Article & Journal Resources

As 2007 draws to a close, here is my individual review of the year, taken from the perspective of seven key groups:
1. Bill-payers

It's not been a terribly good year for Britain's bill-paying public. Although wages rose by an average of around 4% during 2007, much of this gain has been gobbled up by rising prices. Indeed, annual inflation, as measured by the Retail Prices Index (RPI), is up by around 4.3%. This is largely due to the rising cost of food, fuel and other essential goods. Although gas and electricity prices fell in early 2007, wholesale prices are climbing again, so expect higher energy bills to kick in next year.

On the other hand, the national minimum wage (for workers aged 22+) rose to £5.52 an hour in October, which provided some cheer for low-paid employees.
2. Motorists

As ever, motorists found themselves under the cosh. A surge in the price of oil late in the year saw fuel prices soar. In November alone, average petrol prices rose by 3.5p a litre to exceed £1, with the monthly rise for diesel averaging 5p. As usual, Vehicle Excise Duty (‘road tax') was increased and premiums for motor insurance climbed.

The London Borough of Richmond Upon Thames (LBRUT) started a revolution when it began linking the cost of parking permits to vehicles' CO2 emissions. Under the new scheme, LBRUT households with two or more cars will pay more for second and subsequent parking permits. Perhaps this scheme will be copied by other councils in 2008?
3. Borrowers

The longest borrowing binge in British history continued throughout 2007. Indeed, personal debt rose by almost £10 billion a month. It now stands at £1,400 billion, which is exactly the figure I predicted in January. Also as forecast, over 10,000 people now become insolvent or bankrupt each month.

The Bank of England piled on the pressure early in the year, hiking its base rate by a quarter-point in January, May and July. However, a global credit crunch which started in the summer played havoc with financial markets, leading the Bank to cut its base rate to 5.50% in December. Although further rate cuts are expected, I predict that these will be too little, too late. Our huge debt burden is here to stay, so I foresee that 2008 will be the year when ‘easy credit' turns into ‘tough debt'!
4. Savers

A rising base rate is good news for savers, so the first half of the year saw Best Buy savings rates reach and then exceed 6% a year. The ‘dash for cash' among banks also caused rates to rise, especially for fixed-rate savings bonds. However, the rate cut late in the year has caused a dip in savings interest rates, and we can expect more cutbacks in 2008.

Then again, it seems that savers are a rare breed these days. Despite government efforts to stimulate saving through improvements to ISAs and pensions, more than a third of adults have no savings at all. Furthermore, the savings ratio (the proportion of our take-home pay which we save) hit 2% in early 2007 -- its lowest level in 47 years. Still, weak house-price growth tends to encourage saving, so this ratio has started climbing again.
5. Homeowners

The year started well for homeowners, with house prices continuing to climb across most of the UK. By the midpoint of the year, the Halifax House Price Index showed house prices up an average of 10.9% over the previous twelve months. However, the credit crunch forced banks to cut back on mortgage lending, causing house prices to fall in September, October and November. Hence, house-price inflation should be around 6% for 2007. I expect to see house-price indices continue to fall and turn negative at some point in 2008.
6. Investors

It's been a rollercoaster year for stock-market investors, as market jitters depressed share prices in the second half of the year. The blue-chip FTSE 100 index began the year at 6220.8, so it's up a mere 1% as I write. Add on, say, 3% for dividends (the income paid by shares) and the total return for the Footsie is roughly 4%. Thus, the FTSE 100 has underperformed cash for the first time in five years -- and many investors in smaller companies are sitting on some hefty losses. Not a great year for equities, all told.
7. Pensioners

It was a mixed year for pensioners. The basic state pension for a single person rose in April by almost £3 to £87.30 a week. However, pensioner inflation is much higher than general inflation, as they spend a far higher proportion of their incomes on food, energy and the Council Tax. Thus, many pensioners felt worse off in 2007.

The only truly good news for pensioners came close to the end of the year, when the government agreed higher compensation for the 140,000 victims of collapsed company pensions. Again, this settlement came several years too late, so it joins Equitable Life, Farepak and Northern Rock in this government's Hall of Shame.

Blast, I thought I'd made it all the way to the end without mentioning Northern Rock! Watch out for its inevitable nationalisation in early 2008...

Finally, I offer season's greetings to all Fool readers. It's been a pleasure writing for you, and I hope to continue to "educate, amuse and enrich" you next year.