Government debt rose again during the first quarter of the year, to £2.3tn

By Suzanne Evans, Director, Political Insight

Government debt rose again during the first quarter of the year, to £2.3tn, the equivalent of 99.6% of GDP, according to the Office for National Statistics(ONS), which also said on Friday that this was 11.8 percentage points above the EU average. The deficit, meanwhile, was £15.8bn during the period, equal to 2.6% of GDP. The ONS said borrowing was £4.1bn higher in June than the same month a year before, overshooting the Office for Budget Responsibility forecast by £600m.
 
Credit card borrowing grew 12.5% in June, the fastest rate since 2005 Bank of England (BOE) figures show. The BOE figures also showed the nation is also putting much less money aside in savings, depositing only an extra £1.5bn with banks and building societies in June, well down on May's total of £5.2bn. Nicholas Farr, assistant economist at Capital Economics said: " Overall, June's money and credit data add to signs that higher inflation and higher interest rates are taking their toll on households”. “With inflation and interest rates only set to rise further, we think the economy will soon slip into a recession,” he told the BBC.
 
The Bank of England’s (BOE) June proposal to withdraw the mortgage affordability test comes into effect today. The "stress test," introduced in 2014 as to help prevent a repeat of the mortgage mis-selling scandal that contributed to the 2008 financial crisis, had require lenders to calculate whether potential borrowers would be able to cope if interest rates climbed by up to 3%. However, strict loan-to-income limits will remain in place. Mark Yallop, chairman of the Financial Markets Standards Board, said that while the change would make it "slightly easier" for some borrowers to get a mortgage, he did not think with would have a significant impact. "The biggest constraint on new mortgages is the ability of borrowers to afford a deposit," he said.
 
UK mortgage lending decreased to £5.3bn in June, down from £8bn the month before, according to the Bank of England’s (BoE) money and credit report released on Friday. Gross lending decreased to £25.4bn in June from £28.1bn in May, and gross repayments decreased slightly to £20.3bn from £21.2bn. Approvals for house purchases, an indicator of future borrowing, decreased to 63,700 last month, from 65,700 in May, below the 12-month pre-pandemic average up to February 2020 of 66,700. Approvals for remortgaging, which only capture remortgaging with a different lender, decreased to 44,000 in June, from 47,200 in May. This also remains below the 12-month pre-pandemic average up to February 2020 of 49,500. “The monthly decline in the total amount of borrowed could be the clearest sign yet that nervousness over inflation and the crippling cost of living crisis is finally seeping into the UK’s red-hot property market,” Alice Haine, personal finance analyst at Bestinvest, told Yahoo Finance. The BOE pointed out that net mortgage debt borrowing is still, however, above its 12-month pre-pandemic average up to February 2020 of £4.3bn.
 
The RAC is again calling on the government to cut fuel taxes, saying cuts already implemented in the UK are among the lowest in Europe. Of 13 European nations that have cut tax on petrol, only Luxembourg has done less, the motoring organisation says. The UK cut fuel duty by 5p a litre in March, while Germany had taken 25p a litre in tax off, Italy 21p, Portugal 16p, and Ireland and the Netherlands 15p. Together, fuel duty and VAT make up 46% of the cost of a litre of petrol in the UK.
 
Octopus Energy has asked the government for £1bn so it can take over collapsed rival Bulb, Sky News says. Bulb went bust last November and is currently being run by the state through energy regulator Ofgem. Sky says that Octopus - the only energy supplier willing to take Bulb over - is now offering a profit-sharing deal with the government; to pay between £100m - £200m for Bulb’s customers; and to pay the £1bn back in full over time to secure the deal. The Bulb bailout is already expected to cost the taxpayer around £2bn by next year, but the Office for Budget Responsibility warned in March that “given the volatility in global energy markets, there remains uncertainty around the final cost". The government declined to comment on Sky’s story, widely reported elsewhere, "due to commercial sensitivity," as did Octopus.
 
Citizen’s Advice is urging Ofcom to do more to help broadband and mobile customers who pay a "loyalty penalty" for staying with their provider, having analysed 165,000 budgets of those seeking debt help and finding people on the lowest incomes spent almost double the proportion of their income on telecoms, when compared to the highest earners. Often, the cheapest deals are only available to new customers, a practice Citizen’s Advice says must change. In January, the Financial Conduct Authority (FCA) put a stop to year-on-year increases, so-called "price walking", for car and home insurance by requiring companies to automatically switch their customers to better deals. Citizens Advice is now looking for similar action from other regulators. Ofcom responded by saying that switching to a new deal when an existing one ends can result in significant savings and that it had taken action to make the process simpler and quicker. a "One Touch Switch" system is also due to be introduced in April 2023.
 
The Competition and Markets Authority (CMA) is investigating Asos, Boohoo and Asda over claims that may suggest their fashion collections are greener than they actually are. The probe – which will look in particular at the Responsible edit" from Asos, Boohoo's "Ready for the Future" range and "George for Good" at Asda - is part of the watchdog’s ongoing investigation into potential "greenwashing", when firms make incorrect eco-friendly claims for their products. Sarah Cardell, interim chief executive of the CMA, said: "People who want to 'buy green' should be able to do so confident that they aren't being misled. Eco-friendly and sustainable products can play a role in tackling climate change, but only if they are genuine." The companies all told the BBC that they were committed to providing accurate information.
 
Sportswear chain JD Sports has lost millions of pounds after being forced to sell Footasylum, three years after buying it. The takeover was retrospectively blocked by The Competition and Markets Authority (CMA) which ruled the merger could lead to less choice and a "worse deal" for customers.
JD has now sold Footasylum to private equity firm Aurelius for £37.5m, far less than the £90m price it paid in 2019. Earlier this year, the CMA also fined JD Sports and Footasylum almost £4.7m by the CMA for sharing commercially sensitive information during its investigation.  JD Sports boss Peter Cowgill, resigned from the company after the fine, having admitted to "inadvertently" breaking the rules over the sharing of commercially sensitive information. However, JD maintains the decision to block the takeover is "inexplicable”.
 
Waitrose has joined M&S, Morrisons, the Co-op, and Tesco in scrapping best before dates on nearly 500 items of fresh food from September, in an attempt to tackle food waste.
 
Crisis-hit Chinese property giant Evergrande says that one of its subsidiaries has been ordered to pay out 7.3bn yuan (£888.7m) for failing to honour its debt obligations. Evergrande Group (Nanchang) Co. Ltd had pledged a total of 1.3 billion shares that it held in Shengjing Bank Co. Ltd as counter-guarantees, and that as the borrowers failed to repay the loans, “the applicant carried out its obligations under the guarantee and claimed against the subsidiary under the pledge," the company said. The announcement comes just two days after Evergrande outlined plans to restructure its foreign debts, plans which include offering offshore creditors asset packages that may include shares in it overseas units - including an electric vehicles business and property services provider - as a sweetener, the BBC reports. Evergrande was once China's top-selling property developer but has for months been struggling under the weight of more than $300bn of debts, of which around $20bn is held by investors from outside China.

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