UK Finance News

The million policyholders that lost half of their investment with Equitable Life in 2001, when the company came to the brink of collapse, have been given some hope that they will be at last be able to seek compensation for their losses as a report from the Parliamentary Ombudsman Ann Abraham, is published.

The ombudsman found evidence of “serial regulatory failure” by the government departments and watchdogs that were supposed to be protecting the insurer’s customers. She identified 10 instances of maladministration in the period leading up to December 2001, called on the government to apologise to policyholders for the “injustice” they had suffered and recommended that ministers set up a compensation scheme.

Chancellor Alistair Darling has insisted that the government cannot be held responsible for compensation, but he faces a tough fight from the ombudsman who’s report follows a European parliament finding that also claimed compensation should be paid.

Compensation for losses is likely to be around £4.5billion.

The bumbling government Treasury department have today announced the further postponement of the 2p per litre fuel tax rise for the second time since it’s proposed introduction in this April this year.

The tax was first postponed until October, but pressure from motorists and business leaders have resulted in the further postponement until April next year.

Chancellor Alistair Darling said: “The global credit crunch and sharp rises in world oil prices have pushed up prices at the pump. Today’s decision will help motorists and businesses get through what is a difficult time for everyone.”

So they are looking out for us after all.

The forgotten political party, the Liberal Democrats have however condemned the move as ‘irresponsible’, suggesting that the government have acted in a ‘panic environment’ and would like to know how the government can afford to pay it.

Of course the fact that the fuel tax increase has been such an important issue in Gordon Brown’s home country during the upcoming Glasgow East byelection will have nothing to do with the decision.

The Scottish National Party are proving a strong opposition to the the current Labour government, and its members have been instructing voters to send a clear message to Brown over the fuel duty increase.

London’s FTSE 100 index slid into ‘bear market’ territory amid fears that the UK economy could fall into recession.

Speculation that two US mortgage providers might have to raise fresh capital and make further write-downs prompted a ’sell off’ on Wall Street, making things very uncomfortable for a host of financial stocks on the UK market.

Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said: “Today’s fall marks a full entry into bear market territory, even though most investors will have been feeling that this has been here already for some months. At this precise moment, it is difficult to identify from where a positive catalyst might emerge,” he added.

Fears over rising inflation are a concern for homeowners who are looking to the Bank of England for some respite, but any thoughts of a cut in the interest rate this week are most unlikely, despite the boost a cut would give the economy.

With crude prices refusing to drop below $140 per barrel and food prices increasing almost weekly, the threat of inflation remains severe and most experts expect the bank rate to remain unchanged.

Good advice from The Daily Mail This Is Money section, for the 1.4 million of us who hold shares in HBOS, a document outlining the companies rights issue should now be in your possession.

Put it through the shredder is the advice being given and should not even be a consideration. HBOS share price on 1st July was 6p lower than the 275p being asked for the new rights issue, so really there is no point in buying.

Giving the current economic climate it is unlikely that the HBOS share price will rise dramatically before 11th July the D day for the rights issue, if it were to improve then the advice could very well change.

But being realistic, Stockbroker Justin Urquhart Stewart, of Seven Investment Management, says: ‘Don’t even think about participating in this rights issue. If you really want to buy HBOS shares, then go to the market and buy them. Leave the merchant banks to pick up the pieces of this issue.’

Pressure from the government to avert another Northern Rock crisis has led to Alistair Darling announcing new proposals which have been put forward to the Financial Services Authority for approval.

The chancellor wants the current limit for compensation raised from £35,000 to £50,000. However Banks have already hit out at the idea of paying into a fund to cover the risk of collapse, claiming that they are already under enough pressure with the current credit crunch.

The government responded by saying that the scheme would have the power to borrow money from the public sector in the event of collapse, allowing it to repay savers quickly.

Since October 2007 the Financial Services Compensation Scheme (FSCS) has guaranteed all deposits up to £35,000. In November it was suggested that the amount should be raised to £100,000 to bring it in line with the USA protection levels, but as usual the governments response has been far less than impressive, settling on just half of the proposed figure.

The usual story of too little too late from the UK government.