PPI refunds 'boost UK economy'
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%.
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.
She told the newspaper: "When I heard I was going to get over £2,000 in compensation I hired builders to fix a long-overdue problem with the eaves in my roof and put the rest of the money towards a holiday to Greece in September."
Some £4.8 billion in PPI compensation had been paid out by May this year and £5 billion is still to be claimed, according to consumer group Which?. The body has been campaigning to make it easier for people to make claims directly rather than use claims management companies which often take a quarter of any payout.
The British Bankers' Association confirmed in May last year that it was not going to appeal against a High Court ruling that rules relating to the mis-selling of PPI could be applied retrospectively. The Financial Ombudsman Service (FOS) has said it expects to settle a record number of PPI cases this year at around 130,000.
© 2012 Press Association