World Economic News
British Rates Set To Rise Against House-Price Inflation
Interest rates in Britain will have to be increased to 5.25% by year's end, as the only way to deflate housing prices, now at a 20% annual rate, warned the UK Council of Mortgage Lenders on May 24. The 5.25% rate would be double the all-time-low rate which prevailed until the Bank of England began a series of three interest-rate increases last year. Council director-general Michael Coogan said: "We are not expecting a house price crash, we expect there to be a slowdown." Only by increasing rates could house price rises be brought down to 8% by next year. The Council represents 98% of mortgage lending in Britain.
Currently, in Southwest Britain, house prices are almost 7.5 times local earnings. Nationwide, prices are 5.6 times earnings. Since 2001, house prices have risen by one-third in greater London, but almost two-thirds in the rest of Britainalthough prices are still much higher in London.
In April, British householders borrowed a record 6.4 billion pounds against the value of their houses, pushing existing debt in the country up to 980 billion pounds. The figure could break 1 trillion pounds by summer, an amount equal to the national annual income, the London Times warned on May 22.
UK Jobless Levels Would Double if 'Hidden Unemployment' Counted
British unemployment levelsclaimed to be the lowest in the G-7would double if all the "hidden unemployment" were included in the figures, a just-released report by the Centre for Regional Economic and Social Research of Sheffield Hallam University says. It says that the government is sitting on an unemployment "time bomb." Some 2.5 million people are out of work in Britain, rather than the 900,000 claimed by the government, whose figures are based on those "receiving job seekers' allowance" (JSA). This figure is also double those 1.4 million classified as "jobless" by the International Labor Organization's definition.
According to the study, over 1 million people claiming sickness benefits, have been taken off JSA, and are therefore no longer counted as "unemployed." "The true level of unemployment is much greater than official figures indicate," the report, which reflects several years of research, states. Were access to disability or other benefits tightened, the levels of officially unemployed would "explode," the study warns. The disability claims have grown from 570,000 in 1981 to a "truly astonishing" 2.1 million in 2003, the study says. Most claims, by far, are in former industrial areas.
The issue is not increased bad health, but lack of work, the study says. In the formerly industrial northeast, more than 6% of the workforce is on disability, contrasted to about 1% in the service-led economy of the southeast. Regional employment imbalances are "far more severe than has generally been recognized, and certainly far worse than claimant unemployment figures suggest," the study concludes. Under Tony Blair's New Labour, Britain has lost 750,000 jobs in industry since 1997.
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