PPI refunds 'boost UK economy'
Aug 08 2012
Refunds to customers who were mis-sold payment protection insurance are having a similar effect on the UK economy as a tax cut, it has been suggested.
Around £10 billion has been set aside by banks to cover claims being made by people who were sold insurance they did not want or need, in what is predicted to become the biggest consumer financial scandal of all time.
But it has been suggested that the scandal has a silver lining, with average payouts of £2,750 giving people's cashflows a shot in the arm at a time when their budgets are under huge pressure due to high living costs, high unemployment and below-inflation pay rises.
The National Institute of Economic and Social Research (NIESR) said that even by a conservative estimate, a £10 billion PPI payout in 2012 could have the effect of raising GDP by 0.1%.
Simon Kirby, a senior research fellow at the institute, said: "PPI payments are a boost to household finances which are broadly the same as having a temporary tax cut."
Jonathan Portes, NIESR director, said the effect of the PPI windfalls was greater at a time of recession: "From an economic point of view, the timing of these payouts is quite good. This is a good time for the money to be flowing into the economy."
The GDP figures emerged as a result of research by the Financial Times, which spoke to Elaine Overten, a retired nurse from Derbyshire, who received compensation for PPI payments made on her mortgage.
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