Connect with us

Published

on

There was a time, in the wake of the first wave of COVID-19, that politicians and economists yearned for a V-shaped recovery – an immediate bounce-back from the financial devastation of lockdowns.

The second wave put paid to that, and as we tiptoe out of the most recent restrictions, the line drawn by GDP is starting to look more like an England supporter’s ECG than a smooth path back to economic health.

For the third consecutive month, GDP growth slowed in May. The increase of 0.8% was a fourth consecutive month of growth – almost inevitable given the restrictions on personal and professional life that applied at the start of 2021 – but only half of what had been forecast.

Live COVID updates from the UK and around the world

Please use Chrome browser for a more accessible video player

Sunak hint over change to ‘pinging’

What growth there was came from hospitality where restaurants and hotels, closed to indoor trade by government order until 17 May, saw a 37.1% increase in business, and the sector as a whole contributed almost all of the monthly growth.

Without the easing of restrictions the economy would have been flatlining as supply bottlenecks and lingering consumer reticence constrained spending.

The biggest drag on GDP came courtesy of the global microchip shortage that has slowed vehicle production lines and delayed production of consumer electronics. Transport manufacturing fell 16.5% in the month and, while recovery is under way, chip producers say shortages will linger until the end of the year.

More on Covid-19

The economy remains 3.1% smaller than pre-crisis, and while continued easing of restrictions means economic activity is likely to increase, some have pushed back expectations of when it will return to the pre-COVID levels of February 2020 from August to October.

A key factor will be consumer confidence as legal restrictions are dropped and our COVID security becomes dependent on the personal choices made by others.

The impact of a new wave of cases on businesses’ ability to function will also be crucial. The pinging of the NHS app may be a bell tolling for economic recovery.

Continue Reading

Business

Chancellor Jeremy Hunt considering further public spending cut to boost tax giveaway in budget

Published

on

By

Chancellor Jeremy Hunt considering further public spending cut to boost tax giveaway in budget

Jeremy Hunt is considering a last minute further cut to public spending to boost the tax giveaway in Wednesday’s budget.

The Politics At Jack And Sam’s podcast, out now, sets out how Number 10 and 11 have spent recent days finding as many different ways of raising future revenue as possible to increase the size of Wednesday’s tax cuts.

National insurance could be cut by 2p again in the budget if the chancellor succeeds in finding the right mix of revenue-raising measures and spending cuts.

👉 Listen above and tap here to follow Politics At Jack And Sam’s wherever you get your podcasts 👈

Currently, spending is due to rise 1% above inflation after next year. However, if this was cut to 0.75% above inflation, that would raise £5-6bn.

The chancellor would hope to resist questions about where he would cut, saying he is doing an efficiency drive and decisions would be outlined at a future spending review post election.

The decision on whether to cut future spending was live in the Treasury as recently as Friday, and this morning the chancellor was arguing about the importance of finding efficiencies.

More on Budget 2024

Please use Chrome browser for a more accessible video player

What do people want in the budget?

This is likely to boost Labour’s charge that the government is “maxing out the credit card” to keep its own supporters on side.

However, most Tories in government believe this is a necessary trade-off to allow the party to go into the next election presenting themselves as the low-tax party.

Some senior Tories disagree, however, worrying that the public is more worried about the state of public services than tax cuts.

Please use Chrome browser for a more accessible video player

Budget 2024 explained

The budget is likely to have cuts or the abolition of non-dom status, which could raise £2-3bn, plus other small loopholes being closed, generating a few hundred million in revenue.

Read more:
Any tax cuts will need to be ‘undone’ after election – economist
Unfunded tax cuts ‘deeply unconservative’ – Hunt
When is the budget – timings and how to watch

The Politics At Jack And Sam’s Podcast also reveals how delaying Contaminated Blood compensation payouts has helped deliver tax cuts.

In January, the Treasury was worried those payments might reduce the amount the chancellor could spend before he reached the borrowing limits from his fiscal rules.

However, the inquiry will not report until later and the government is resisting calls for interim payouts.

Continue Reading

Business

Any tax cuts will need to be ‘undone’ after election, economist claims

Published

on

By

Any tax cuts will need to be 'undone' after election, economist claims

Any tax cuts made during this budget will “one way or another be undone after the election”, according to one economist.

Speaking to Sky News, Paul Johnson, the director of the Institute for Fiscal Studies, explained that – if it were not an election year – it is unlikely that Chancellor Jeremy Hunt would be looking to trim the tax burden.

Speaking to Sunday Morning with Trevor Phillips, Mr Hunt said his budget would be “prudent and responsible” – but added that he wanted to “make some progress” on the “journey” started by the two pence cut to National Insurance announced in the autumn statement six months ago.

The chancellor is facing pressure to cut taxes to try and shift the polls in favour of his own party, which is languishing well behind Labour.

Sunday Morning with Trevor Phillips
Sunday Morning with Trevor Phillips

Watch live each week on Sunday at 8:30am on Sky channel 501, Freeview 233, Virgin 602, the Sky News website and app or YouTube.

Tap here for more

Mr Johnson said: “I think this is going to be a political decision in an election year. If this weren’t an election year, I don’t think we’d be talking about tax cuts at all.”

He added: “If we weren’t looking at an election, I think he would be saying, let’s steady as she goes, let’s see where we are in a year or two.

“But given it is an election, I suspect we will get some tax cuts.

More on Budget 2024

“My guess, though, is that those will, one way or another, be undone after the election.

“The state of public finances, the state of public services, the shortage of money for everything from the health service to local government to social care indicates to me, we’re going to need more money over the next five years rather than less.”

Please use Chrome browser for a more accessible video player

Budget 2024 explained

Changes to income tax and National Insurance have been mooted as potential options, as well the government taking Labour’s policy of scrapping the non-dom tax status.

But with the budget itself not due until Wednesday lunchtime, Sky News understands decisions are still being made in Downing Street about what to include.

The tricky financial picture means there has been limited space to make pre-budget announcements.

Read more:
Unfunded tax cuts ‘deeply unconservative’ – Hunt
What to expect from the budget – tax cuts to vaping duty
When is the budget – timings and how to watch

Please use Chrome browser for a more accessible video player

Budget will be ‘prudent and responsible’

The tax burden is reaching record levels, with it expected to rise to its highest point since the Second World War before the end of this decade as the country looks to pay back heavy borrowing used for support during COVID-19 and the energy spike in the aftermath of Russia’s invasion of Ukraine.

Mr Hunt has already announced plans for an £800m package of technology reforms which government hopes will free up public sector workers.

Mr Hunt claims that “we shouldn’t fall into the trap of thinking more spending buys us better public services” – and that the £800m investment will yield £1.8bn in benefits by 2029.

Torsten Bell, the head of the Resolution Foundation, worked in the Treasury as a civil servant before going to work for chancellor Alistair Darling in the financial crisis.

He explained to Sky News why Mr Hunt is having difficulty “rolling the pitch” – preparing the ground for the announcements in the budget.

Mr Bell said: “The reason why the chancellor is finding things quite difficult is two reasons; One is the difficult economic circumstance.

Please use Chrome browser for a more accessible video player

What public finance figures mean for the budget

“We’re obviously coming out of a high inflation period, but we’re not seeing a lot of economic growth.

“And then on top of that, we’re in a world where they’re talking about tax cuts, but everybody around the country, everybody watching this knows that, the reality is this is an era of taxes going up.

“So it’s a difficult situation.”

Mr Hunt said he wants to cut taxes as it helps faster growth as seen in North America and Asia.

👉 Listen above then tap here to follow Electoral Dysfunction wherever you get your podcasts 👈

“But it would be deeply unconservative to cut taxes in a way that increased borrowing that wasn’t fully funded,” the chancellor said.

“If I think of the great tax-cutting budgets of the past – Nigel Lawson’s budget in 1988.

“The reason that was so significant is because those tax cuts were permanent and people need to know that these are tax cuts you can really afford.

“So it will be responsible and everything I do will be affordable.”

Continue Reading

Business

Banks placed on alert over ‘rogue’ Companies House filings

Published

on

By

Banks placed on alert over 'rogue' Companies House filings

Britain’s biggest banks have been placed on alert over hundreds of ‘rogue’ filings which appear to have been lodged at Companies House, the UK’s central corporate register.

Sky News has obtained a note issued by UK Finance, the banking trade association, which warned its members that approximately 800 forms relating to the discharging of financial liabilities were submitted at Companies House late last month.

In the notice to banks – marked as “Urgent” when it was circulated last week – UK Finance said it had alerted both Companies House and the Department for Business and Trade to the issue.

Industry executives pointed to the possibility of an attempted fraud or hacking of the Companies House register, although the circumstances remained unclear on Sunday.

UK Finance said in its memo that a number of members and law firms had “flagged an issue regarding the apparently erroneous satisfaction of security (registered charges) on Companies House relating to a number of live business clients”.

In a further update issued on Friday, it said it had been informed that roughly 800 rogue filings related to 190 companies had been submitted, adding: “Companies House have emphasised that an incorrect entry in the register – saying a charge has been satisfied – does not invalidate or cancel that charge.

“It remains valid and enforceable.

More from Business

“However, there will likely be other consequences for lenders that will need to be resolved.”

Read more:
Unfunded tax cuts ‘deeply unconservative’, says Hunt ahead of Budget
Post Office should be handed over to postmasters, former boss says

Companies House, which is owned by the government, is responsible for incorporating and limiting millions of limited companies.

One source described the situation as “deeply alarming” and said it was disappointing that Companies House had also outlined plans to increase its fees in May “when it was susceptible to rogue corporate filings in this way”.

Responding to an enquiry from Sky News, a Companies House spokesperson said: “We are aware of this matter and we are looking into it.”

UK Finance declined to comment further.

Continue Reading

Trending