am I talking about this now? Because it implanted in my mind how discussing debt in trillions and billions is too abstract to sink in. Here though, was a very human, tangible manifestation of how people are hurt when an economy falls too far into debt. Our national finances are in better fettle than Italy, the most heavily indebted nation in Europe after Greece, but we are in danger of becoming far too complacent. And with our national debt at more than £2trillion, we literally cannot afford to be. 

Rishi Sunak, the Chancellor, does not have a bottomless well on which to draw. He had no option but to throw taxpayers’ money at firms in the teeth of the crisis. The alternative would have been far worse. 

With interest rates so low, the debt we are running up is not an immediate problem. 

But when countries go broke, it is not pretty. The nearest we have come to it in post-war times was in 1976 when James Callaghan’s Labour government was forced to borrow $3.9billion from the International Monetary Fund to stabilise the pound, a loan that came with dollops of humiliation. 

Nor is it a picnic when great cities hit the financial buffers, as New York did when it almost went bankrupt in 1976, an era when the air of menace and despair was captured in films like Dog Day Afternoon and Looking For Mr Goodbar. 

The city was rescued by a group of financiers and businessmen led by Felix Rohatyn, the legendary Lazard banker, after the political class failed. A warning there for Sadiq Khan, the London Mayor, busy mismanaging our own capital. 

In a nation like Argentina, Covid has made a dire situation even worse so that nearly half the population is in poverty, eking out an existence on less than $200 a month. 

When economies fray, so does the fabric of society. Politics become unstable and governance is weakened. Nations become prey for ruthless financiers and vulture funds on the international money markets. 

Young people cannot find work or get on the housing ladder, start families and build a stake in society. Older people are stripped of their pensions and the middle class are in terror for their savings. Banks become unsafe and trust breaks down.

Britain is a long way from this apocalyptic vision. Most of our debts are held by UK pension funds and the Bank of England and our credit rating is solid. We are fortunate not to be part of the Eurozone and can run our monetary and fiscal policies to suit our needs. Above all, Jeremy Corbyn is not in charge. However we criticise this Government, he would have been infinitely worse. 

Unlike Argentina, the serial defaulter, the UK has the distinction of not having reneged on its obligations for more than a century. But we cannot let the largesse run out of hand, particularly when the world order is changing, with China powering back to growth and greater dominance. 

Argentina was one of the world’s richest countries in the early 20th century. No nation is immune from the realities of debt.

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Regular saver accounts: HSBC and First Direct slash rates again

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regular saver accounts hsbc and first direct slash rates again

HSBC has once again chopped the rate on its popular regular saver account available to current account customers.  

The bank and its offshoot First Direct have cut the rate from 2.75 per cent to 1 per cent. Up until last October, they paid 5 per cent, while as recently as 2016, First Direct offered 6 per cent.

With HSBC, savers can put in between £25 to £250 a month, while at First Direct it is £300. It is likely to have proven a popular home for those Britons who have been able to squirrel more money in the pandemic. 

On the maximum £3,600 allowance for First Direct customers, it works out as a cut in interest from £99 a year to £36. For HSBC customers on the full £3,000, they will be paid £30, down from £82.50.

HSBC and First Direct customers will lose as much as £63 a year in interest after the cuts were brought in

HSBC and First Direct customers will lose as much as £63 a year in interest after the cuts were brought in

HSBC and First Direct customers will lose as much as £63 a year in interest after the cuts were brought in

HSBC snuck out the change, which came into effect at midnight, unannounced on the same day heavy cuts from Treasury-backed National Savings & Investments affecting 25million savers came into effect.

However, some customers were possibly prepared for the news, after they were sent paperwork last week dated 24 November telling them the interest rate was 1 per cent.

HSBC last week refused to confirm whether the cut to its regular saver was coming, with customers told it was a ‘technical error’. 

Both it and First Direct failed to respond to This is Money yesterday when asked whether there would be a cut meaning we couldn’t alert readers beforehand for them to get in before it closed its doors.  

M&S Bank, another managed by HSBC, took its regular saver paying the same interest rate off-sale on 12 November.

HSBC and First Direct customers who got in before midnight last night will still receive 2.75 per cent, but everyone who applies from now on will get the lower rate. 

Those who already have the account will be unaffected until the 12 months is up.

It is a blow to savers suffering from rock bottom rates as these regular savings accounts, which lock customers’ money away for a fixed period in return for a greater payoff, are some of the last decent rates available from Britain’s biggest high street names. 

HSBC cut its basic easy-access account to just 0.01 per cent earlier this year.

The cap on how much can be saved each month and the fact money can’t be accessed straightaway also means they are often described as a good option for people trying to get into the savings habit, with the best rates often only available to banks’ current account customers.

The best account available to everyone is offered by Coventry Building Society

It pays 1.55 per cent and doesn’t require a minimum deposit each month, with savers able to put away up to £500.

A raft of other providers have cut rates on these accounts in recent years, or have scrapped them altogether.  

The account with Britain’s second biggest mutual can be opened online, by post or over the phone and savers would earn around £93 in interest after the 12-month term if they stashed away the full £6,000 allowed by the account.

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Speeding cases up 7% during first lockdown, official data shows

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With roads far emptier than usual during the first national lockdown in Britain, more drivers broke speed limits than a year earlier, official records have confirmed today.

The Department for Transport’s speed compliance statistics for January to June found evidence of a sharp year-on-year increase in motorists breaking limits from mid-March, just as restrictions were put in place.

It found that 30mph zones were most commonly exceeded by drivers, rising to 63 per cent during the lockdown compared to 56 per cent over the same period in 2019.

Confirmed: New figures released today by the DfT shows that there speeding in 30mph zones rose by 7% during the first Covid-19 restrictions between April and June

Confirmed: New figures released today by the DfT shows that there speeding in 30mph zones rose by 7% during the first Covid-19 restrictions between April and June

Confirmed: New figures released today by the DfT shows that there speeding in 30mph zones rose by 7% during the first Covid-19 restrictions between April and June

UK traffic levels during the first restrictions fell to as low as 25 per cent of the normal as people were forced to stay home or walk and cycle more often to get around. 

Despite this, MPs, councils and police reported at the time reported a growing number of excessive speeding cases, with accusations that drivers were using deserted roads like their own private race tracks.

Reports in June said that traffic officers caught eight speeding drivers doing more than 130mph during the initial restrictions – including a Porsche doing 163mph on M1.

Another motorists was also pursued by authorities after posting a video of his Audi reaching an indicated speed of 200mph in Kent.  

The DfT’s analysis of speed compliance isn’t based on the number of offences and drivers caught breaking limits.

Instead, it is measured using traffic speed data collected from a sample of Automatic Traffic Counters put in place across the country by the department.

ACT sites count traffic continuously as well as recording the speed at which the vehicles travel. 

UK traffic levels during the first lockdown fell to as low as 25% of the normal as people were forced to stay home when the pandemic first hit the UK

UK traffic levels during the first lockdown fell to as low as 25% of the normal as people were forced to stay home when the pandemic first hit the UK

UK traffic levels during the first lockdown fell to as low as 25% of the normal as people were forced to stay home when the pandemic first hit the UK

During the second quarter of 2020 - the height of the first lockdown - speeding on all road types increased compared to the same period a year earlier, the DfT records show

During the second quarter of 2020 - the height of the first lockdown - speeding on all road types increased compared to the same period a year earlier, the DfT records show

During the second quarter of 2020 – the height of the first lockdown – speeding on all road types increased compared to the same period a year earlier, the DfT records show

As well as more cases of speeding, there was a spike in extreme cases of breaking limits. Exceeding the speed limit by 10mph went up from 13% to 15% on motorways

As well as more cases of speeding, there was a spike in extreme cases of breaking limits. Exceeding the speed limit by 10mph went up from 13% to 15% on motorways

As well as more cases of speeding, there was a spike in extreme cases of breaking limits. Exceeding the speed limit by 10mph went up from 13% to 15% on motorways

The new report published this morning shows that 30mph zones were most often exceeded, though cases of speeding on 60mph single carriageway roads between April and June also increased from 10 per cent in 2019 to 17 per cent.

Breaking the speed limit on motorways during the lockdown period also rose by one per cent to 53 per cent during the same three-month period. 

As well as more cases of speeding, there was a spike in extreme cases of breaking limits.

Exceeding the speed limit by 10mph went up from 13 per cent to 15 per cent on motorways, one per cent to three per cent on single carriageway roads and six per cent to eight per cent on 30mph roads,

The DfT figures show the spike in speeding cases in 30mph zones when the pandemic struct. That's despite far fewer cars being on the road

The DfT figures show the spike in speeding cases in 30mph zones when the pandemic struct. That's despite far fewer cars being on the road

The DfT figures show the spike in speeding cases in 30mph zones when the pandemic struct. That’s despite far fewer cars being on the road

The records show that speeds in 30mph zones were much higher in April to June 2020 than the same months in 2019

The records show that speeds in 30mph zones were much higher in April to June 2020 than the same months in 2019

The records show that speeds in 30mph zones were much higher in April to June 2020 than the same months in 2019

Speeding on single carriageway roads also rose during the first national lockdown, though like other routes began to fall to 2019 levels as lockdown measures were eased

Speeding on single carriageway roads also rose during the first national lockdown, though like other routes began to fall to 2019 levels as lockdown measures were eased

Speeding on single carriageway roads also rose during the first national lockdown, though like other routes began to fall to 2019 levels as lockdown measures were eased

The stats for April to June show that fewer drivers were travelling below the speed limit in 2020 than a year earlier, with more motorists taking advantage of deserted roads to travel at higher speeds

The stats for April to June show that fewer drivers were travelling below the speed limit in 2020 than a year earlier, with more motorists taking advantage of deserted roads to travel at higher speeds

The stats for April to June show that fewer drivers were travelling below the speed limit in 2020 than a year earlier, with more motorists taking advantage of deserted roads to travel at higher speeds

There was only a nominal increase in speeding on motorways during the lockdown period of April to June, despite the horror stories of motorists reaching speeds of up to 200mph

There was only a nominal increase in speeding on motorways during the lockdown period of April to June, despite the horror stories of motorists reaching speeds of up to 200mph

There was only a nominal increase in speeding on motorways during the lockdown period of April to June, despite the horror stories of motorists reaching speeds of up to 200mph

Motorway speeds were relatively consistent year-on-year, though there are more cases of extreme cases of 90mph-plus in 2020 than in 2019

Motorway speeds were relatively consistent year-on-year, though there are more cases of extreme cases of 90mph-plus in 2020 than in 2019

Motorway speeds were relatively consistent year-on-year, though there are more cases of extreme cases of 90mph-plus in 2020 than in 2019

Once the lockdown started to relax, breaking the speed limits returned to normal levels even though there was still much less traffic on the road – down to 80 per cent by the end of June.

Jack Cousens, head of AA Roads Policy said the DfT’s published figures were ‘worrying’. 

‘Also of great concern was the increase on 30mph roads, given there were more pedestrians and cyclists exercising or avoiding public transport during the first lockdown,’ he added.

RAC's head of roads policy Nicholas Lyes said the new data confirms what the motoring group had previously suspected, that 'lower traffic volumes sadly led to some shocking levels of speed limit disobedience'

RAC's head of roads policy Nicholas Lyes said the new data confirms what the motoring group had previously suspected, that 'lower traffic volumes sadly led to some shocking levels of speed limit disobedience'

RAC’s head of roads policy Nicholas Lyes said the new data confirms what the motoring group had previously suspected, that ‘lower traffic volumes sadly led to some shocking levels of speed limit disobedience’

However, Mr Cousens say that despite some high-profile law breakers, UK roads did not turn into race tracks during the first Covid-19 lockdown.

‘Early in the lockdown, there were incidents of extreme speed on motorways, main roads and even residential streets, particularly around London, as offenders thought the police would be busy enforcing the lockdown. 

‘However, through a series of high-profile “collars” and social media, the police made it clear they were still on the case and that extreme speeders would be targeted.

‘Additionally and carrying on through the second lockdown, rural police forces have had to crack down on speeding along quieter country roads and villages.’

RAC’s head of roads policy Nicholas Lyes said the new data confirms what the motoring group had previously suspected, that ‘lower traffic volumes sadly led to some shocking levels of speed limit disobedience, particularly on 30mph limit roads’.

He told This is Money: ‘This dangerous behaviour unnecessarily put lives at risk during the first national lockdown when more people were walking and cycling. 

‘Empty roads should not be an excuse to drive dangerously and it would be frightening to think one of the legacies of the lockdown is a complete disregard for speed limits and other road users’ safety.’ 

The highest speeds clocked by the UK’s police forces during lockdown

Freedom of information requests revealed the highest speeds recorded by forces from March 23-April 13. In brackets are the speed limits. 

Metropolitan Police: 163mph  (unknown)* 

West Yorkshire Police: 151mph (70mph)

Suffolk Constabulary: 140mph (70mph)

Northamptonshire Police: 138mph (70mph)

Gwent Police: 136mph (70mph)

Staffordshire Police: 135mph (70mph) 

Kent Police: 132mph (70mph)

Humberside Police: 130mph (70mph)

Police Scotland: 128mph (70mph)

Lancashire Constabulary: 120mph (70mph)

Merseyside Police: 115mph (70mph)

North Wales Police: 111mph (70mph)

Norfolk Constabulary: 110mph (70mph)

Derbyshire Constabulary: 108mph (40mph)

South Wales Police: 108mph (50mph)

West Midlands Police: 108mph (70mph)

Gloucestershire Constabulary: 106mph (70mph)

Bedfordshire Constabulary: 104mph (40mph)

Devon & Cornwall Police: 101mph (70mph)

Hampshire Constabulary: 101mph (70mph)

Cheshire Constabulary: 95mph (70mph)

West Mercia Police: 92mph (60mph)

Cumbria Constabulary: 89mph (60mph)

Dyfed-Powys Police: 88mph (60mph)

South Yorkshire Police: 88mph (60mph)

Cleveland Police: 86mph (70mph)

Northumbria Police: 86mph (70mph)

Dorset Police: 73mph (50mph)

Leicestershire Police: 58mph (50mph)

Durham Constabulary: 44mph (30mph)

Source: RAC 

*Case revealed separately by the Metropolitan Police 

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Lenders shun the self-employed

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Millions of self-employed workers, already facing the blight of Covid-19, are receiving harsher treatment from mortgage lenders compared to salaried employees.

Self-employed borrowers are being asked for bigger deposits, additional paperwork, with some lenders lowering the amounts they can borrow and subjecting them to longer waiting times with more frequent and rigorous questioning.

There are over five million self-employed workers in the UK, with the majority now facing tighter lending criteria and affordability rules which, according to HSBC, could remain in place well into 2022.

Self-employed workers face tighter lending criteria and affordability rules

Self-employed workers face tighter lending criteria and affordability rules

Self-employed workers face tighter lending criteria and affordability rules 

Andrew Montlake, of mortgage broker Coreco, said: ‘It is hard not to feel sorry for the legions of self-employed people out there who are finding their path to getting a mortgage blocked by tougher underwriting and additional questions even though they may have perfectly good businesses.

‘Many lenders are lumping everyone together, no matter what industry or their background.’

NatWest is one such lender, recently introducing a separate affordability calculation for self-employed workers which is less generous than the assessment for salaried employees.

Chris Sykes, mortgage consultant at Private Finance, believes NatWest’s decision to restrict the self-employed may be partly because their applications typically take more time for the bank’s underwriters to assess. 

‘NatWest adopted a blanket approach to reduce the number of self-employed applicants it has,’ said Sykes.

‘It has specifically put a section on its mortgage affordability calculator where you have to tick yes or no for if you are self-employed or not and NatWest will lend you less if you’re self-employed compared to an employed person.’

A NatWest spokesman said: ‘We look to understand an individual customer’s circumstances so we can lend responsibly and within that we apply different maximum limits to different customer groups based on their individual risk profile.’

Self-employed workers have to provide lenders with more paperwork and undergo additional questioning in order to secure a mortgage

Self-employed workers have to provide lenders with more paperwork and undergo additional questioning in order to secure a mortgage

Self-employed workers have to provide lenders with more paperwork and undergo additional questioning in order to secure a mortgage

Last month, Metro Bank also toughened up on self-employed workers requiring more documentation from them.

The bank previously requested three months’ worth of bank statements, but is now demanding six months of statements from self-employed people.

A Metro Bank spokesman said that for a salaried employee it would require just three months’ personal bank statements and payslips as opposed to three years’ tax returns, six months’ business bank statements and three months’ personal bank statements for self-employed workers.

William Rhind, of mortgage broker Habito, said: ‘It’s a tough situation for any self-employed people looking to get a new mortgage right now.

‘There are more hoops for the self-employed to jump through with lenders than ever before.’

Pandemic income is now more important

Rhind said lenders are no longer just interested in how a self-employed person has performed over the past two to three years but also how their income has fared during the pandemic.

‘Lenders are now typically reviewing turnover in the last three to six months to see if there has been a significant change since lockdown,’ he added.

‘Unfortunately, if someone’s taken financial support from the Government, or if their business completely closed during lockdown, lenders are seeming to judge these more harshly.’

Nationwide declared last month that the maximum mortgage it is willing to offer self-employed workers is 85 per cent of a property’s value while allowing salaried employees to continue to access to its 90 per cent mortgage products.

This means, for a self-employed worker wishing to buy a £200,000 property, they will need a minimum deposit of £30,000 to qualify for a Nationwide mortgage as opposed to £20,000 for a salaried employee.

A Nationwide spokesman said: ‘The impact of Covid-19 means that underwriting mortgages for self-employed borrowers is much more complex than before as a result of the difficulties in being able to fully assess long-term affordability in these uncertain times.

‘We are therefore temporarily aligning our maximum Loan to value for self-employed borrowers with other major lenders in the market.’

Self-employed borrowers seeking a mortgage 

Experts advise any self-employed workers looking to get a mortgage at the moment to ensure they have the most relevant and up-to-date documentation prepared in advance of any application.

‘They will need their latest accounting figures for the year ending April 2020, their last six months’ business bank statements and a statement as to why the Covid-19 crisis has not affected them unduly,’ said Andrew Montlake.

‘A projection into the next financial year may also come in handy. Some lenders are taking a dim view of businesses which have taken bounce back loans or grants, although others understand that this is perhaps prudent business management rather than a sign that a business is in trouble.

‘As ever, different lenders are taking different approaches and while at present I would probably suggest self-employed borrowers avoid lenders such as NatWest for example, there are other options.’

Obtaining advice from an independent mortgage adviser was deemed vital for those who work for themselves. 

‘If you are looking to get a mortgage and you’re self-employed – it can be done,’ said William Rhind.

‘But getting independent advice from a whole of market mortgage broker is more important than ever.

‘Brokers will be able to present all your lender options, the timeframes expected, and what you need to provide paper-work wise.’

Best mortgage rates and how to find them with This is Money’s help

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35640496 8946397 image a 2 1606135041053

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