And experts warn that it could cost the average household £425 a year. Ahead of next week’s budget, the TUC calculates the poorest fifth of households spend twice the percentage of their disposable income on VAT as the richest fifth.

Food and children’s clothes are exempt but so are private health and private education. The TUC report said increasing VAT would feed  directly through to inflation, with possible interest rate rises leading to higher borrowing costs for companies and bigger mortgage bills for consumers.

TUC general secretary Brendan Barber said: ‘VAT increases don’t just hit the poor more, they also hit small firms, threaten retail jobs and by boosting inflation could lead to higher interest rates.’ Accounting firm KPMG added that a VAT increase could hit businesses, such as retail and financial services, hard. Malcolm Edge, head of national markets at KPMG, said: ‘Such a move could stifle consumer spending, hampering the recovery and it could cost the average household £425 a year.’  Article First  Published in Metro

Dave Williams, 42, wanted to borrow £83,000 but has been turned down after surveyors found Japanese knotweed in his flower beds. The bamboo-like weed can grow up to 3.6m (12ft) and is hard to eradicate with pesticides. It can push through concrete and damage buildings. Offi-
cials said the knotweed posed a risk to the structure of the building, which rendered it ‘unsaleable’.

‘It’s crazy. We should use some common sense,’ said MrWilliams. ‘It is an intensive weed but all I’ve got is half a dozen sticks barely 2ft high. ‘If I had a survey done in winter I would have been OK because it only comes up in spring and summer.’ The offending plant is growing on land nearby that Mr Williams bought to extend his garden. The carpenter, from St Austell, Cornwall, had hoped to borrow 20 per cent of the house
value but mortgage provider Santander refused. In a letter to the family, Santander said the property was ‘not readily saleable for owner occupation’.

Aspokesman said: ‘Due to the invasive and destructive nature of Japanese knotweed, if it is found in close proximity to the property we would need to assess whether or not a mortgage could be accepted.’ Knotweed is common in Britain after being brought over from Japan in the mid-19th century. It is immune to most natural pests and diseases. Cutting it back tends to make it grow back thicker. The cost of trying to eradicate the weed from Britain is estimated at more than £1.25billion.

But a spokesman for the Royal Horticultural Society said knotweed was a ‘nuisance’ not a ‘problem’. And a spokesman for knotweed eradication company Herpetosure said the weed could be dealt with ‘if treated properly’.  By Ross McGuinness

Here are the key points of Chancellor Alistair Darling’s 2010 Budget, the last one before the general election.

UK Budget 2010

FUEL, CIGARETTES AND ALCOHOL DUTIES

• 3p fuel duty rise to be phased in<http://news.bbc.co.uk/1/hi/business/8585352.stm> in three stages between April and January 2011 rather than in one go next month
• Cider duty to rise by 10% above inflation <http://www.bbc.co.uk/blogs/daveharvey/2010/03/chancellors_cider_tax_leaves_w.html> from midnight on Sunday Wine, beer and spirit duties to rise by 2% from midnight on Sunday and further 2% rise planned for two years from 2013.
• Tobacco duty up 1% from midnight on Sunday and by 2% in real terms each year until 2014

HOUSING

• Stamp Duty scrapped for homes  <http://news.bbc.co.uk/1/hi/business/8585423.stm> selling for up to £250,000 for first-time buyers, but only for two years.
• Stamp duty on residential property sales over £1m to increase to 5% from April 2011.
• The most expensive properties in each area will be excluded from Housing Benefit calculations.

UK ECONOMY

• Economy contracted 6% during the recession<http://news.bbc.co.uk/1/hi/avconsole/latest_news/857354.stm>.
• Predicted growth of 1% to 1.25% in 2010, in line with forecasts.
• 2011 growth forecast lowered from 3.5% to 3-3.5%.

BORROWING

• Borrowing this year forecast to be £167bn<http://news.bbc.co.uk/1/hi/business/8584978.stm> – £11bn lower than predicted in December.
• Borrowing to fall from £163bn in 2010-11 to £74bn by 2014-15.
• Public sector net debt to reach 54% of gross domestic product this year,increasing to 75% in 2014/15.

HELP FOR BUSINESS

• £2.5bn package for small business to boost skills and innovation<http://news.bbc.co.uk/1/hi/business/8585144.stm>
• One year business rate cut from October to help 500,000 companies.
• Investment allowance for small firms doubled to £100,000.
• Doubling relief on capital gains tax for entrepreneurs but no change to capital gains tax rates.
• £385m to maintain road network.
• Canals body British Waterways to become charitable trust not sold off

BANK LENDING

• One-off bank bonus tax has raised £2bn, double the amount forecast.
• Basic bank account guarantee for a million extra people.
• RBS and Lloyds Bank Group to provide £94bn in small business loans.
• Backs tax on bank transactions but on global basis.
• New service to adjudicate credit disputes

JOBS AND TRAINING

• Six month work or training guarantee for under 24s extended to 2012.
• Amount of time over-65s must work to receive work credits reduced.

OTHER TAXES AND ALLOWANCES

• Tax allowances for those on over £100,000 gradually removed. No changes to allowances for everyone else.
• Annual limits on Individual Savings Accounts (ISAs) will rise from £7,200 to £10,200 next month.
• No changes to VAT or income tax planned.
• Inheritance tax threshold frozen for four years.
• Clampdown on tax avoidance to raise £500m
• New tax agreements with Belize, Grenada and Dominica

GOVERNMENT SAVINGS

• On track to achieve £11bn efficiency savings target by 2012-3.
• Reform of housing benefit to save £250m.
• 15,000 civil servants to be relocated outside London.
• As part of £343m cuts to the Ministry of Justice budget, the Courts Service and the Tribunals Service will be merged and 20 magistrates courts closed.

ENVIRONMENT

• £2bn investment bank to back low-carbon industries such as offshore wind.
• Government to provide £1bn through asset sales

EDUCATION

• Funding for 20,000 new university places in science and maths but institutions must make savings elsewhere.
• £35m enterprise fund to help university-launched businesses.

PENSIONS AND BENEFITS

• Winter fuel allowance rates extended for further year.
• £4 rise in child tax credit for parents with young children from 2012.

Minutes published by the Committee last month show that the Bank may look to spend more on quantitative easing in the future, but wants to judge how effective its purchases have been before it commits more money to the programme.

Figures from the Office for National Statistics last week revealed that the UK economy had grown between October and December by more than was originally thought.

UK gross domestic product grew by 0.3% in Q4 according to the latest revision, up from the sluggish 0.1% growth initially estimated by the ONS. The quantitative easing programme was not expected to be boosted further this month as the Bank looks to curb rising inflation.

Inflation hit 3.5% in January, the highest level since November 2008 and up from 2.9% in December.

Bank of England

Ben Thompson, director of mortgages at Legal & General, says: “Political forces will significantly influence the overall economic picture this year – we’ve got an election coming up and inevitable tax hikes to tackle the gargantuan government debt. “This will hit the pockets of British families, tempering their spending and allowing the MPC to maintain rates at a low level for some time yet.” He adds: “The lurking threat is inflation though. “The Bank expects inflation to remain high for several months but only temporarily so. “There are some signs that inflationary pressure may build up over the course of this year and next year.”

Ray Boulger, senior technical manager at John Charcol, says: “The economic arguments continue to suggest a tracker mortgage is the right choice for most borrowers because the economy is in such a mess that low interest rates are here for some time yet. “Yet the election cannot be ignored.  The markets have been expecting a Conservative majority and what once looked like a foregone conclusion is now not so certain.  This may have a negative effect on fixed rate pricing.”

As ever, I hope this information is useful to you.

You may be aware that the Bank of England today decided to maintain the Base Rate at 0.5% for the 11th consecutive month. Mortgage rates have also remained stable over the initial 5 weeks of the year with a slight reduction in Fixed Rates, as lenders try and temp clients to fix while rates remain low.

We have seen an increase in higher Loan to Value products with 80% and 85% lending options competitively priced. Further information can be found here – http://news.bbc.co.uk/1/hi/business/8496830.stm

The UK base rate remains at 0.5% for the eleventh month running. Although there are signs that inflation is starting to increase in combination with the increase in the rate of VAT, there are no indications that the Bank of England is planning to reverse its low-rate policy.

Recession:-

The UK finally emerged from recession in January. In the last three months of 2009, the UK grew by 0.1%. Whilst this is lower than expected, it is a welcome end to the stigma that is attached with being in recession.

Housing Market:-

The housing market continues to show strong growth. According to Nationwide, house prices increased by 1.2% in January. In addition, the average price of a UK property cost 8.6% more compared to this time last year. Unless there is a fall in property values this month, annual house price inflation is likely to move into double-digit territory next month for the first time since May 2007.

Mortgage Market:-

It is clear that banks now have a much stronger appetite to lend. Over the last six weeks, there has been an incredible 22% increase in mortgages available at 85%; with approximately 384 products now available. There has also been an increase in the 90% sector, with approximately 165 products now on offer. This is good news and if lenders continue to operate in these markets, we could see a significant improvement to the housing market in 2010.

Risk remains central to lending policy and products are priced to reflect this. 70% to 75% lending is considered “safe” with some rates as low as 2.69% and fees of £995. At 85%, we are seeing rates at 4% and 90% options at 4.99% with fees as low as £99.

Buy to Let:-

The buy to let market has also seen some impressive signs of improvement over the last five weeks. During 2008 and 2009; the number of buy to let products available seriously decreased and the few lenders left in this space introduced very heavy fees; typically 2% of the loan amount. Whilst lenders had major concerns about this sector, recent analysis suggests that tenant demand is still very strong, particularly in London. In addition, some lenders have introduced products without a fee and lending at 75% with rates below 6%.

Summary:-

Whilst the above news is very encouraging, some lenders continue to tighten lending policy and are beginning to increase their standard variable rates. Some SVR margins are now disjointed from the base rate. Certain pundits refer to this as the “SVR Trap” where lenders look to increase variable rates given the volume of people now taking advantage of the low margins. This is a potential problem for existing borrowers and we have been working with many clients recently to secure refinance products to minimise this risk. Given that property values are more stable; we expect to see the remortgage market grow this year for these reasons.

Whilst we don’t anticipate too much in the way of “outstanding” news this year; we don’t expect a return to the horror stories the credit world has experienced over the last two years. We are very positive about the future and we continue to work very closely with clients to address their needs.