RINGING THE CHANGES

From Wednesday 1 July 2015 you are not charged for making a call to any number beginning 0800 or 0808. Despite the fact that these numbers are called Freephone, before the change a call to 0800 or 0808 could be very expensive indeed if made from a mobile phone or some landlines. 

From 1 July 2015 new Ofcom rules mean that all calls from any provider to 0800 or 0808 will cost the caller nothing. That is not to say they will be free to the receiver. The firm offering the number will still pay for the call. To avoid that cost many firms are expected to replace 0800 with 03 numbers. They are charged the same as 01 and 02 numbers and are included in many monthly inclusive ‘bundles’ so effectively cost the caller nothing anyway. 

Other firms will move 0800 numbers to 084 or 087 numbers. The charges for those are also being changed from 1 July so that the cost to the caller will be made clearer - though not necessarily cheaper. 

In future, the charge will be in two parts

• Your phone provider will make what is called an ‘access charge’. That will be a per minute charge for all numbers that begin 084, 087, 09 or 118 which will be stated on every bill. 
• The number you are calling will also make a per minute ‘service charge’ for the call. That will be stated in every advert or written communication about the service. If it is not then report them to the Advertising Standards Authority. 

Phone providers have now announced their access charges which vary from 5p to 44p a minute. For landlines TalkTalk charges 5p a minute, BT 9.58p, VirginMedia 10.25p, and EE 11p. Charges from mobiles are much higher. TalkTalk mobile charges 20p a minute. Vodafone 23p until 10 August when it will rise to 45p, O2 25p, Virgin 36p, and EE 44p a minute.

The service charges will vary but are capped at 7p a minute for 084 numbers and at 13p a minute for 087 numbers. 118 calls are not capped but will be much more expensive. And 09 numbers can charge up to £3.60 per minute and a single call can cost at least £6. 09 offers ‘specialist services’ including horoscopes, advice, and sex lines.

Some financial firms which are still offering 084 and 087 numbers must tell you from 1 July what the service charge will be in any published material that refers to them. You may find that substituting a '3' for the '8' will get your though at normal call rates.

Complexity
Ofcom tells me that it expects some mobile providers to muddy the transparent waters of the new simpler prices. Or, as they might put it, engage in imaginative competitive deals. The providers making the higher access charges are expected to offer customers the choice of paying an extra fee to access 084 or 087 numbers with no service charge. EE has already announced an 084 and 087 add-on. By paying an extra £3 a month you get up to 300 minutes of calls to 084 and 087 numbers at no extra charge. 

BT is joining in the complexification by continuing to include 0845 and 0870 numbers it its inclusive bundles so they will be free for the hours the bundle covers. But beware – other 084 and 087 numbers are not included in that deal. 

The freephone changes do not apply to 0500 numbers which may still be expensive to call. They will be phased out in 2017.

More details on all the changes at UK Calling Info  

Paul Lewis
1 July 2015
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WAGE RISES TO BOOST TRIPLE LOCK

Average earnings rose by 2.7% compared with a year ago. The figure – provisional and for the three months February to April 2015 – was published this week. I'm sure many of you are shouting 'mine didn't' or 'pay frozen for three years' or 'barely 1% in my case'. But that is not the topic. The rise in the official measure of average pay above 2.5% has big implications for the triple lock.

The triple lock, you will recall, raises the basic state pension each April by prices, earnings, or 2.5% whichever is the highest. Prices are now (since 2012) measured by the Consumer Prices Index (CPI) and earnings are measured using the average earnings figure published each month which this month reached 2.7%. 

The CPI used is the one for September – which is published mid-October. 

The average earnings figure uses the measure for the whole economy, seasonally adjusted, taken from May to July, and compared with the same three months a year earlier. It is the figure for total pay (which includes bonuses) and waits for the revised estimate which is published a month after the provisional figure. That final figure is officially the statistic KAC3 for May to July (revised). It is also published mid-October. 

If the figure published four months from now is above 2.5% then it will be inserted in the triple lock calculations instead of the 2.5% floor. So the fact that statistic KAC3 February to April (provisional) is 2.7% is highly significant. Not least because if we look back at the revised figures over the last twelve months and project them forward in a straight line, then KAC3 revised for May to July is projected to be 3.5%. If that turns out to be the true figure it will be good news for pensioners and bad news for the Chancellor.

The Office for Budget responsibility had estimated that the rise in average pay for 2015/16 would be 2.3% and CPI would be 0.2%. That meant the triple lock to fix the state pension next April would use 2.5% leading to a basic pension of £118.85 a week. But if the earnings rise is 3.5% then that would be the figure used instead of 2.5%. If so the basic state pension would rise from its present £115.95 not to £118.85 but by another £1.15 a week to £120.00. The extra cost of that extra rise for 13 million pensioners will be around £700 million in 2016/17. And each year after that the costs will grow as that amount is itself uprated. Over the parliament it could add £4 billion to the cost of the state pension.

The extra cost does not stop there. It also affects the starting level of the single tier state pension due from April which would have to be £1.15 higher than the £154.10 which a 2.5% rise implies. And that figure of £155.25 would then set the benchmark for the future because the triple lock – under present plans – applies to all new pensions from April 2016 paid up to that single tier amount.

In my April blog Triple Lock to Continue I estimated that the extra cost of using the triple lock rather than CPI to uprate the state pension was at least £12 billion and could be up to £17 billion over the current parliament (see http://paullewismoney.blogspot.co.uk/2015/04/triple-lock-to-continue.html). If wage growth is higher than the official predictions – and this month’s data indicates it might be – then the extra cost of the triple lock will be even higher.

This blogpost is an based on my Money Box newsletter 19 June 2015. Subscribe here 

19 June 2015

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WHERE HAVE ALL THE BANK FINES GONE?

Almost every week a bank or firm – even an individual – is fined millions of pounds for cheating someone or other. In the last few weeks Barclays was fined £284m over rigging foreign exchange markets and Lloyds £117m over failing to pay the right redress to customers it had already conned by mis-selling them  PPI. 

So who gets this fine money?

It’s a question I am often asked. And the short answer is George Osborne or, as he is officially known – the Consolidated Fund!

In the past, fines by the regulator were small – a few thousands of pounds – and the money was used to offset some of the costs of regulation. But from April 2012 that changed. Seeing the large number of substantial fines coming through for banks that had cheated the markets by rigging LIBOR interest rates the Government decided that it would follow the US Treasury and keep the money itself – after the costs of enforcement (around £45 million a year) had been deducted by the regulator – the Financial Conduct Authority.

Initially the Government sweetened the pill of snaffling this money by dedicating the fines to good causes. The first announcement in October 2012 allocated £35 million of the LIBOR fines to ‘support Britain’s armed forces community’. A year later, in his 2013 Autumn Statement, George Osborne announced he would “make a further £100 million of LIBOR fines available to our brilliant military charities and extend support to those who care for the work of our police, fire and ambulance services.”

The money has partly been used to pay for rehabilitation of injured soldiers. The fines for cheating on the Forex markets are earmarked for the NHS. And before the election the Conservatives promised to use a £227 million fine imposed on Deutsche Bank to fund 50,000 apprenticeships. All things which you may think the Government would be paying for anyway.

Now the Government has told Money Marketing – which tried to track the money down – that the fines are collected centrally and “the Treasury then allocates it to relevant departments.” So it seems it will in future mainly be used to fund general Government spending.

The amounts that are now being raised are eye-watering. In 2014 alone fines totalled £1.4 billion, mainly from the big banks over foreign exchange and LIBOR fixing. And so far this year another £814 million has been clocked up for similar transgressions.

These are tempting sums for any Chancellor, especially one who is committed to begin the process of reducing the £1.5 trillion national debt before the end of this Parliament.

This piece was first published in the Money Box newsletter 11 June 2015. Subscribe here