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Billions of pounds that could be spent on fixing public services and filling the “black hole” in the UK’s finances is being lost through unpaid taxes, MPs have warned.

An “eye-watering” £42bn is outstanding in tax debt, with about 5% of tax owed each year failing to be collected by HMRC, according to the Commons Public Accounts Committee.

The Liberal Democrats labelled the amount “absolutely staggering” as the country battles a cost of living crisis and the biggest outbreak of industrial action in a generation – with multiple sectors striking over pay in the face of high inflation and stretched public finances.

In his Autumn Statement in November, Chancellor Jeremy Hunt announced a raft of tax hikes and spending aimed at making £54bn worth of savings.

But Dame Meg Hillier, chair of the committee, said: “The eye-watering £42bn now owed to HMRC in unpaid taxes would have filled a lot of this year’s infamous public spending black hole.”

MPs on the committee criticised ministers for not doing more to claw back the money owed to the public purse.

Dame Meg said HMRC will only employ more staff to tackle compliance over the next few years and that is “not fast enough to dent the tax gap at a time of huge public sector spending pressures”.

More on Cost Of Living

According to the 22-page document, £731.1bn was collected in taxes and duties in 2021-22.

Although this was the highest on record as the UK emerged from the pandemic, the committee said more could be done to claim unpaid taxes.

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Sky’s Economics and Data Editor Ed Conway unpicks the impact of a year shaped by the cost of living crisis and the mini budget.

The report said that for every £1 that HMRC spends on compliance activities, it recovers £18 in additional tax revenue – and the government “is missing the opportunity to recover billions in lost revenue by not resourcing compliance”.

MPs warned more is now owed in tax debt than before the pandemic, with the debt also expected to fall more slowly than previous years as taxpayers feel the effects of the cost of living crisis.

The £42bn in unpaid taxes comes on top of the £4.5bn lost to fraud in COVID support schemes – of which HMRC only expects to recover a quarter.

Dame Meg said HMRC is “settling for trying to recover less than a quarter of estimated losses in schemes such as furlough”.

“We recognise the problems HMRC faces – due to poor controls, the horse has bolted – but we believe there is a moral duty to pursue fraud,” she said.

“HMRC must ensure dishonesty is not seen to create advantage.”

HMRC ‘have 6,000 fewer customer service staff than five years ago’

The Chartered Institute of Taxation (CIOT) welcomed the report and said the current levels of service being provided by HMRC are not acceptable.

The CIOT said HMRC has 6,000 fewer customer service staff than five years ago and the government “appear to have cut staff numbers anticipating efficiencies and time savings from digitalisation that have not yet arrived”.

Susan Ball, president of the CIOT, said members tell them every day “of the delays they face getting answers and action from HMRC”.

She said: “It is crazy that people trying to get help from HMRC on paying the right amount of tax find it so difficult to get through, especially when an estimated £3bn a year is lost to the Exchequer from non-deliberate taxpayer error.

“The first principle of compliance surely has to be making it easy for willing taxpayers to comply with their obligations.”

Christine Jardine, the Liberal Democrat Cabinet Office spokeswoman, said: “This government is losing absolutely staggering amounts of money through its incompetence and inability to collect the tax it’s owed.

“We need to see serious action to close this tax gap black hole.

“Ministers need to immediately get a grip on this situation, anything less would be a failure for millions of people who are struggling with the cost of living crisis.”

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Family of man killed by psychiatric patient say they’ve been ‘treated like dirt’ after learning attacker can leave hospital

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Family of man killed by psychiatric patient say they've been 'treated like dirt' after learning attacker can leave hospital

The family of a dog walker killed by a psychiatric patient say they have been ‘treated like dirt’ by the NHS after learning his attacker has been granted permission to leave hospital.

Lewis Stone was stabbed to death by David Fleet in a random attack in Borth, Wales, in 2019, shortly after Mr Fleet had been released into the community.

Mr Stone’s family were informed of the update to his care just hours after Sky News aired their first TV interview calling for an internal NHS Trust report into its handling of Fleet’s case to be released.

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From 10 April: Victim’s family demand answers over killer’s NHS care

Mr Stone’s stepdaughter, Vicki Lindsay, told Sky News: “As victims, we have been treated disgracefully.

“We still do not know why the killer was released 10 days before he attacked Lewis, who made that decision and why, and who is going to be held accountable for it.

“But as if all that were not bad enough, only six years on, we now get to live knowing that the killer is now allowed out at night time.”

Ms Lindsay also told Sky’s Sarah-Jane Mee that “my biggest fear is that it’s going to happen again – I can’t sleep at night thinking about other families going through what we’ve gone through”.

More on Wales

Mr Fleet was sectioned under the Mental Health Act after admitting manslaughter with diminished responsibility.

He was suffering from paranoid schizophrenia at the time of the attack and told psychiatrists that if he had not stabbed Mr Stone, the voices in his head “were going to kill him”.

Lewis Stone and his wife Elizabeth (Liz)
Lewis Stone was fatally stabbed on 28 February 2019 by David Fleet, has been sectioned under the Mental Health Act after admitting manslaughter with diminished responsibility. Lewis' family are demanding Hywel Dda health board reveals details of internal NHS Trust report into Fleet's mental health treatment. Pics sourced from family via mark.thompson@sky.uk
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Lewis Stone was fatally stabbed in February 2019

Patients who have committed a mental health-related homicide can be granted permission to leave their hospital under Section 17 of the Mental Health Act.

It is considered part of the patient’s rehabilitation and preparation for eventual discharge.

What has the MoJ said?

A Ministry of Justice spokesperson said: “We understand this decision will be difficult for the Stone family, and our thoughts are with them.

“Any decision to approve access to the community is only made after a thorough risk assessment and with strict safeguards in place.”

Lewis Stone and Sammy (Granddaughter) , 
Lewis Stone was fatally stabbed on 28 February 2019 by David Fleet, has been sectioned under the Mental Health Act after admitting manslaughter with diminished responsibility. Lewis' family are demanding Hywel Dda health board reveals details of internal NHS Trust report into Fleet's mental health treatment. Pics sourced from family via mark.thompson@sky.uk
Image:
Lewis Stone with his granddaughter Sammy

The Hywel Dda health board says it does not intend to release an internal report into Fleet’s care.

Sharon Daniel, the interim executive director for nursing, quality and patient experience, said: “The duty of candour for patients came into force in Wales in April 2023.

“At the time of this incident and concern, we fulfilled our duties to be open.”

A senior NHS official has called the decision not to release the internal report “callous and uncaring”. Speaking on condition of anonymity, they said: “On the face of it, this family has been failed multiple times over.

“Of course, there is a balance to be struck between the rights of the family and the rights of the person detained, but the basic lack of transparency and consideration here undermines the duty of candour.”

Freedom of Information requests made by the victim’s support organisation Hundred Families have found that nearly 400 people were killed by former mental health patients between 2018 and 2023.

However, this number is expected to be a significant underestimate as a quarter of NHS Mental Health Trusts refused to say how many of their patients went on to kill, as they don’t want to risk identifying offenders.

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Julian Hendy, who founded Hundred Families, said: “Unfortunately the family of Lewis Stone is not alone. There is a terrible lack of openness and transparency and that needs to change.

“The public needs to know that mental health services are keeping people safe and learning effectively when things go wrong.

“At the moment, by failing to share information the public cannot be reassured.”

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Manchester van driver ‘took 20 lines of coke’ before killing toddler in crash

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Manchester van driver 'took 20 lines of coke' before killing toddler in crash

A van driver who killed a three-year-old girl in a crash had taken “at least 20 lines of cocaine”, a court has heard.

Rawal Rehman, 35, of Lambton Road, Manchester, was driving on Mosley Street on 22 February when he collided with a tram.

He then hit Louisa Palmisano – known as Lulu – while she was walking with her parents, and fled the scene at around 10am before later being arrested.

The three-year-old girl died from her injuries in hospital.

On Tuesday, Rehman pleaded guilty to causing death by dangerous driving in his Mercedes Sprinter van.

Prosecutor Rachel Shenton told Manchester Crown Court that he had visited two massage parlours in the city hours before.

She added he had taken “at least 20 lines of cocaine” in seven hours.

Judge Alan Conrad KC heard it was the prosecution’s case that Rehman’s drug consumption adversely affected his driving.

The Crown Prosecution Service (CPS) said in a statement that Rehman ignored stop signs and gave the tram driver no time to react before it struck the side of the van, which then mounted the pavement.

Abbie Clarke, senior crown prosecutor for CPS North West, said: “It is clear his driving fell far short of what is expected of a competent and careful driver.

“Rehman failed to take responsibility for his actions. He fled the scene in a taxi and denied that he drove dangerously in interview, only accepting responsibility on his third hearing before the court.

“He must now face the consequences for his role in this wholly avoidable tragedy.”

Read more from Sky News:
Harvard sues Trump over $2.2bn freeze
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Rehman was previously jailed in 2017 for conspiracy to pervert the course of justice by burning a car involved in a fatal hit-and-run collision, which killed a 25-year-old man in Chorlton.

He has been remanded in custody until sentencing on 27 May.

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UK economy will be among hardest hit by global trade war, IMF warns

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UK economy will be among hardest hit by global trade war, IMF warns

Britain’s economy will be among the hardest hit by the global trade war and inflation is set to climb, the International Monetary Fund (IMF) has warned – as it slashed its UK growth forecast by a third.

In a sobering set of projections, the Washington-based organisation said it was grappling with “extremely high levels of policy uncertainty” – and the global economy would slow even if countries manage to negotiate a permanent reduction in tariffs from the US.

Echoing earlier warnings about the risks to the global financial system, the IMF said stock markets could fall even more sharply than they did in the aftermath of Donald Trump‘s “Liberation Day” tariffs announcement, when US and UK indices recorded some of their largest one-day falls since the pandemic.

It comes as Chancellor Rachel Reeves prepares to meet her US counterpart Scott Bessent at the IMF’s spring gathering in Washington this week.

She is hoping to negotiate a reduction to the 10% baseline tariff the US president has applied to all UK goods. Steel, aluminium and car exports face an additional 25% tariff.

Money latest: Trump’s ‘major loser’ attack on Fed chair sparks market alarm

HARD TO SEE A WIN FOR REEVES AHEAD


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Gurpreet Narwan

Business and economics correspondent

@gurpreetnarwan

As long as the world’s two largest economies are at war with each other, there will be considerable spillovers. The US and China account for 43% of the global economy.

If demand in either nation slows, that has ripple effects across the world. Tariff or no tariff, exporters to those markets will be hurt.

If China redirects its goods elsewhere, that could hurt domestic industries – jobs could be at stake.
US and Chinese investors might hit pause on global projects and stock market devaluations could hurt consumer confidence. Things could unravel quickly.

Against that backdrop, it is difficult to say with any certainty what would happen to the UK but, even if we find a way to sweet talk our way out of tariffs, the dark clouds of the global economy are moving in every direction.

Britain is an open and highly trade-sensitive economy (we have a trade-to-GDP ratio of around 65%) and global spillovers will rain on us.

Then there are the spillovers from the financial markets. The IMF warned that rising government borrowing costs were weighing on economic growth.
While rising UK bond yields are, in part, a reflection of investor unease over the UK’s growth and inflation outlook, they also reflect anxiety over the US trajectory.

It’s worth bearing all of this in mind if Chancellor Rachel Reeves emerges from her trip to Washington with a deal.

The Treasury would no doubt celebrate the achievement. After all, a reduction in tariffs could make a big difference to some industries, especially our car manufacturers who are currently grappling with a 25% levy on goods to their largest export market. However, it would not solve our problems.

In fact, it would barely make a difference to our overall GDP. Back in 2020, the government estimated that a free trade deal with the US would boost the UK economy by just 0.16% over the next 15 years.

And overall GDP does matter. The chancellor desperately needs economic growth to support the country’s ailing public finances (when the economy grows, so do government tax receipts).

She will know better than most that the prize the US has to offer is comparatively small, so she should weigh up the costs of any deal carefully.

The IMF presented a range of forecasts in its latest World Economic Outlook. Its main case looked at the period up to 4 April, after Mr Trump announced sweeping tariffs on countries across the world, ratcheting up US protectionism to its highest level in a century.

If the president were to revert to this policy framework, global growth would fall from 3.3% last year to 2.8% this year, before recovering to 3% in 2026.

In January, the IMF was predicting a rate of 3.3% for both years.

IMF

Nearly all countries were hit with downgrades, with the US expected to grow by just 1.8% this year, a downgrade of 0.9 percentage points.

Mexico was downgraded by 1.7 percentage points, while China and Canada are forecast to slow by 0.6 percentage points and Japan by 0.5 percentage points.

The UK economy is expected to grow by just 1.1% this year, down 0.5 percentage points from the 1.6% the IMF was predicting in January. Growth picks up to 1.4% next year, still 0.1 percentage points lower than the January forecast.

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Will tariffs hit UK growth?


Along with recent tariff announcements, the IMF blamed the UK’s poor performance on a rise in government borrowing costs, which has in part been triggered by growing unease among investors over the fate of the US economy.

When borrowing costs rise, the chancellor has to rein in public spending or raise taxes to meet her fiscal rules. That can weigh on economic growth.

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Trump: Tariffs are making US ‘rich’

It also pointed to problems in the domestic economy, mainly “weaker private consumption amid higher inflation as a result of regulated prices and energy costs”.

In a blow to the chancellor, the IMF warned that the UK would experience one of the largest upticks in inflation because of utility bill increases that took effect in April.

It upgraded its inflation forecast by 0.7 percentage points to 3.1% for 2025, taking it even higher above the Bank of England’s 2% target and deepening the dilemma for central bankers who are also grappling with weak growth.

Read more:
Can Reeves come up trumps in Washington?
Trump’s tariffs to have major global impact

Meanwhile, inflation in the US is likely to jump one percentage point higher than previously forecast to 3% in 2025 on the back of higher tariffs.

The IMF forecast period ended on 4 April. That was before the US president paused his reciprocal tariffs on countries across the world while ratcheting up levies on China.

In a worrying sign for finance ministers across the world, as they attempt to negotiate a deal with the US administration, the IMF said the global economy would slow just the same if Mr Trump were to make his temporary pause on reciprocal tariffs permanent.

That is because higher tariffs between the US and China, which together account for 43% of the global economy, would have spillover effects on the rest of the world that offset the benefits to individual countries.

“The gains from lower effective tariff rates for those countries that were previously subject to higher tariffs would now be offset by poorer growth outcomes in China and the United States – due to the escalating tariff rates – that would propagate through global supply chains,” the IMF said.

In response, Chancellor Rachel Reeves said:

“This forecast shows that the UK is still the fastest-growing European G7 country. The IMF have recognised that this government is delivering reform which will drive up long-term growth in the UK, through our plan for change.

“The report also clearly shows that the world has changed, which is why I will be in Washington this week defending British interests and making the case for free and fair trade.”

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