Cheap loans for small businesses

What difference will the government's new National Loan Guarantee Scheme make to a small business?

Quick recap: Mr Osborne guarantees £20bn of fundraising for banks over 2 years, so they can raise money at a cheaper interest rate than normal to lend on to small businesses.

The technical name for the policy is "credit easing".

Full details tomorrow, but the burning questions for the firms and traders concerned will be what's it worth, can they get it and how much is available?

1. What's it worth?
Up to 1% off the interest rate you would have been charged outside the scheme.
One big bank offers an average interest rate to small business of just under 3%, with the vast majority of loans under 6% -- so 1% off that is a decent amount.

2. Can I get it?
You have to  pass the same credit checks as normal. There's no special leniency.
New and existing borrowers will qualify.
The lending is expected to be fixed rate and you're likely to have to provide security, either business property or your own home.

3. How much can I borrow?
There's no upper limit and loans will go right down to £1,000, though not all banks will go down that far.
Terms are likely to be 3 or 5 years.

4. How many loans will be available?
The scheme will only cover a minority of small business lending during the 2 year period.
So if it proves popular, it'll be...buy now while stocks last.

We know already that RBS/NatWest, Barclays, Lloyds, Santander and Aldermore will be offering the discounted loans, not HSBC.

Will it work? It seems likely that a lot of firms will be able to take advantage of the scheme, even though they would have borrowed the money anyway.

But the cut-price loans and the publicity could tempt some new borrowers who are ready to expand.

Stamp duty dodge

No one likes tax dodgers, especially if they're rich.

So the Coalition's rumblings against UK celebs and foreign tycoons using offshore companies to avoid stamp duty on their homes have got plenty of notice.

Which works well for Mr Osborne if, on the other hand, you are planning to do the wealthy a favour by cutting the top rate of tax.

But there seems to be a lot of confusion about what's being avoided and how much.

Just to be clear, the device of using, or setting up, an offshore company to buy a UK home would not normally get you out of paying Stamp Duty Land Tax.

Interestingly, the tax man will tell you that the very fact that the property appears in the Land Registry's records as owned by an offshore company means that stamp duty has been paid.

It is hardly surprising, then, that various well known people and Middle Eastern figures have told the newspaper that they haven't avoided the tax.

The tax benefit comes later on, because the offshore company can change hands without the duty being paid by the purchaser. In theory, then, the purchaser might be prepared to pay more to the vendor.

And the owner would probably be able to dodge inheritance tax, if everything was kept offshore.

There are three main scenarios to keep in mind:

1. You buy a home in the normal way and pay Stamp Duty Land Tax at the normal rate, which is what most people do.

2. You use an offshore company to buy it. You still pay stamp duty but the duty might be avoided by the person who buys it from you.

3. You buy the property in the normal way but use the name of an offshore company as the owner, to keep the ownership private. You pay stamp duty and the person you sell it to pays the duty as well.

Incidentally, the point about privacy is an important one, if you want to understand what is going on.

Solicitors involved in pushing these deals through are adamant that secrecy is the main motivation for the very wealthy buyers who use offshore companies.

Consider a Greek tycoon or a rich Syrian, keen to pull money out of danger and park it in London property -- currently viewed as an international safe haven and relatively cheap. They'd want to keep it all under wraps.

Having said that, it still seems likely that the Exchequer is missing out on many millions of pounds in stamp duty. The question is: how many millions?

The most headline-grabbing estimate is that £1bn is being lost, though it's not clear whether this is per year. Another number bandied about is £500m.

Tax officials at HMRC put the total Stamp Duty Land Tax gap at £250m for 2009-10, taking both residential and commercial property into account.

What I'm told by people involved in the transactions is that the yield from a clampdown would be at the lower end of these figures, though still - possibly - hundreds of millions.

Maybe you'd expect them to say that but the reasons are:

*The buyers tend to pay the initial stamp duty

*Then they tend to sit on the investment. There's not much trading which goes on afterwards.

So there's no doubt that action against this dodge is imminent, but there is doubt about how much the clampdown will yield.

Groupon's abject "Sorry"

What should we conclude from the abject apology on Groupon's website today, after accusations that it misled customers with exaggerated offers of discounts?

In response to the hugely embarrassing charge from the Office of Fair Trading that there was widespread evidence of consumer protection laws having been breached, Groupon says:

"We’re sorry."

"We've failed."

"It pains us when we fall short."

"We messed up."

Groupon does squirm a bit, blaming "the negative side effects of our growth" and firms who advertise their discounts on the website and "are unfamiliar with how much capacity their business can actually handle."

Even so, the company has promised to vet its adverts so they don't mislead.

And it will make careful checks on firms who make the offers, to ensure that they can deliver the goods.

But the question hanging over this is whether a monster organisation like Groupon can work consistently in the consumer's interest.

If you are posting hundreds of new offers a day across 50 towns and cities and growing like topsy, can you be 100% confident that they are fair, accurate and reliable?

We will know the answer in a few months because the OFT is basically saying: "I've got my eye on you!"

On the OFT, Groupon comments: "Frankly, we’re grateful any time someone takes the time to give us feedback on how to better serve our customers."

Please remember, Groupon, this is not a gentle piece of feedback, it is a threat of court action and a fine.

Groupon clampdown

Office of Fair Trading takes action against Groupon

The fast-growing discount offers website, Groupon, has promised the Office of Fair Trading to improve its trading practices.

An OFT investigation found widespread examples of Groupon's practices which in the watchdog's view breached consumer protection regulations.

Groupon has said it will change its practices to ensure that prices in its adverts are accurate and honest and that any limitations on availability are made clear.

It's also given assurances that it will check whether suppliers can provide goods in the quantities or time frame suggested.

Groupon was criticised by the Advertising Standards Authority last year for exaggerating savings, not providing evidence that offers were availalble and not clarifying terms and conditions.

The OFT warned Groupon today that it would monitor complaints closely and that any breach of the undertakings could lead to court enforcement orders.

Bank of Ireland rate hike

The Bank of Ireland is raising the Standard Variable Rate on its mortgages by 1.5%, affecting 100,000 customers across the UK.

The SVR will rise from 2.99% to 4.49% in two stages.

There will be a 1% in June this year and a further 0.5% in September.


A homeowner with a £100,000 repayment mortgage will see an £81 increase in monthly payments to £555 a month, according to the financial information firm, Moneyfacts.

The lender said the cost of funding mortgages had increased significantly. It added that its current SVR was considerably lower than the market norm and its rates would remain competitive.

The move comes after the Uk's largest mortgage lender, Halifax, said it would raise its SVR from 3.5% to 3.99% from 1st May.

Standard Variable Rate is a benchmark mortgage rate which large numbers of borrowers revert to after discount offers or fixed rates have expired.

Why they work at John Lewis

Today's announcement that John Lewis and Waitrose staff will be paid a bonus of 14% of their salaries is focusing attention on on the perks that this UK shopping institution gives to its 81,000 partners.

The bonus works out at a juicy 7 weeks pay. It's slightly down on last year in light of the fact that the group's profits have dropped a bit while other retailers took a hammering.

But partners can console themselves with:

* their non-contributory final salary pension scheme which they can join after 3 years' service

* 5 holiday complexes for staff, including golf courses in Berkshire and Hampshire, a sailing club and holiday resorts in the Lake District and on Brownsea Island

* discounts on most purchases in John Lewis and Waitrose

* 25 days paid holiday after 3 years, rising to 30 days after 10 years, then a full six months off after 25 years

* cheap lunch, life assurance and more.

No wonder they stick around!

12 million PPI letters

Millions of letters are about to be sent out by banks, telling customers that they may hav e been mis-sold Payment Protection Insurance and can apply for compensation.

Today the Financial Services Authority is expected to tell banks what the letters should say, in a move which is likely to trigger billions of pounds worth of additional claims.

Payment Protection Insurance or PPI was sold by banks, credit card companies and other financial firms to cover payments on loans if the policyholder fell ill or lost a job. But often it was to people who didn't need the insurance or couldn't use it.

£2bn has already been paid to customers who complained. On top of that, banks have been preparing a mass mailout of up to 12 million letters.

They are under pressure from the FSA, which is anxious that they contact possible victims of PPI mis-selling who haven't yet put in a claim.

The FSA is worried that the letters wo't be clear enough to prompt people to seek compensation. So the watchdog is likely to require banks to state clearly that the customers may have been mis-sold, may be entitled to compensation and should act quickly.

The trawl for more people who have lost out could lead to compensation payments worth £3bn. Banks have already set aside £7.6bn to cover the total compensation bill.