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Why the latest ash cloud should act as a wake up call for travellers

Chris Torney, Personal Finance Editor at the Daily Express, says the latest ash cloud should encourage travellers to get the right kind of insurance

The latest episode in the ongoing Icelandic volcano saga appears to have ended without too much disruption.

Certainly the ash cloud produced when Grimsvoetn erupted last month has had nothing like the effect Eyjafjallajökull had in April and May 2010, when much of Europe’s airspace was closed at one point or another.

From volcanoes to cabin-crew strikes or heavy snowfalls, British travellers have in recent months faced a host of obstacles when trying to get away from it all.

So it is to be hoped that these events – and the regularity with which they now seem to occur – can act as a wake-up call for previously unwary travellers who fail to take out the right protection before they head off on holiday.

Too much choice?

Having your hard-earned break delayed or cancelled is bad enough. But if you don’t have the right kind of travel insurance, you could have insult added to injury if you are denied compensation or face a long battle with airlines and tour operators for a refund.

As news of Grimsvoetn’s eruption broke, thousands of Brits scheduled to head off for the bank-holiday weekend or a half-term break will have been frantically checking their travel policies’ small-print to see if they would be able to claim in the event of their flights being grounded.

And this is the problem: with hundreds of different types of holiday insurance now available, too many of us are signing up without knowing exactly what we are covered for.

Research from analyst Defaqto has found there are now 378 single-trip travel policies on the market, compared to 308 in 2008.

That’s great news for consumer choice, but it does mean that buying the right cover can be confusing.

Work out what’s important

Frequently, people opt for protection on the basis of price. But the problem here is that many of the cheap travel insurance policies are full of exclusions which mean that you won’t be able to claim in a variety of circumstances.

For example, many deals now exclude disruption due to weather or similar events – which could mean no claims as a result of volcanic ash.

Others won’t give you your money back if your airline goes bust, or if you’re forced to cancel your trip due to illness, for example.

Trying to save money on your policy is fine, but before you buy, work out what you most want to be covered for – whether it’s lost luggage or airline failure – and make sure the insurance you choose providers the relevant protection.

As well as a financial safety net, insurance is supposed to offer peace of mind: so there’s no point buying cover and then worrying about whether it will pay out if things go wrong.

I’m Confused.com about... the state of the economy

Chris Torney, personal finance editor of the Daily Express, says it’s no surprise the economy hasn’t benefited immediately from the austerity measures.

During its first year in power, the coalition government has stressed it needs to make severe cuts to public services to reduce the UK’s deficit and get the economy back on track following the banking crisis and recession.

There have been lots of cuts but the latest GDP figures are nothing to write home about: in the first three months of 2011 the economy expanded by just 0.5 per cent. This followed a contraction by the same amount at the end of 2010, so we’re essentially at a standstill.

More recently statistics from Britain’s manufacturing sector, where output hit a seven-month low in April, have added to the gloomy outlook.

So why aren’t we getting the recovery we were promised?

Cutting the deficit

When the Tory-LibDem coalition came to power last May, ministers said their biggest economic priority was to cut Britain’s borrowing deficit. According to the government, getting the UK to live within its means was the only way to avoid a repeat of the recent downturn and create long-term stability.

Reducing the deficit by cutting public spending (and therefore the need to borrow) is designed to put Britain in a stronger position in international finance markets. The less debt we have, the more likely we are to be able to pay back what we owe, and to be able to continue borrowing.

Why is this important? Well, if the UK is seen as a big credit risk – like Greece, Ireland and Portugal say – our cost of borrowing rises. In a worst-case scenario, this could result in the country going bust and being unable to provide basic public services, for example, without help from other states. This is the economic catastrophe the coalition desperately wanted to avoid.

The rest of the economy

Unfortunately, cuts in government spending and rises in tax are not good news for the wider economy in the short term. This is why recent growth figures are so uninspiring.

Firms which traditionally do a lot of business with the state have struggled; laid off public-sector workers will stop spending, as will those who are worried about their jobs. All these factors lead can to lower confidence in the economy and lower growth.

It was hoped that the private sector would lead the recovery but it too has been hampered by low consumer spending, not to mention high fuel prices and inflation – issues which, to some extent, are beyond ministers’ control.

What’s the outlook?

The banking crisis and subsequent recession was a huge shock to financial systems all over the world so it’s no surprise that recovery is proving to be a slow process. The coalition’s view is that there is no gain without pain but unfortunately the gain looks likely to be delayed for a year or two at least.

We can realistically expect to enjoy decent growth levels in the next couple of years provided Britain can keep its deficit in check and avoid slipping back into recession, which would hugely damage confidence. But a sudden improvement in our fortunes is, alas, very unlikely.

What does 'unlimited' sum insured mean?

Gareth Kloet, head of home insurance at Confused.com, answers a common question asked when customers calculate the level of cover required for their home.
Question: What does 'unlimited' mean in relation to the sum insured in a home insurance policy?

Answer: Usually when taking out a home insurance policy you have to specify certain values – for example, the value of your contents or the rebuild value of your home.

While most policies will have a limit put in place for the total amount you can cover your building or contents for, some will offer an unlimited sum. This, simply put, means that they do not place a cap on the buildings or contents value that you wish to cover.

However, with contents cover you still need to be aware of clauses like maximum single item values. There may also be some exclusions for the type of building you are looking to cover. As such, it is important to always check the terms and conditions and never make assumptions, as different policies have different specifications.

If you have any more home insurance questions, take a look at our home insurance FAQs, where you might well find the answer.

If that doesn't help, feel free to put your queries to us below or email them to editor@confused.com. We'll do our best to give you a response.

Debit cards or credit cards abroad: Which is best?

Summer is here, and despite the Mediterranean-style sunshine currently bathing the UK, many people will still be travelling abroad and splashing the “holiday fund” they have saved since this time last year. In many cases, that’s quite a considerable amount of spending, so how do you know you are getting the best from your money? Confused.com money analyst Alex Higgs explains all.

Well, many people still prefer to go abroad with a wedge of cash, or simply use the debit card they would normally use at home. And due to the high APR, and the fact most providers charge interest from that same day rather than the end of the month, I would never consider taking cash out on a credit card unless it was an emergency, so if you want to take out cash, in most cases the debit card will be the better option.

What to be aware of when making purchases abroad

However, when making purchases abroad there are a number of hidden fees that can make the cost mount up. One of the current leading debit cards, let’s call it Card X*, charges a fixed £1.50 fee for each and every transaction, in addition to a 2.75 per cent exchange fee.

If this talk about fees and percentages means nothing to you and has got you switched off, don’t look away just that because that’s playing into the hands of the banks and that is exactly how they make money.

Look at it in Pound terms, and say that on a seven day holiday, you make four purchases a day (including meals etc), with an average value of say £30. Well with Card X above, that means you get £840 worth of goods and services, but pay £905 for the privilege!

Looking purely at foreign purchases, one of the best alternatives right now is the Post Office Credit Card, which has zero fees on purchases - so in the above example, if the price is £840, you pay £840 – leaving you an extra £65 to blow on much more interesting frivolous things.

And as with any credit card, you benefit from the cover of Section 75 of the Consumer Credit Act– in short, your issuer will cover any purchases you make between £100 and £30,000 if they are faulty, the firm goes bust, or your order never arrives – a protection you don’t get with either debit cards, or cash.

Credit cards in the wrong or unsure hands can be a bad thing, but if you are smart, and know the pros and cons, you can use credit cards to your advantage.

 

Switching home insurance: Just how easy is it?

The summer has finally landed and, along with the proliferation of ice cream vans and T-shirt tans, the sun has brought with it home movers' season. Darren Black, head of home insurance at Confused.com, shares his own experience when finding cover for his house.

The summer months (June, July and August) see a 30 per cent rise in people moving homes compared to the rest of the year, and even though the housing market has been suppressed in recent years, 2010 is showing some definite signs of recovery.

It’s therefore naturally time for all the home movers (and the rest of us) to reassess our home insurance needs - I know its dull, I know it’s boring, but, really, I think you’ll be surprised at just how much it needs to be done.

In the interest of fairness I put myself through this (not so) arduous task last weekend, and being the head of home insurance I was pretty sure that I had it right from the start so it was all going to be plain sailing.

First of all, just to set the scene I live in a three-bedroom house with a garage, front and rear gardens and, of course, my lovely girlfriend. We don’t have children just yet, but being typical early 30-somethings we have a house crammed full of technology, gadgets and musical instruments. This isn’t far off the typical Confused.com customer profile, apart from the lack of children and perhaps my unhealthy obsession with owning guitars.

My home insurance was fairly comprehensive, but I hadn’t reviewed it in the last three years and therefore I was insuring the following:

Rebuild Cost: £200,000

Contents Cover: £21,000

Specified Items

•    Laptop: £600

•    Mountain Bike: £200

•    Camera: £500

So, I set about my task by firstly downloading the Confused.com handy app for the iPhone. This walks you round each room in your house (not literally, sadly) and helps you add up your total contents. Walking round each room in the house, the app prompts you to give a value for everything in the room – things id quite plainly forgotten about when I was searching for my last home insurance policy. Things like rugs, towels, curtains were all things I’d totally forgotten about – but in the event of a fire or flood these would be exactly the things I’d need to claim for.

It struck me that when I was searching for home insurance what I was really looking for was anti burglary insurance when what I really needed was insurance to protect my home in case of fire or flood. Over 20 per cent of all homes in the UK are built on a flood plain – and it turns out that mine was one of them!

So what did I end up with?

Rebuild Cost:£152,000

Contents Cover: £34,000

Specified Items

•    Laptops: £1,200

•    Mountain Bike: £400

•    Camera: £500

•    Watch: £800

•    Guitar: £1,200

So, it turns out I was underinsured by 35 per cent and, should the worst have come to the worst, I would have had to find an additional £11,000 just to bring my home back up to the standard it is now. Needless to say, I got searching for a new policy straight away and thankfully, found one using our site and managed to shave £60 off the premium to the bargain.

So, the moral of the story is, whether you are moving home this summer, or simply sitting back and enjoying the sunshine, there is no better time to take stock of what you actually own – and therefore what you actually need to insure.

Confused.com about the Election? Try our Live Blog

Our live blog has now finished. Thanks to everyone who joined us over the last few days, especially to those who shared their comments. Please keep them coming, and feel free to read down if you want to catch up on the last few days' events.

We'll be providing more coverage of what it all means once the dust has settled, so if you have any questions, make sure you post them below or email me at stephen.jones@confused.com.

12 May 2010

15:45: That's all from me and the live election blog. It's been emotional, thrilling and exhausting in equal measure, but I've loved every minute of the last three days (particularly those where I managed to get some sleep!). Keep your thoughts coming in, and thanks ever so much for sticking with me. I'll leave you with a clip of the funny moment I mentioned earlier. Enjoy!

15:20: So, the coalition agreement has been published. So here are some more key snippets that we haven't already covered:

• "The parties agree that funding for the NHS should increase in real terms in each year of the Parliament, while recognising the impact this decision would have on other departments."
• We will restore the earnings link for the basic state pension from April 2011 with a “triple guarantee” that pensions are raised by the higher of earnings, prices or 2.5%, as proposed by the Liberal Democrats."
• "We further agree to seek a detailed agreement on taxing non-business capital gains at rates similar or close to those applied to income, with generous exemptions for entrepreneurial business activities."
• "We agree that there should be no further transfer of sovereignty or powers over the course of the next Parliament."
• There were also agreements to extend the powers of the Bank of England and to "rule out joining the European Single Currency during the duration of this agreement".

There is much, much more that will take a lot of combing through - for the keener among you, the Times have posted a full copy which you can view here.

And on that note, we'll be bringing our live blog to a close. After six long days of uncertainty, we have a government, and the business of beginning to govern can now begin - although many details are far from finalised.

14:55: Details starting to emerge on more policies - a few picked out by the Guardian:

• A review of the year at which the state pension age should rise to 66. For men it won't come before 2016 and for women, 2020
• £6bn cuts to public spending will be subject to Treasury and Bank of England advice for "feasibility"
• There will be legislation for reform to a five year fixed parliamentary term, but this can be dissolved if 55 per cent of the Commons vote in favour.

More to follow before we wrap this up...

14:30: Pretty inspirational words from Clegg and Cam, whatever your thoughts on the coalition. They seem pretty united here. And then there's some light humour - when asked if David Cameron regrets replying "Nick Clegg" to the question "what's your favourite joke?", Nick Clegg jokingly threatens to leave. An amazing good spirit about this. We're still a little bit thin on details of how it will actually work so far, though.

14:22: Ian Duncan-Smith is new work and pensions secretary. FACT.

Cameron and Clegg now in the Downing Street garden behind twin lecterns, looking pretty chummy and giving a dual speech on the future of the coalition. Would you have imagined this after watching the TV debates? Incredible.

We'll hopefully have some more details of their plans very soon...

13:55: The Association of Independent Financial Advisers (AIFA) has called on the new government to "restore a savings culture". "Individually, and as a nation, we need to rediscover thrift and true prudence," Chris Cummings, director general says, while also calling on the coalition to encourage and help Brits to "better manage their debts". We concur heartily.

13:04: Confirmation that Vince Cable will be business secretary and Michael Gove the new schools secretary, according to the BBC.

12:48: To Charles Kelly: Don't wish to upset you, but Nick Clegg would indeed be stand-in leader in the event that anything should happen to our new prime minister.

12:44: Theresa May becomes home secretary and minister for women and equality - so who will take up the cudgels on pensions? Word from the BBC is that it will be former Tory leader Ian-Duncan Smith.

12:37: Bank of England governor Mervyn King has come out praising the new coalition government's deficit reduction plan - which will aim to cut public spending by £6 billion in 2010 - as "strong and powerful".

11:13: No word on a pensions secretary yet, although the likelihood is it will be Conservative Theresa May. Whoever it is will have a big mess to deal with, with research from MGM Advantage published today suggesting that more than half of those approaching retirement expect their standard of living to decline once they leave the working world.

It will be interesting to see what stance this coalition takes to pensions and retirement - one thing we can be almost certain of is that the state pension will be linked to earnings at some point during this government. At least, you'd hope so - it was in both parties' manifestos.

10:29: The Low Incomes Tax Reform Group have put together a very nice summary of how a rise in the income tax threshold would affect you. Click here to take a look.

10:19: A sign of the job at hand: Unemployment figures show joblessness to have hit its highest level since 1994.

10:04: Another good morning to you, our first morning with a coalition government since World War II. I'll be continuing to update this blog through the day to keep you up to date with the ever-emerging policies.

Already we have some cabinet news from through the night: Vince Cable will not be George Osborne's unlikely sidekick after all, and will instead probably be something along the lines of business and banking secretary - which is unlikely to please bankers. Vince made it pretty clear in the election campaign that he wanted to break up the major banks and take a much tougher stance on the sector overall - though he will probably have to be pulled back a little from that stance in a coalition, it is still likely to mean a tougher stance than under a more laissez-faire thinker like Ken Clarke.

The BBC's seemingly omnipresent Laura Kuenssberg is also suggesting that the coalition will introduce an elected House of Lords, voted for by proportional representation. I'm starting to think Nick Clegg would be a pretty awesome poker player.

In other news, no home secretary just yet, and Chris Huhne - thought to be one of the candidates - is now energy and climate change minister. Any guesses?

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11 May 2010

23:40: Lib Dems will be delighted to have got 20 posts in government overall, including 5 in the Cabinet. Other policy news: Non-EU immigration will be capped, a Tory promise that will remain after the agreement.

And on that note, I will be heading off for some much needed beauty sleep. To summarise, if you have been trapped in a cupboard all day:

• We have a new government - David Cameron heads it up as PM, with Nick Clegg as his deputy in a Lib-Con coalition that will next face an election in 2015.
• Gordon Brown has resigned as Labour leader and PM with immediate effect.

There is much, much more, but I will leave it to you all to wade through my rubbish from the last two days. Thanks for joining me during that time, and I'll be back to provide a bit of a summary of it all once it becomes a little clearer. 

Night night! 

23:10: BBC reports that an emergency Budget will be launched in 50 days. Lots of details of the compromises made by both parties being given already...

• Lib Dem plans for the rise in the income tax threshold will be phased in
• This will be funded not by their now-scrapped Mansion Tax, but from a rise in Capital Gains Tax
• Rise in National Insurance will be cancelled
• Lib Dems give up their plans for scrapping Trident and scrapping tuition fees
• More to come...

Looking at the above, the big question you're tempted to ask is: 'Where is the pain going to come?' Lots of lost money for the government coffers there, so it seems increasingly likely that taxes will have to rise elsewhere in that emergency Budget. Will it be a rise in VAT? I'd expect so, but then I'll say it again... I'm no expert.

23:03: Reports are coming through that the next election will be held in 2015 under the new fixed term agreement. So that's five years of the coalition government - we'd better hope it works!

22:41: Nick Clegg will be deputy prime minister - a pretty big deal and quite a coup for the Lib Dems. There will also be four other Lib Dem cabinet members.

21:50: William Hague will be foreign secretary in the new government. Those pesky Sky sources are suggesting that Vince Cable will act as Osborne's number two in the Treasury. Now THAT's an odd couple.

21:13: Reactions to Cameron's elevation to PM now sweeping through Twitter. A handful from each side of the spectrum for you:

artanzubi: "Congratulation to David Cameron. I hope he can solve the problems in GB."

JWatkiss: "well done to Cam and Clegg for getting their act together; they know there is huge amount at stake, it has to work!"

and...

The_Best_inTown: 'david cameron just made me waste 90 minutes of my life. wanted to watch eastenders. thanks mr priminister...'

It's also been announced that George Osborne will definitely be Mr Cameron's chancellor. Bad news for Vince Cable fans, but not all that much of a shock in truth.

20:43: David Cameron pays tribute to Gordon Brown and then announces his intention to form a "proper and full" coalition with the Liberal Democrats. It will be "difficult" he says in a fairly gritty and determined statement, but now enters Number 10 as prime minister for the very first time, prepared to get to work. Now for the votes - if that all goes to plan we will finally, finally have a government after five awfully long days.

20:41: Nick Robinson says part of the new agreement between the two parties will be a fixed term government - which means an election every four years and no snap election in the next year.

20:38: So, we have a new Prime Minister. David Cameron is on his way from the Palace to Downing Street now, ready to let his waiting staff into Downing Street. 

20:27: How long has David Cameron been in the Palace? Has he been trapped in a conversation with Philip? Attacked by corgis? Watch this space to find out! (Look, I've been writing this for two days now, can you blame me for going a little potty?)

20:19: Well, the BBC didn't know, Brown is now apparently not standing down. He speaks in front of his party, thanks staff for their endeavours and almost looks relieved to step away from the hotseat. Almost.

20:12: Nick Robinson announces on BBC that the agreement has been reached, though has yet to be voted on by the respective parties. He also adds - and this is key - that the Conservatives have put on hold their marriage and inheritance tax plans, and that George Osborne will remain Chancellor in the coalition government, assuming that it is passed successfully through the respective parties.

20:07: Cameron arriving at Buckingham Palace now, looking extremely happy - as I suppose you would. This is all part the novel pomp of the job he's about to take, but things are likely to be much tougher from here on in. Not least because there is still no deal with the Liberal Democrats. There could yet be a few twists and turns; the last few days have certainly taught us not to take anything for granted.

19:45: Apparently, the BBC knows. He's planning to leave politics altogether. So what were you doing when Gordon Brown resigned? I, for one, was updating this blog with one hand and feeding myself a sausage sandwich with the other. Sorry, not as respectful of the man's 13 years in high office as I could have been, but I was hungry and thought I had a little more time.

19:38: Bit of an odd decision from Gordy, because Downing St had said there would be no announcement until a deal was done. Talks are still ongoing on that front, but David Cameron will be our Prime Minister by the end of the night. Meanwhile, our outgoing PM is now in Buckingham Palace chatting to the Queen and will emerge soon as simply Gordon Brown, MP for Kircaldy and Cowdenbeath. Will he stay in politics? Who knows.

19:21: And he's gone. With a cracking voice, Brown gives a pretty dignified speech that lays out his history as PM briefly, and announces his decision to head to the Palace and hand in his resignation. Even when you expect it, it's all a pretty extraordinary process, and it's almost over now. Enter David Cameron...

19:09: OK, I'm back and ready to fill you in on the last hour. Nothing and everything has happened since we last spoke, and by that I mean we can see a podium placed outside 10 Downing Street, and we wait for Gordon Brown to exit and announce his resignation. Epic moment, people. It has become clear that an agreement is close enough for Brown to resign and usher in our first modern coalition government.

17:48: A nice man on BBC News says now is the perfect time to take a break as we await the Lib Dem vote on whatever has been agreed (assuming that is what their 7.30 meeting is for). I'm going to take his word for it and grab a bite. Again, if I miss something momentous then I can only apologise, but my stomach is playing some pretty loud tunes about now.

17:40: Vince Cable tells Sky News a deal with the Conservatives is "very, very close".

17:31: George Pascoe-Watson, who used to be political editor at the Sun, tweets: "Libdems have six cabinet posts, Clegg becomes deputy PM, sources say." If true, that gets an official 'wowza!' from yours truly.

17:14: Just to clarify something I wrote earlier - the bags outside Downing Street were not Gordon Brown's apparently. Still, it looks to only be a matter of time.

17:09: Some clever chaps at the Guardian have managed to sneak a view of Nick Clegg's notes, containing his demands in talks with Labour and the Conservatives. Take a look here.

17:00: My personal correspondent from Westminster (AKA my Mum) says an anti-war demo is now taking place - "peaceful, but extra police have arrived". Just thought I'd give her a mention.

16:50: This well please some of you that have commented below, particularly Chas and Catherine. BBC's Laura Kuenssberg tweets: "Lord Mandelson has left no 10 - no words, no smile."

16:43: Conservative blogger Ian Dale tweets that a room is being "prepared for imminent Cameron press conference according to staff". Could this be done by tea? Surely not.

16:38: The Guardian is reporting that the pound has risen sharply following speculation not only that a Lib-Lab pact is over, but also that David Cameron could replace Gordon Brown as prime minister as early as tonight. Expect a busy evening - I certainly am!

16:33: So now it looks very much like a Tory-Lib Dem deal of some description will be announced, perhaps tonight. The BBC just showed a thrilling shot of David Cameron getting into his car - is it symbolic for his desire to get things moving? Or does he actually just need to get somewhere?

Vince Cable has, of course, been highly involved with all of these negotiations, but what role would he play in any coalition government? Surely Cameron wouldn't be too keen on the idea of stripping Osborne of his promised chancellorship?

16:12: It's all happening. London's Evening Standard now reports that Gordon Brown will resign as leader of the Labour Party tonight after the Lib-Lab deal broke down.

16:05: Latest update on BBC News: "Luggage seen at rear of Number 10". How you react to that statement will largely depend on your political persuasion, but either way it surely spells the end of an era.

15:59: The Beeb's Jon Pienaar is now reporting that Labour have given up on talks with the Lib Dems. Number 10, he says, is acknowledging that the two parties will not come to any positive agreement. So, after 13 years and all sorts of uncertainty in the last few days, it appears to be certain that the Labour Party will not play any part in the next government. We may have seen it coming in the last few hours, but it still feels like a pretty big bombshell, no?

15:06: More and more Labour MPs breaking ranks on a potential coalition, but the most significant remains current Health Minister Andy Burnham, who, the Evening Standard reports, is firmly against a so-called 'losers' coalition'.

The economy seems to be a bit of a sideshow at the moment, but the National Institute of Economic and Social Research (NIESR) has, moments ago, predicted that the three months to April saw a relatively small growth in GDP of 0.5 per cent. The recovery remains unstable, they say, however the news indicates an improvement on the official figures for the previous quarter. It would, if accurate, suggest a continued emergence from recession - here's hoping!

14:40: Interesting YouGov poll for the Sun. Results:

• 20 per cent wanted Conservative minority government
• 33 per cent wanted a pact or coalition between the Conservatives and Liberal Democrats (meaning 53 per cent favour a Conservative government in some form)
• 39 per cent of respondents after "rainbow coalition"

Also of interest: 38 per cent prefer first past the post, 47 per cent favour proportional representation.

Are the people going to get what they want?

14:33: Various Labour MPs now expressing their doubt about a Lib-Lab pact, indicating that that decision might have already been made fror them. Methinks that a Lib-Tory agreement will go through, perhaps even tonight (but then, I'm no expert!).

14:13: According to the Guardian, analysts at BNP Paribas are suggesting that a Lib-Lab pact would be the least favoured option for the markets, and would "almost guarantee a downgrade of the UK sovereign debt".

This would effectively make it more difficult for the UK to cut its deficit, as the interest on its debt would rise - in turn potentially meaning harsher tax rises, bigger cuts in spending and even an increase in the cost of borrowing for everyone. Scary stuff indeed, but a long way from reality at the moment.

14:01: Steve Mann comments below, "nowhere on my ballot paper was there a candidate who represented a "Hung Parliament" party", in response to numerous such claims from politicians of almost all persuasions.

13:36: Whispers abound that we're closing in on a Lib-Con pact; but then we were told that yesterday. William Hague has just tweeted: 'Will be returning to the Cabinet Office shortly to resume negotiation with the Liberal Democrats.' However, the Evening Standard's Paul Waugh tweets 'Looks like @edballsmp and c whelan have delivered. Unite union just written to 100 of their MPs to say Lib-Lab is "best option"'.  Tweeting hell - that could be significant; but it's all just conjecture at the moment.

That's not all, as I write, the Times is reporting that Labour have offered the Lib Dems another sweetener as they appear to be becoming more anxious - immediate legislation on the Alternative Vote (AV).

Nonetheless, one journalist comments: "On way to College Green, Westminster. Only made decision 10mins ago. Deal imminent we think. Hoping to have my very own Adam Boulton moment."

Who is the mystery man on the spot? None other than...er, former Big Breakfast host Richard Bacon. This is getting mental -I'm now half expecting Gaby Roslin to turn up and reveal details of a military coup.

12:54: Lib-Lab talks have been going on in the House of Commons and have just finished - David Miliband describes them as "good", which I'm told is political slang for "we're not going to tell you what happened". Surely we can't go into a sixth day?

From your comments, we're seeing evidence of the issue that seems to be dividing the nation at the minute. Is first past the post dead? Probably. What goes in its place, however, is far from clear.

12:15: Not alot of excitement at the moment, relatively speaking of course. I could tell you that I'm struggling to tackle a pretty stubborn jacket potato right now, but that wouldn't be very interesting, would it?

Instead, I will share with you the news that the FTSE 100 is not enjoying such a good day as we saw yesterday. It closed  5 per cent up, but has struggled so far today as the optimism from yesterday's EU bailout seems to have dissipated. Also, without getting too techy, today's sale of government bonds saw an oversubscription of 2.5 times those available - which, in short, means that market confidence in the political situation perhaps isn't as terrible as it could be at this point.

11:15: We've also got figures showing that industrial output increased by 2 per cent in March - a fair bit more than expected. That in turn caused a boost to Sterling, so perhaps that will offset any nervousness we might have seen about another day without government.

11:00: Back safe and sound and our entire civil society hasn't collapsed just yet.

Now, in terms of things that have actually happened, the British Retail Consortium reports a fall back in consumer high street spending during April, as the public nervously awaited the election result. Stephen Robertson, director-general of the organisation said of the finding: "People need to know how a new Government’s moves to tackle the deficit will affect their incomes and jobs. Even if the measures are tough, knowing what they are could be better than the current uncertainty.”

10:49: Going to risk a brief loo break. Please accept my apologies if we have a new government by the time I return.

10:47: According to the beeb, one Labour MP, Douglas Alexander, indicates that an alliance with the SNP is unlikely. Will be interesting to see where else they look to get their votes.

10:36: AJ_ay_it tweets: "Clegg's responsibility is only to the people who voted for him, not the whole electorate. They want Lib-Lab and voting reform." Meanwhile, hmsfli posts: "Memo to all who say 'don't want an unelected PM': leaders of parties are chosen by party members only not the electorate." Just keeping it balanced, peeps. What are your thoughts?

10:24: General mood from our commenters so far is that of disenfranchisement, and Bob Young is not the first to have mentioned the "Z" word in relation to this election. Scary stuff! Keep them coming, people - but remember, keep it clean and don't be too mean. It's a family website.

10:12: Speaking on BBC Newsnight yesterday evening, Tory frontbencher Michael Gove and Labour deputy Harriet Harman both gave signs that they would be willing to come toward the Liberal Democrats on plans to raise the income tax threshold. The Lib Dems want it up from £6,500 to £10,000, which they say would save the average person £700 a year - though that level might have to be tempered in any agreement. The question of where the money would be raised from is another interesting one, and would be likely to vary depending on which party they form an agreement with (if any).

10:00: The Federation of Small Businesses (FSB) backs up what we reported yesterday, that the business world is not at all enjoying the uncertainty surrounding this election. 54 per cent say they will halt any expansion plans following the results of Thursday's vote and 49 per cent want another election in the next six months. More than half lack confidence in the economy.

9:40: Morning, all! Back in the office and it seems that the politicos have been very gracious and decided to get nothing done while I was asleep. So here's a brief summary of what has happened since my last update:

• David Cameron tells the Liberal Democrats it's "decision time", after they tabled their "final offer" last night. Nick Clegg for his part says that the negotiations have reached a "critical and final stage" - so we can probably expect a decision by next Friday, in other words.
• House prices rose in April and are set to enjoy a post-election bounce, according to a new survey from the Royal Institution of Chartered Surveyors (Rics). This neutral growth that we were told to expect by a number of analysts doesn't appear to be materialising - but is it stable, or are we likely to see another crash?

More to come, so keep your eyes peeled...

------------------------------------------------------------------------------------------------

10 May 2010

22:18: That's it from me for tonight. It's been a busy, busy day and I'm shattered. Goodness knows how Clegg and Cameron are still awake, although I have a feeling Gordon Brown for once will be sleeping very soundly tonight. Check back in tomorrow for more updates - if it's anything like today, then we could be in for a lively one. Goodnight all!

21:10: What a tasty dinner - my shirt appears to have enjoyed it, too. Anyway, no such whirlwind news as earlier in the day, although William Hague has revealed that Nick Clegg is now after a more formal coalition if they are to partner with the Tories. Again, it's all evidence of just how up in the air the situation is today.

In other news, Conservative MP John Redwood is on BBC News now. If you're anything like me, you might enjoy muting the television and playing the Welsh national anthem, to relive this golden piece of political history.

20:00: Well, Harman has disappeared in a car. So much for that statement - promised by David Miliband, incidentally. Anyway, I'll give you a break for a bit while I eat my tea.

19:58: Deputy Labour leader Harriet Harman stepping out shortly to make a statement after a pretty long cabinet meeting. Meanwhile, Labour MP and incumbent Work and Pensions secretary Yvette Cooper departs saying there will be no decision on leadership candidates today and that the party is focusing on trying to form a government. Perhaps she's right; I'm not sure how much excitement we can all handle in one day.

19:20: It really is all going on now. Former Conservative leader and shadow foreign secretary William Hague has announced that the party will make one last ditch offer of a referendum on the alternative vote to prevent the Lib Dems jumping into bed with Labour. Voting reform is thought to be one of the major determinants on the Lib Dems' decision, though it's not quite as far as the vote on proportional representation that they want so badly. All of it means that Clegg must now be facing the toughest decision since 'Daddy or chips?' What would you do in his position?

18:10: Several sources reporting that David Miliband will be putting himself forward as a candidate for Labour leader this evening. In the words of my all-time favourite cartoon character: "Crumbs, DM".

17:40: Of course, if this does turn the tide of power away from the Tories, then their supporters (and indeed David Cameron) will have every right to feel slightly cheesed. After all, they did get more votes than any other single party. What do you think?

17:31: A wave of Twittersphere eulogies after the resignation of Our Great Leader (copyright Andrew Neil). Jennyheppy said: "Ahh Gordon, what a gentleman", while Sam_Howells described Broon as "a great leader caught up in terrible circumstances".

2010ukpolitics was slightly less charitable about our outgoing PM, mind: "Like a horror film where up we go to the dead monster, kick it gingerly and GAAAH! it's still alive and it's gonna kill ya!"

17:13: Just a thought - who's your money on for Labour leader? Interesting, innit.

17:06: Nice speech from Gord, although he did go round the houses a little bit before getting to the juicy stuff. He also announced that the Liberal Democrats had entered formal talks with the Labour Party about a possible "progressive" coalition. It appears, then, that the Lib Dems have a very interesting choice now, with Labour having met both their demands (a referendum on voting reform and a new leader), yet failing to hold the popular vote. Oh, to be Nick Clegg!

17:04: It is! So Gordon Brown will stand down by September, in what is clearly an attempt to lure the Lib Dems away from their unlikely bedfellows in blue. Things just got interesting, and I actually mean it this time!

16:47: Gordon Brown about to make a statement outside Downing Street. Could it be... surely it isn't... the end?!

16:26: I'm starting to think Sky actually meant "sorcerors" rather than "sources", as they missed the mark pretty spectacularly on this one. They're now reporting the words of Simon Hughes, Lib Dem MP, who says a deal by the end of the day is unlikely. However, he adds that there's every reason to expect a government to be formed by the end of the week. I do hope so; Britain's Got Talent has been tragically neglected by the mainstream media while this whole palaver's been going on.

Anyway, I promised to be helpful, so that I shall be. Contrary to the popular belief that markets would tumble, today has seen the FTSE 100 soar off the back of the EU recovery package, while Sterling has actually climbed in response to hopes of a Lib Dem-Tory deal. In layman's terms, that means a very tiny "yay" if you're going on holiday tomorrow (assuming you're like me and leave your money-buying to the last possible moment) or have any vested interest in the stockmarket.

16:00: Lib Dem frontbencher David Laws steps out to make a statement saying words to the effect of "we want a bit more" from the deal offered by the Conservatives, particularly on education funding and voting reform. Thanks a bunch, "Sky sources".

15:00: "Sky sources" say that the Lib Dems and Tories have the basis of a deal. If that is the case, it would be up to the party leaderships to take the plans to their respective MPs for approval. Still a long way to go, one suspects, but the word from the Guardian is that it will be a form of "supply and confidence plus" rather than a full on coalition. If you don't know what that means, then I'm glad not to be the only one. Eyes down, ladies and gents, it's all about to kick off again.

14:26: The Times is reporting that even Gordon Brown's closest allies are urging him to step down. A last ditch attempt to curry favour for a Lib-Lab pact?

14:03: Twitterer WilliamLeggett makes me chuckle by writing: ‘Nick Clegg has changed his Facebook relationship status to: "it’s complicated"’. Not really news, but I thought I'd share it.

13:24: Just had some sustenance and now back on the beat. There’s a lot of talk about markets nosediving as a result of a hung parliament. That doesn’t seem to be the case so far, and Bronwen Maddox writes in the Times that concerns about the fall of the pound are greatly exaggerated. There’s still an awful lot of uncertainty over in the eurozone, though, so find out if now is the time to buy your foreign currency.

12:15: The Bank of England holds interest rates at 0.5 per cent and maintains quantitative easing at £200 billion. So more good news if you’re on a tracker mortgage - but will it last? Ray Boulger at mortgage broker John Charcol reckons so, saying that “there are still enough concerns about the health of global economy... to suggest it is still much too early to start tightening monetary policy”.

12:10: Research from unbiased.co.uk suggests that a third of you are expecting significant tax increases, whichever party forms a government. Looks like you’re probably right, but who will it hit most and where? We have already brought you the prediction that VAT will rise whichever party comes into power, and we’ll be watching closely to see where else consumers’ pockets could be hit. 

One major manifesto pledge from the Lib Dems was to raise the income tax threshold to £10,000, funded by the introduction of a so-called Mansion Tax on higher value properties. Whether they’ll be able to fully introduce this in any partnership with the Tories is unlikely, but, as it’s a key part of the Nick Clegg’s economic plans, then it could well be included partially.

12:00: The BBC is reporting that the Lib Dems held secret talks with senior members of the Labour Party over the weekend. Sneaky.

11.25: Annuity rates could improve as a result of the hung parliament, says MGM Advantage. Hurrah for pensioners, who have seen rates falling for some time now.

11:03: Save our Savers are calling on whichever government we get to “encourage personal savings as the bedrock of a sustainable and resilient economy” in the future.

Find out what the Conservatives, Liberal Democrats and Labour all had to say about encouraging saving - as well as a raft of other personal finance issues - when we grilled them before the election.

10:36: Homeowners take note: the gaping hole in the public finances is likely to increase the cost of mortgage lending for some time. The Association of Mortgage Intermediaries also says that gross mortgage lending is still very constrained – standing at less than half the peak seen in 2007. So, all in all, not the best news if your current mortgage deal is set to expire in the next couple of years.

9:37: Businesses aren’t feeling good about this hung parliament business. 48 per cent say that it will have a negative impact on their business, according to a survey from Travelex – largely because of the expected weakness of sterling.

9:14: Good Morning – hope you all had a good weekend. I also hope you’re excited - it's seventy years to the day that Winston Churchill formed his wartime coalition government and today could be the day we see our own new government. Then again, we have been saying that since Friday.

Keep an eye out here for all the latest as it happens. (Note: Unlike others, I will not be updating to tell you when there is ‘no news’)

The Labour Party answers your questions

Having spoken to the Liberal Democrats Treasury spokesman Vince Cable and Conservative shadow chief secretary to the Treasury Phil Hammond, our next stop was the Labour Party.

Unfortunately, Labour could provide no one to answer the same questions as we had asked to the other two parties, so instead they have offered up Kevin Brennan, Minister for Consumer Affairs.

On Bank Charges...

Q: The Office of Fair Trading (OFT) is not willing to bring another challenge to the banks over overdraft charges. Will the Labour Party be doing anything to pursue what are widely accepted as extortionate penalties on consumers?

A: There has been progress on this issue but we don't think banks have gone far enough. The OFT recently announced measures to encourage the banks to bring fees down, including offering customers the option of an account where they can’t go into an unauthorised overdraft and incur a fee.  We’ll be monitoring this closely with the OFT. We want to ensure the system is fair and proportionate. We will legislate if necessary and we would not rule out legislating before 2012.

On Store Cards...

Q: Shoppers in the UK are finding themselves in increasing amounts of store card debt because they do not see the credit as 'real money' or fail to understand the terms and conditions. APR rates are high up to 27 per cent and people can feel pressured into buying one at the counter by inadequately trained shop staff.

Should this at-the-counter practice be banned? Or something done to show that the benefits of having the card can be outweighed by high interest rates for those who do not pay back what they owe in full each month. What do you plan to do in this space if anything?

A: I recently announced five new rights for credit and store card users which will save consumers around £300m a year and give them more control of their borrowing.  The government has agreed with UK credit and store card companies that they will make changes to ensure that the most expensive debt is paid off first, minimum repayments for new customers are set at a level which ensure that the debt will always go down, credit limit and rate increases for people at risk of financial difficulty are banned and consumers have a right to 60 days to reject interest rate increases.

We share your concerns that store cards should be responsibly sold.  That’s why we’re also introducing new legislation which places a duty on lenders to make sure they provide adequate explanations about the credit on offer to the consumer before they take out a new card or loan. This means that, from next year, when consumers are interested in taking out a store card at the counter they will have to be taken through how it works, what it will cost and the key risks they need to be aware of. 

Consumers will have to have the opportunity to talk to someone who is adequately trained to do this or the card company will risk losing their licence.Because of concerns about the high cost of borrowing on store cards, new rules were introduced in 2007 which say that if a store card charges more than 25% APR, the card company has to make clear on a customers statement that there may be cheaper forms of credit available. This was part of a series of measures which are aimed at encouraging more competition in the store card market to bring interest rates down.

The Competition Commission is talking to store card companies about conducting a review of how those changes are working. The evidence suggests that consumers are becoming more savvy about store cards. Borrowing on store cards has actually fallen from nearly £3 billion in 2004 to less than £2 billion at the end of 2008.

On Loan Sharks...

Q: Around £82m in total was borrowed from loan sharks over the last Christmas period, but actually the loans were valued at £29m (figures from a report by the Financial Inclusion Centre). This highlights the massive interest rates and mark-up imposed by loan sharks.

What is the solution to this problem and what does Labour plan to do about it? It’s a growing consumer issue given that research has put the number of people using loan sharks as up by 22% over the last 2 years.

A: Loan sharks prey on some of the most vulnerable people in our communities. This is a disgusting and totally unacceptable practice and we are determined to come down hard on them.

The government has created specialist Trading Standards illegal money lending teams around the country. We have invested £16.5 million to tackle this problem since 2004, helped more than 10,000 victims and, to aid this effort, we have written off more than £31 million of illegal debt and secured more than 50 years in prison sentences, as well as launching the confidential hotline number: 0300 555 2222.

We know that people use loan sharks as a last resort, so there is a worry that, if they can’t get credit from other sources, they may feel that they have no option but to go to a loan shark. That’s why we are working hard to show people that there are safe and affordable alternatives.

On Credit Cards...

Q: Despite the banking crisis and the bailout of major institutions, banks continue to treat their consumers unfairly. For example, some credit card rates are subject to interest in excess of 30% and rising, and you can find loans with interest of over 50%.

Is there a need to introduce further regulation of the banking system to ensure customers are treated more fairly and that providers do not get away with making too much money to the detriment of the public?

A:  It’s understandable that people are concerned about high interest rates on credit cards and loans when the base rate is so low.  We have been concerned about credit and store card companies increasing people’s interest rates, which is why we recently announced that in future card companies will have to notify consumers clearly before increasing their interest rate, illustrating how much their borrowing will cost them at the higher rate, and consumers will have 60 days to say they want to reject the interest rate increase and pay off their balance over a reasonable period at the old rate of interest.

The best way to encourage rates to come down is through improved competition, which is why we’re also introducing an annual statement which will show consumers how much it is costing them to use their card and make it easier to compare deals. If consumers shop around with the right information, and vote with their feet by exercising their right to reject higher rates, this is what will bring interest rates down over time.

On Unfair Lending Rates...

Q: There is also a new view that consumers could be entitled to challenge lenders’ credit card rate increases following the change in the Consumer Credit Act in 2008.

This Act means lenders are now forbidden from establishing an 'unfair relationship' with their customers. Is there more to be done to tighten up the law so that consumers are less at the mercy of credit card providers? If Labour stay in power, what will you do here?

A: The new “unfair relationships test” which came into force in 2008 is a big step forwards for consumers.  It allows people to challenge any aspect of their relationship with a creditor which they feel is unfair.  This might include the level of interest they are charged but it is much broader than that – it can cover any part of the relationship, including the terms and conditions, the way the credit was sold or how the lender treated the person during the life of the agreement.

On top of that, the “right to reject”, which we recently agreed with credit and store card companies, will allow people to reject increases in their interest rate.  What this says is you will get clearly notified, your lender will have to show you how much more you’d be paying if they change your rate so you can make a proper informed decision, and if you want to reject your new rate you can pay off your balance over a reasonable period.  We’ve agreed with card companies that they will double the time consumers have to reject the new rate.

On Payday Loans...

Q: There are said to be as many as 1.75 million people who do not have access to a bank account and 7 million without access to credit cards, overdrafts and loans.

The Better Banking campaign has called for banks to offer credit to those excluded to prevent them having to resort to payday loans or home credit loans, both of which carry high levels of interest which could lead to debt problems.

How do you plan to get lenders to better support the financial needs of people and businesses? This is important, as many of these institutions have been supported by money from the taxpayers during the recession.

A: This question is more about getting banks to provide more credit so that consumers and businesses do not have to turn to high-cost credit such as payday loans and home credit loans.

Brian Pomeroy, the chair of the Financial Inclusion Taskforce, an independent body set up to advise the Treasury, has met with the retail chief executives of all of the mainstream banks to discuss what action they will take to fulfil their commitment in 2007 to support the provision of affordable credit in the high priority areas identified by the Taskforce.

A number of the banks have agreed to fund feasibility studies in some of the remaining areas that have not already been reached by the government’s Growth Fund. In addition, some are providing or have committed to providing direct funding for credit unions and Community Development Finance Institutions that serve vulnerable households.

This includes £500,000 which is being divided between support for individual lenders and funding to assist the Association of British Credit Unions to help its members achieve economies of scale by collaborating on key aspects of their operations. The Taskforce will be reporting to government shortly on further progress by the banks this year against their commitment.

On Savings...

Q: With interest rates at record lows, what will you be doing to incentivise saving in the UK?

A: The government has introduced a range of measures to support saving, including ISAs, Child Trust Funds, and, from 2010, the Saving Gateway. On 6th October 2009 the government raised the ISA limits for people aged 50 and over to £10,200, of which £5,100 can be saved in cash. The ISA limits will rise to these same levels for all savers from April 2010. Over 19 million people now have an ISA, and the estimated tax relief given through ISAs amounted to an estimated £2 billion in 2008/09.

Meanwhile, around 4.8 million children now have a Child Trust Fund (CTF). CTFs are helping to strengthen the savings habit of future generations, promote financial education and will ensure that, at age 18, every child will have access to their own financial asset. The CTF supports all children to save, with extra support for children in lower income families. From April 2010, the government will also make an additional payment of £100 per year into the CTF account of disabled children, with £200 for severely disabled children, recognising that children with disabilities are likely to have greater financial needs on transition to adult life.

The Saving Gateway will encourage saving for working-age people on lower incomes and will promote financial inclusion. Having been successfully piloted twice, it will be introduced nationally and will offer around 8 million people the opportunity to receive 50 pence from the government for each £1 they save.

Regarding interest rates, in 1997 the government gave the Bank of England operational independence to set interest rates through the Monetary Policy Committee (MPC). The MPC is charged with meeting the government's symmetrical inflation target, helping to deliver price stability, which is essential for high and stable levels of growth and employment.

The interest rates offered on particular savings accounts are a commercial decision for providers. However, a number of banks and other institutions continue to offer savings interest rates significantly above the Bank of England base rate, and savers can ensure they get the best possible income from their savings by shopping around.

The Financial Services Authority publishes comparative tables of savings accounts and the interest rates offered as part of its Money Made Clear initiative. These tables can be found at www.moneymadeclear.fsa.gov.uk.

We also asked the minister if he had any plans to raise the ISA limit, and this was his response...

“On 6th October 2009 the government raised the ISA limits for people aged 50 and over to £10,200, of which £5,100 can be saved in cash. The ISA limits will rise to these same levels for all savers from April 2010. Over 19 million people now have an ISA, and the estimated tax relief given through ISAs amounted to an estimated £2 billion in 2008/09.”

So, is that a ‘no’, then?

Want to know what the other parties are saying? Click here to take a look at our previous Q&As with the Liberal Democrats and the Conservative Party. And don't forget to have your say below!

ISAs unwrapped

We at Confused.com recently ran an ISA surgery and invited our readers to send us their ISA questions. We were inundated with responses and, sadly, couldn’t answer them all, but we did do our best to address as many as we could and cover the common themes that cropped up.

With the help of Fair Investment, the Tax Incentivised Savings Association (TISA) and the Buildings Societies Association we’ve put together a selection of the questions and answers. We also put together an ISA guide dealing with more of the basics, so take a look for more help there, too.

Finally, a big thank you to everyone who sent in their questions. We hope the answers go some way to clearing up any confusion you may have when it comes to ISAs.

Question: Can you tell me exactly all the different types of investments one is able to invest within an ISA, including any leveraged products like ETFs (exchange-traded funds)?

Answer: Within a Stocks and Shares ISA there are a wide variety of types of investment that can be held, provided they meet certain criteria laid down in the ISA Regulations. Where an ISA Manager offers a particular fund or investment within an ISA wrapper, the investor can assume that the investment is ISA-qualifying. It is the ISA Manager’s responsibility to ensure all investments held within ISAs meet the requirements of the ISA Regulations.

For ISA investors who wish to make their own decisions about what to invest in (often referred to as a ‘self-select’ ISA) it is still the ISA Manager’s responsibility to ensure all investments chosen by the investor comply. 

Many of the categories (see below) impose listing requirements (for example, that shares are ‘officially listed on a recognised stock exchange’). 

It should be noted, for example, that not all stock exchanges are ‘recognised’ by HMRC; secondary markets - such as the Alternative Investment Market (AIM) - are not regarded as part of the main stock exchange; and being traded on a particular exchange is not the same as being officially listed. 

This is why the investor always needs to check the status of any proposed investment with their ISA Manager before giving their instructions.

The categories of qualifying investment that may be held in a Stocks and Shares ISA are:

1.   Shares that are officially listed on a recognised stock exchange and pass 5% test (below)

2.   Corporate Bonds (loan stocks issued by companies), subject to listing requirements and repayment conditions

3.   UK Gilts and European equivalents with more than 5 years to maturity at time of purchase

4.   Bonds issued by Multilateral Institutions subject to listing requirements and repayment conditions

5.   UK Authorised Funds (unit trusts/OEICS) which qualify either as a UCITS (Undertakings for Collective Investment in Transferable Securities) scheme or as a non-UCITS retail scheme and pass 5% test*

6.   Non-UK schemes recognised in UK which pass 5% test

7.   Shares in (and bonds issued by) Investment Trusts (as recognised by HMRC) provided the underlying portfolio does not hold more than 50% in bonds etc. which had less than 5 years to maturity when they were first acquired by the company.

8.   Qualifying stakeholder unit-linked medium term products which pass 5% test

9.   Shares emerging from approved (all-employee) share schemes**

10. Depository Interests (e.g. Crest Depository Interests) where all the investments represented by the DI would qualify if held directly in an ISA

11. Eligible policies of life insurance that pass 5% test

12. Cash held within the Stocks and Shares ISA pending investment in one or more of the above  

*5% test – this applies to categories 1, 5, 6, 8 & 10

To qualify for a Stocks and Shares ISA, there must be no guarantee (explicit or implied) that the investor will get back more than 95% of his investment at any point within the first five years.  However, if the investment fails this test – i.e. there is a guarantee or expectation that the investor will get back most if not all of his money – such an investment would qualify under the ISA Regulations for inclusion in a Cash ISA.  

**Item 9 -  This only applies where the ISA investor is entitled to acquire shares from a Savings-Related Share Option Scheme or a Share Incentive Plan. 

Such shares may be transferred from the scheme into the investor’s Stocks & Shares ISA subject to the annual subscription limit (shares are valued at market value or equivalent on the date of transfer) irrespective of whether the shares would otherwise be qualifying ISA investments  

More on Exchange-Traded Funds...

The term Exchange-Traded Fund (ETF) is not defined in tax law or the ISA Regulations. 

The London Stock Exchange has defined the criteria they believe a collective investment should meet to become an ETF. These generic features of ETFs are neither regulatory nor statutory requirements. One of the criteria is that the vehicle should be open-ended.

(NOTE: This does not make it an Open Ended Investment Company (OEIC) as defined in the ISA Regulations.)

ETFs are classified as collective investment schemes (CIS), but will not qualify as authorised schemes in the UK owing to corporate governance and structural issues.

Currently, there are no ETFs set up in the UK, but any that might be established would be an unregulated CIS and would therefore not be ISA-qualifying.

ETFs from EEA (European Economic Area) financial centres may be traded through the London Stock Exchange (LSE) but would only qualify for inclusion in an ISA if they were authorised by their home regulator (in another EEA state) as a UCITS and were a ‘recognised scheme’ (under Section 264 of the Financial Services and Markets Act 2000).  References to ETFs on the LSE website and elsewhere suggest that most ETFs may be ISA eligible but managers must satisfy themselves that any proposed ISA investment meets the appropriate regulations.

An ETF based in one of the designated territories (currently Jersey, Guernsey, Isle of Man and Bermuda) would not qualify under the non-UCITS retail schemes (NURS) regulations because ETFs are not included in the FSA Designation Orders with each of these territories and therefore are not ‘recognised schemes’ (under Section 270 of the Financial Services and Markets Act 2000). Such an ETF would not therefore be ISA-qualifying.

An ETF based elsewhere outside the EEA (e.g. USA) would be very unlikely to qualify as a ‘recognised scheme’ (under Section 272 of the Financial Services and Markets Act 2000) and therefore would not be ISA-qualifying.

Question: I have an ISA but the interest rate is very low. I want to open a new ISA in another bank but if I do this before 5 April I will lose the bonus payment. If I don’t do this I will lose the offer of a better rate as it will change after April. What can I do to solve this problem?

Answer: If you have not subscribed during 2009/10 to your current Cash ISA, there is nothing to stop you opening a new Cash ISA with another ISA Manager.

However, if you have subscribed this year, your only option is to transfer the ISA from your existing ISA Manager to the new ISA Manager, after which you can only add further subscriptions before the end of the tax year (5 April) to the extent that you have not already used your full 2009/10 Cash ISA allowance (£3,600 or, if over 50, £5,100).

In so doing, if you lose your bonus on the current ISA, that is the effect of the terms and conditions that you accepted when you opened the account with your current ISA Manager.

(If you also have a Stocks and Shares ISA to which you have made subscriptions during the current tax year, you must also ensure your total subscriptions to both types of ISA (Cash ISA and Stocks & Shares ISA) do not exceed the overall ISA limit of £10,200).

Question: Providing I do not exceed the permitted maximum amount, can I open or invest in more than one ISA per year?  

Answer: You cannot subscribe to more than one ISA of the same type (Cash ISA or Stocks and Shares ISA) during any one tax year.  For example, in the current tax year, assume that you have subscribed £2,000 to a Cash ISA with ISA Manager A and now wish to subscribe further with ISA Manager B.

You must arrange to have your current ISA transferred from A to B, after which you can subscribe a further £1,600 (or, if you are over 50, £3,100).

Question: My wife and I each invested £7,200 in a Stocks and Shares ISA in late April 2009. We did not invest in a Cash ISA and we are both over 50 yrs old. Given the changes in ISAs from October 2009, is it allowable for us to invest £3,000 each in a Cash ISA in the current tax year?

Answer: Yes, you can subscribe £3,000 to a Cash ISA with any ISA Manager of your choice. 

Although the Cash ISA limit for over-50s is £5,100, you are correct in limiting your subscription to £3,000 because, taking into account your subscription to your Stocks & Shares ISA, this will bring you up to the overall limit of £10,200 for the tax year.  

Question: Please explain why I can get investments that pay more after basic rate tax is paid than what the returns from Cash ISAs offer.

Answer: Make sure you are comparing like for like.  If you find a deposit account that pays more net of tax than you can get from an ISA, check whether there is a lock-in period. 

Many such accounts offer an attractive interest rate which is actually a much lower rate plus a bonus, which will only be paid if the deposit is left in the account for a specified period (e.g. 3 years).

Any deposit account paying interest net of basic rate tax will be better held within an ISA (if that option is available) because there would be no tax deducted.

Question: If I enter a Cash ISA at the end of April 2009 which is fixed for 2 or 3 years, what happens if I want to take out another Cash ISA a year later (end of April 2010)? Will that be the same as having a Cash ISA running and taking a new one out each new tax year?  

Answer: The fact that your 2009/10 Cash ISA is fixed for 2/3 years does not affect your ability to subscribe to a Cash ISA in 2010/11 and 2011/12 with any Cash ISA Manager of your choice. 

As you will not be making further subscriptions to your 2009/10 ISA, this will not breach the ISA Regulations which do not allow you to subscribe to two different Cash ISAs in the same tax year.

Question: Why are banks allowed to take so long in transferring your ISA to your new provider - keeping your savings at their new lower rate and depriving you of interest at the new improved rate at your new ISA provider?

Answer: When a new Cash ISA product is launched with a particularly attractive interest rate, it can cause an unexpected rush of instructions to other ISA Managers to transfer ISAs out to the provider of the new product and this can cause delays.

However, if you feel you have cause for complaint, you should take it up with the ISA Manager concerned.

Question: Would taking out an equity ISA (as well as the Cash ISA) for the maximum £5,100 be a good idea, since I am not getting much interest on my savings at present? Should I hold both ISAs with the same provider? 

Answer: If you decide to subscribe to both a Cash ISA and a Stocks and Shares ISA in the same year, it is entirely your decision whether you choose both with the same ISA Manager or with different ISA Managers.  If you choose to use different managers, remember to limit your Stocks and Shares ISA subscriptions so that between the two ISAs you do not exceed the overall limit of £10,200. 

Question: Is the ISA provider obliged to permit partial transfers out, or is this left to their discretion?

Answer: Although the regulations allow managers to make partial transfers, they are not obliged to offer this facility (check with your ISA Manager). 

Where a partial transfer is made, the current year cannot be split – it must either remain entirely with the existing manager or be transferred entirely to the new manager.  Previous years can be split in any way agreeable to investor and ISA Manager.  

Question: I already have an online-only ISA with the Halifax which has a 0.5% interest rate. I want to open a new one for 5 April and try to get a better interest rate - can I do this? Can I shut the one I have and open a new one, or can I open a new one and leave the money in this and just not add to it in 2010/2011? Also do you have to be at that bank already to open a new ISA?

Answer: I understand that you have already subscribed to your online Halifax ISA during the current 2009/10 tax year and that you wish to open a new Cash ISA in the new tax year, starting 6 April 2010.  So long as you put no further money into your current Halifax ISA after 5 April 2010, you can open a new Cash ISA with any Cash ISA Manager of your choice.

Whether a particular provider would require you to be an existing banking customer before opening an ISA with them will depend on their terms & conditions – you will need to check with them.

Question: Can I get tax relief in year 2010-11 on all sums invested now in a Cash ISA?

Answer: Once you have made subscriptions to your Cash ISA, any interest earned is free from income tax as long as it remains in the ISA.  This is irrespective of your tax status.

Question: Is it a good idea to put my children’s money into an ISA?

Answer: The clue is in the title – Individual Savings Account.  Subscriptions to your ISA can only be made with your own money and the assets held (whether cash on deposit in a Cash ISA or investments held in a Stocks & Shares ISA) belong to you, the individual.  ISAs cannot be held jointly or be subject to a legal charge.

You may wish to put money away in your ISA with the intention of giving all or some of it to your children at a later date but, if you change your mind, and end up taking the proceeds out to pay for a lavish party, there is nothing your children can do about it.

Question: If, after 6th April 2010, I no longer subscribe to my current pair of ISAs, but start subscribing to new ones with different companies, and then wished to transfer my now current Cash ISA to a Stocks and Shares ISA, would I have to do so to the Stocks and Shares ISA to which I was then subscribing?

Answer: When you transfer a Cash ISA that includes current year subscriptions to a Stocks and Shares ISA, the subscriptions that you have already made to the Cash ISA are recorded by the Stocks and Shares ISA Manager as subscriptions to that Stocks and Shares ISA in the current tax year. 

In your scenario, because you have already made subscriptions to your current Stocks and Shares ISA prior to the transfer, you can only transfer your current Cash ISA into this current Stocks and Shares ISA. 

You cannot transfer the current Cash ISA into your previous Stocks and Shares ISA because you would then have subscribed to two different Stocks and Shares ISAs both in the same tax year. 

Had you not already opened your 2010/11 Stocks and Shares ISA, then you could have transferred your current Cash ISA into your previous Stocks and Shares ISA, which would then have become your current year Stocks and Shares ISA by virtue of the reclassification of the current year subscriptions previously made to the Cash ISA.

Conversely, in your scenario, after 6 April 2010, you can transfer your previous Cash ISA (into which you have made no further subscriptions) to either of your Stocks and Shares ISAs, because there is no current year subscription to be taken into account.

Question: Why can I find a one year tax-free ISA that pays less (gross) than, say, a one year bond (net after tax)? I'm confused.  

Answer: You may not be comparing like for like.  You refer to a one-year bond that pays more net of tax than you can get from an ISA. 

The one-year bond means, by definition, that you can’t get your hands on your money for twelve months or, at the very least, will suffer a penalty if the bond issuer allows you to make an early withdrawal. 

The Cash ISA may well allow instant withdrawals at no penalty.  Having said that, see whether the bond issuer allows it to be held within an ISA in which case you will be entitled to the bond interest without deduction of tax.

Question: Can you please advise if I am able to transfer over money from one ISA to another? I realise that I would be closing one and opening another? Also, when would be the best time to do this - before or after the April tax year? Also, will my Building Society transfer the money for me or do I have to close and open new accounts myself?

Answer: You appear to have money in a Cash ISA with Building Society A which you wish to move into an ISA with another institution (Bank B). You are perfectly entitled to close your current ISA with A. 

However, if you do so, the maximum you will be able to put into a Cash ISA with B will be subject to the annual subscription limit for the tax year.

This means that, before 5 April 2010, depending on your age and whether you have already made any ISA subscriptions during 2009/10, you may be limited to anything from £5,100 to nothing.  After 6 April 2010, you will have a new £5,100 limit (irrespective of age). 

Question: What are the benefits of a Stocks and Shares ISA over a Cash ISA?

Answer: Stocks and Shares ISAs hold stock market investments (either directly through qualifying shares and other investments or indirectly through qualifying collective funds or investment trusts), which most people will agree should provide a better return over the long-term (at least 5 years).

However, this comes at the price of exposing your savings to a level of risk which could be anything from slightly higher than that associated with deposit accounts (such as Cash ISAs) to a very much higher level of risk – it all depends on the risk profile of the chosen investments.

Question: For the 2009/2010 year I invested the full £7,200 allowance in a stocks & shares ISA. Following the Budget increase in April 2009 up to £10,200, can I put the extra £3,000 into a Cash ISA as this comes under the £5,100 maximum for a Cash ISA?

Answer: You should be able to invest the £3,000 into a Cash ISA.

Question: Can I have an Equity ISA with one company and a Cash ISA with another both within allowed limits?

Answer: Yes you can.

Question: I have read that you should never withdraw money from an ISA because you will lose all the tax free benefits that you have built up over the years. Can you reassure me that my money isn't locked up forever?

Answer: There are different types of ISA available to you, some of which offer fixed rates over a period of time, where others allow instant access and variable rate interest. Normally a Stocks and Shares ISA can be accessed at any time, unless they invest in a structured product or a non-liquid fund.  

Question: Sooner or later I have to pay the shortfall on a mis-sold endowment policy covering my mortgage. If it's a case of losing the interest, then why bother with ISAs at all?  

Answer: ISAs offer significant income tax and capital gains tax advantages. However the only way to ensure repayment of a mortgage is to have a capital repayment mortgage.  

Question: I have already opened an ISA this financial year for more than £5,200, which came from an existing ISA opened over two years ago. Am I entitled to open another Cash ISA this financial year?

Answer: It depends if you transferred the money or withdrew it and then invested it. I am assuming you must have transferred the capital, in which case, yes, you are entitled to open another Cash ISA and invest the full allowance, which is £3,600 if you are under 50 or £5,100 if you are 50 or over (you need to have turned 50 by 5 April 2010).

Question: I have invested the maximum allowable this financial year in cash and am considering investing in a Stocks and Shares ISA. Is the maximum amount allowable in addition to that of a Cash ISA?

Answer: If you are under 50, the maximum ISA allowance is £7,200, of which you may invest up to £3,600 into a cash ISA. If you are 50 or over (you need to have turned 50 by 5 April 2010) the maximum ISA allowance is £10,200, of which you may invest up to £5,100 into a cash ISA.

If you are under 50 and you have used your maximum cash ISA allowance of £3,600, you have £3,600 left to invest into a stocks and shares ISA before 5 April.

If you are over 50, and you did know you had an increased allowance, you must have invested £5,100 into a Cash ISA and you therefore have £5,100 to invest into a Stocks and Shares ISA before 5 April.

However, if you are over 50 and you didn’t know you had an increased allowance and have invested £3,600 into a Cash ISA, you therefore have £6,600 of your ISA allowance left. You may invest the entire amount into a stocks and shares ISA, or you may invest up to £1,500 further into your cash ISA and the remainder into stocks and shares before 5 April.

The Conservatives answer your questions

Continuing our pre-election series taking your questions to the three major political parties, Confused.com spoke to Conservative MP and shadow chief secretary to the Treasury, Phil Hammond. Here's what he had to say...

On Europe...

Q: Do you have any plans in the future for Britain changing over to the Euro, and would you consider public referendum to make the decision?

A: We are pledged never to take Britain into the Euro. We will also change the law – by amending the 1972 Act – to provide a legally binding safeguard to prevent any future British government from trying to do so without a referendum.

On the NHS...

Q: What is going to be done to improve both patient and staff experiences with the NHS? More funding needs to be put into the NHS to improve the service to the population – would we see this under a Conservative government?

A: Over three years ago, David Cameron spelled out his priorities in three letters – NHS. Since then, we have consistently fought to protect the values the NHS stands for and have campaigned to defend the NHS from Labour’s cuts and reorganisations.

We are committed to protecting health spending in real terms – we will not make the sick pay for Labour’s Debt Crisis. But that doesn’t mean the NHS shouldn’t change. When you’re more likely to die of cancer in Britain than most other countries in Europe – and when the number of managers in the NHS is rising almost three times as fast as the number of nurses – the question isn’t whether the NHS should change, it’s how the NHS should change.

We have a reform plan to make the changes the NHS needs. We will decentralise power, so that patients have a real choice. And by publishing information about the kind of results that healthcare providers are achieving, we will make sure there is no hiding place for failure. If patients don’t like what they are offered, they will be able to find something better. This will drive up standards by allowing people to choose the best providers and by encouraging hospitals to compete for patients.

Making doctors and nurses accountable to patients, not to endless layers of bureaucracy, will also save billions that are currently spent on needless bureaucratic checks – meaning we can spend more on the frontline services that make a real difference.

On Pensions...

Q: Pensioners receive one of the worst state pensions in comparison to other European countries and still have to pay tax on their pension income. Do you have any plans to stop taxing pension income and help pensioners in other ways, such as cheaper council tax?

A: We will take the tough decisions needed to ensure all pensioners receive a decent state pension.

We will re-link the basic state pension to earnings to help stop the spread of the means test. Restoring the link to average earnings will benefit all pensioners. This will be made affordable by bringing forward the date at which the state pension age rises from 65 to 66 - but the earliest that could start would be 2016 for men and 2020 for women, so no-one who is a pensioner today or approaching retirement soon will be affected as a result of this particular change.

At the same time, we will look at how we can simplify the rules and regulations around pensions to encourage companies to offer high quality pension provision to all employees.

We will give people more control over their retirement income by ending the effective obligation to buy an annuity at 75.

Over the longer term, we will reverse the effects on pension savers of the 1997 abolition of the dividend tax credits for pension funds.

We will also raise the Inheritance Tax threshold to £1 million to help millions of people who aspire to pass something on to their children. We’ll also freeze council tax for two years. We oppose Labour’s plans for ‘death taxes’.

On Banking...

Q: Despite the banking crisis and the bailout of major institutions, banks continue to treat their consumers unfairly. For example, some credit card rates are subject to interest in excess of 30% and rising, and you can find loans with interest of over 50%.

Is there a need to introduce further regulation of the banking system to ensure customers are treated more fairly and that providers do not get away with making too much money to the detriment of the public?

A: Alongside a strengthened Bank of England with responsibility for protecting the wider financial system from risk, we will create a strong new Consumer Protection Agency (the CPA) with responsibility for protecting consumers.

The Conservative Party will launch Britain’s first free national financial advice service, providing impartial and independent guidance on financial issues via face-to-face sessions, telephone advisers and online information.

We will introduce a cap on “excessive” store card interest rates to protect the public, and help prevent people from falling into problem debt.

A Conservative government will introduce new legislation requiring all credit card statements and adverts to contain standardised information about borrowing costs.

This will include exactly how much the credit will cost if only minimum repayments are made every month – and how long it will take to repay.

And we will require all credit card providers to send their customers a data file containing two important categories of information: pricing and usage. This will make markets more competitive and help consumers get a better deal by increasing transparency, enabling switching and promoting better informed choice.

On Energy...

Q: When are we really going to get to grips with implementing alternative sources of energy generation? What measures do you have planned to provide reliable, efficient and cheaper sources of power to Britain?

A: After 13 years of Labour, the government is expecting to resort to power cuts in the years ahead; our dependence on fossil fuels, increasingly from imports, has risen; and we have failed to make significant cuts in carbon emissions.

A Conservative government would take immediate action to keep Britain's lights on, to cut greenhouse gas emissions and give Britain leadership in a low carbon world. We will accelerate the planned programme of carbon capture and storage (CCS) demonstration projects.

We will allow communities that choose to host onshore wind farms to keep the additional business rates they generate for six years. And we will mandate the National Grid to extend its network out to sea to galvanise the deployment of offshore wind, marine and tidal energy.

On Tax...

Q: What are your plans for taxation?  Bearing in mind this country is now in debt, owing billions after bailing banks, what are your plans for Income Tax, National Insurance, Inheritance Tax and VAT?

A: Of all Labour's tax rises, [the one to avoid] is the increase in NICs [National Insurance contributions] – a tax on everyone earning over £20,000. But we have not committed to reverse Labour's planned tax until we know we can afford it.

We have no plans to change VAT. Only the Labour Party has dreamt up plans to put VAT up to 18.5%.

We are committed to recognising marriage in the tax system. Britain is alone among the major developed economies in not recognising marriage in the tax system. Our approach is evidence-based: studies prove beyond doubt that children do better when their parents are together – and parents of young children are nearly four times more likely to stay together if they are married.

We will also raise the Inheritance Tax threshold to £1 million to help millions of people who aspire to pass something on to their children.

On the Housing Market...

Q: Currently the costs involved in moving house are extortionate, with stamp duty, legal fees, mortgage fees, Home Information Packs (HIPs), valuations and more - if you are lucky enough to get on the property ladder at all (even by a shared ownership scheme). How do you intend to help with the growing costs of moving house?

A: Gordon Brown’s property tax hikes have helped kick a whole generation off the housing ladder. We will address this by:

Scrapping Stamp Duty for first-time buyers on homes up to £250,000, so that nine out of ten pay nothing.

Abolishing Home Information Packs which have made moving house even more expensive and difficult.

Whereas Labour have curtailed the right of social tenants to own their home, a Conservative government will make it easier for social tenants to own or part-own their home. This will not only help people up the housing ladder, but also ensure residents have a greater stake in their community.

On the Global Economy...

Q: What will you do to get stability back into this country? We have a diminishing manufacturing base and exports and are drifting further from China and Europe. How can you make Britain a strong and productive country again, and in what sectors will you focus your attention?

A: We can’t go on with the old model of an economy built on debt. An irresponsible public spending boom, an overblown banking sector and unsustainable consumer borrowing on the back of a housing bubble were the features of an age of irresponsibility that left Britain so exposed to this economic crisis.

They cannot be the sources of sustainable growth for the future. Indeed, the lack of confidence in Britain’s ability to pay its way now risks higher interest rates and a return to recession.   The answer lies in building a new economic model. Saving and business investment must replace debt as the foundation of prosperity. Our exports must grow. Jobs must be created in the private sector and we must get value for money from the public sector.

The world is changing fast. We can seize the opportunities presented by rising living standards in countries such as India and China, but only if we adapt quickly enough. We should be selling out services and high value goods to the world, including the new millions of Chinese and Indian consumers. Simply borrowing money from China to buy the goods they make for us may be Gordon Brown’s idea of Britain’s economic future, but it is not ours.  

Under the next Conservative government, our tax system, education and national infrastructure will help British firms out-compete others in the world, not hold them back. We will build a more balanced economy which does not depend so heavily on the success of financial services, and where all parts of the country share in the gains. The bedrock of this new model will be the stability and low interest rates that come from a credible plan to reduce our national budget deficit, protect Britain’s credit rating and give taxpayers value for money.

So we will act now on debt to get the economy moving. We’ll get Britain working by boosting enterprise, cutting corporation tax rates, abolishing taxes on the first ten jobs created by new businesses, and getting people off welfare into work.

We’ll make Britain open for business, improving our international rankings for tax competitiveness. And we’ll support SMEs [small and medium enterprises] by, among other things, using government guarantees to create more diverse sources of affordable credit.

On Employment...

Q: How are you going to bring back down the unemployment rate and the claimant rate? Young people are particularly affected, alongside all the people made redundant in the recession. How will you tackle this to get more people back to work?

A: Labour are planning to raise employer and employee National Insurance by 1% in 2011. Of all Labour’s tax increases our first priority will be to try to avoid this tax on jobs. Any new business started in the first two years of a Conservative government will pay no Employer National Insurance on the first ten employees it hires during its first year.  

We will fund 200,000 apprenticeships and pre-apprenticeships, 100,000 work pairings and 100,000 further education college places.

The Enterprise Allowance Scheme in the 1980s provided some of our most successful entrepreneurs with their first break. We will build a network of business mentors and provide loans to would-be entrepreneurs, supporting self-employment and franchising as a route back into work.

We will also work to reduce the very high marginal tax rates faced by many people on low incomes who want to return to work or increase their earnings.

Reducing youth unemployment and reducing the number of children in workless households is a key part of our strategy for tackling poverty and inequality. Under Labour, youth unemployment has hit record highs, and one in five young people are unable to find a job. We are at risk of creating a generation of young people without the skills to participate in the workforce.

On Elderly Care...

Q: There is obviously a hot debate on the UK’s ageing population and how their care will be paid for. If you get into power, how will you address this problem? Is ‘death tax’ the answer, or non-compulsory/compulsory payments?

A: We oppose Labour’s plans for ‘death taxes’.

We have had ten years of debate about the need for social care reform but the Labour government has failed to provide any long term solutions.

We have been clear about our choices. We will create a partnership between the state and families; we will give people the option of a voluntary insurance scheme to protect their homes; we will retain cash disability benefits and we will boost preventative support to help elderly people maintain their independence.

Don't forget, you can find Liberal Democrat Treasury spokesman Vince Cable's answers here. Watch this space for views from the Labour Party.

Vince Cable answers your political questions

At the beginning of February, we at Confused.com asked you, our readers, to send us your political questions in the run-up to the general election, so we could put them to various political parties in the UK. Those taking part in our Q&As include the Labour Party, Conservatives and Liberal Democrats, and we’re still trying to get more on board...

So, in our first pre-election grilling, we put your questions to Vince Cable, Treasury spokesman for the Liberal Democrats. Here are his answers...

On Europe...

Q: Do you have any plans in the future for Britain changing over to the Euro, and would you consider public referendum to make the decision?

A: We have no plans for Britain to join the Euro in the foreseeable future. Any entry to the Eurozone would have to be approved by the British people in a referendum and would have to be based on a test of economic conditions, in particular with a competitive exchange rate.

On the NHS...

Q: What is going to be done to improve both patient and staff experiences with the NHS? More funding needs to be put into the NHS to improve the service to the population – would we see this under a Liberal Democrat government?

A: In the current, serious, budgetary crisis there is no scope for promising additional funding. The NHS has enjoyed big increases in funding in recent years, which have undoubtedly improved services - though much has not been spent as effectively as it could. There is far too much money spent on a bureaucratic, target-monitoring culture.

Where savings can be made from improved efficiency, the first call would be on services like mental health, which have been neglected in the past and [where] patient experience is poor.

On Pensions...

Q: Pensioners receive one of the worst state pensions in comparison to other European countries and still have to pay tax on their pension income. Do you have any plans to stop taxing pension income and help pensioners in other ways, such as cheaper council tax? 

A: The objective should be to improve the state pension so that there is no means testing, as with pension credit, creating powerful disincentives to save for retirement. Liberal Democrats are committed to a rapid move to indexing pensions by earnings rather than prices.

We would like to see taxes cut on small savings by lifting the income tax threshold (to £10,000). We would help occupational and private pensioners by removing compulsory annuitisation, giving pensioners freedom to spend their savings freely.

On Banking...

Q: Despite the banking crisis and the bailout of major institutions, banks continue to treat their consumers unfairly. For example, some credit card rates are subject to interest in excess of 30% and rising, and you can find loans with interest of over 50%.

Is there a need to introduce further regulation of the banking system to ensure customers are treated more fairly and that providers do not get away with making too much money to the detriment of the public?

A: Banks which have benefited from taxpayers’ help should be acting responsibly in the national interest. The main regulatory requirement at present is that the banks should be lending on reasonable terms to their small and medium-sized business customers, which are the backbone of the economy.

What has also become clear is that banks constantly take advantage of their customers through unfair charges. The only answer in the long run is more genuine competition and, in addition to new banks entering the market, the big existing banks will have to be split up to secure this objective.

On Energy...

Q: When are we really going to get to grips with implementing alternative sources of energy generation? What measures do you have planned to provide reliable, efficient and cheaper sources of power to Britain?

A: Britain has fallen well behind other European countries in promoting new renewable sources of energy, and we are committed to raise their share of energy supply significantly using feed-in tariffs and encouraging distributed power systems.

There will be a continued large demand for gas, which is cheap and cleaner than coal, though growing amounts have to be imported - albeit from safe (like Norway) or diverse sources.

The key to greater energy security is bigger storage capacity in case of emergencies. We are not in favour of new nuclear power, around which there are large hidden costs – notably decommissioning. A key element in energy policy is conserving energy, which is highly cost effective and reduces home heating bills, particularly for the elderly. We have an ambitious plan to insulate large numbers of homes and public buildings, creating jobs as well as saving energy.

On Tax...

Q: What are your plans for taxation?  Bearing in mind this country is now in debt, owing billions after bailing banks, what are your plans for Income Tax, National Insurance, Inheritance Tax and VAT?

A: Our main tax proposal is to raise the tax threshold to £10,000, lifting millions of low earners, workers and pensioners out of tax and cutting the income tax bill by £700 a year for average earners.

This tax cut could be fully funded by removing some tax loopholes favouring high earners (in particular, higher rates of tax relief on pension contributions and capital gains tax levied at a lower rate than income tax). We would also raise revenue to finance the tax cut through a 1% levy on the value of mansions over £2 million.

On the Housing Market...

Q: Currently the costs involved in moving house are extortionate, with stamp duty, legal fees, mortgage fees, Home Information Packs (HIPs), valuations and more - if you are lucky enough to get on the property ladder at all (even by a shared ownership scheme). How do you intend to help with the growing costs of moving house?

A: The main problem in moving house at present is the non-availability of mortgages. The semi-nationalised banks must, as part of their lending agreement with the government, maintain a steady flow, on reasonable terms (mortgage lending terms must in future be regulated to exclude 100%-plus LTV [loan-to-value] mortgages and discourage 90% LTVs). We favour scrapping HIPs other than the energy test.

 

On the Global Economy...

Q: What will you do to get stability back into this country? We have a diminishing manufacturing base and exports and are drifting further from China and Europe. How can you make Britain a strong and productive country again, and in what sectors will you focus your attention?

A: Britain’s credibility in the wider world does depend on having a strong economy. That is partly about putting the public finances in order. It is also about creating a better balanced economy, less dependent on London and banking. Britain has a strong reservoir of entrepreneurs, innovators, highly educated and creative people which must be supported.

A better balanced economy will have a bigger role for modern high-tech manufacturing, creative industries, pharmaceuticals, information technology and environmental services and industries. One specific step is to help create an Infrastructure Bank which will fund better human and physical infrastructure (rail, digital, ports) around which wealth-creating activities can grow.

On Unemployment...

Q: How are you going to bring back down the unemployment rate and the claimant rate? Young people are particularly affected, alongside all the people made redundant in the recession. How will you tackle this to get more people back to work?

A: The most important step in tackling the unemployment problem is to ensure that small and medium-sized businesses can grow. At present they are being held back by lack of bank credit with even the semi-nationalised banks failing to meet their legally binding lending obligations.

It is important, too, that the necessary tightening of the budget deficit and spending cuts do not begin prematurely with the ‘slash and burn’ approach favoured by [Conservative Shadow Chancellor George] Osborne; leading to deepening recession and higher levels of unemployment. There is also scope for the government to support specific job creation schemes – a big home insulation programme and refurbishment of empty homes.

On the 'care question'...

Q: There is obviously a hot debate on the UK’s ageing population and how their care will be paid for.  If you get into power, how will you address this problem? Is ‘death tax’ the answer, or non-compulsory/compulsory payments?

A: All parties now agree, in principle, that with an ageing population it is no longer financially realistic to offer unlimited free care for all. There will have to be contributions for those who benefit. We do not have a dogmatic approach, but any form of long-term insurance can only work if all parties sign up to a consensus. There has to be an element of compulsion, since voluntary schemes overseas raise nothing like enough.

Payments must also reflect ability to pay. No sensible approach can rule out obtaining payments from a deceased estate; but there are other approaches, including equity release and the use of pension lump sums and insurance premiums levied in various ways.