Connect with us

Published

on

The Institute for Fiscal Studies’ analysis that the UK’s tax burden is the largest since the Second World War puts into historical context what has been clear since Boris Johnson became prime minister.

Taxes have been rising sharply, either by stealth or declared policy, to keep up with election promises and demand for public services starved of investment during the previous decade.

Calculated as a share of GDP the tax take will have risen to 37% by the next election, a 4% increase since 2019 and a figure not seen since the 1940s.

By international standards, the UK taxpayer is not particularly heavily burdened. In Europe we pay more tax than Swiss and Irish citizens, but far less than the Germans, French and Scandinavian nations.

But historically this is a high, a reflection perhaps of the demands of an electorate that routinely says it wants to pay less tax (who doesn’t) but also wants high levels of public service.

While every one of the five Conservative chancellors since 2019 has consistently said they want to cut taxes they have done the opposite (with the exception of Kwasi Kwarteng, who was sacked and saw his plans abandoned three weeks after making them).

Increased government spending

The demands of tackling COVID-19 and the decision to bail out every household in Britain during the energy crisis have not helped keep a lid on spending and motivated some tax rises, but they are not, the IFS say, the largest drivers.

Rather it has been meeting pledges to spend more on the NHS, increase the number of police officers and so on, that have driven the tax take ever higher.

Rishi Sunak instituted many of the most significant while chancellor, and has rubber-stamped several more as prime minister. Corporation tax was increased from 19% to 25% this year, a measure announced by Sunak in 2021.

Please use Chrome browser for a more accessible video player

‘Pandemic is to blame’

He was also responsible for the “stealth” element of our rising tax bills, the freezing of the thresholds for tax and National Insurance – the level at which we pay the various rates, which usually rise in line with inflation.

Wage inflation means many more people have been dragged into higher tax brackets, raising around £40bn for the exchequer, almost double the headline tax cuts announced at the last budget according to the IFS.

Windfall taxes on energy companies complete the set of measures that will amount to £100bn more in tax receipts than had the burden remained at the pre-2019 level of 33%.

The increases are also in large part a corrective to the austerity policies of David Cameron and George Osbourne, during which the UK tax take grew far less than in comparable economies also adjusting to the aftermath of the financial crash.

Given the IFS measures the tax burden as a percentage of GDP, delivering growth would be a way of cutting the tax burden.

That was Liz Truss’ plan, though the execution crashed the bond market and international confidence in the UK.

Read more:
Rosebank won’t make enormous difference to economy – but politics are significant

Some good news

There was a sliver of a glimmer of good news on that front with the ONS upgrading GDP in the first quarter of this year, and all of 2022 by… 0.2%.

The current Chancellor Jeremy Hunt said the revision “proved the doubters wrong” but while it is of course welcome, it’s not enough to change the overarching narrative of stagnant economic progress in the last decade.

Even if growth were revised upwards by 2% next year, the IFS says it would still leave the tax burden at 36.6%, an increase of 3.5%, still the largest since the 1940s.

Continue Reading

Business

Lloyds Banking Group in talks to buy digital wallet provider Curve

Published

on

By

Lloyds Banking Group in talks to buy digital wallet provider Curve

Britain’s biggest high street bank is in talks to buy Curve, the digital wallet provider, amid growing regulatory pressure on Apple to open its payment services to rivals.

Sky News has learnt that Lloyds Banking Group is in advanced discussions to acquire Curve for a price believed to be up to £120m.

City sources said this weekend that if the negotiations were successfully concluded, a deal could be announced by the end of September.

Curve was founded by Shachar Bialick, a former Israeli special forces soldier, in 2016.

Three years later, he told an interviewer: “In 10 years time we are going to be IPOed [listed on the public equity markets]… and hopefully worth around $50bn to $60bn.”

One insider said this weekend that Curve was being advised by KBW, part of the investment bank Stifel, on the discussions with Lloyds.

If a mooted price range of £100m-£120m turns out to be accurate, that would represent a lower valuation than the £133m Curve raised in its Series C funding round, which concluded in 2023.

More on Lloyds

That round included backing from Britannia, IDC Ventures, Cercano Management – the venture arm of Microsoft co-founder Paul Allen’s estate – and Outward VC.

It was also reported to have raised more than £40m last year, while reducing employee numbers and suspending its US expansion.

In total, the company has raised more than £200m in equity since it was founded.

Curve has been positioned as a rival to Apple Pay in recent years, having initially launched as an app enabling consumers to combine their debit and credit cards in a single wallet.

One source close to the prospective deal said that Lloyds had identified Curve as a strategically attractive bid target as it pushes deeper into payments infrastructure under chief executive Charlie Nunn.

Lloyds is also said to believe that Curve would be a financially rational asset to own because of the fees Apple charges consumers to use its Apple Pay service.

In March, the Financial Conduct Authority and Payment Systems Regulator began working with the Competition and Markets Authority to examine the implications of the growth of digital wallets owned by Apple and Google.

Lloyds owns stakes in a number of fintechs, including the banking-as-a-service platform ThoughtMachine, but has set expanding its tech capabilities as a key strategic objective.

The group employs more than 70,000 people and operates more than 750 branches across Britain.

Curve is chaired by Lord Fink, the former Man Group chief executive who has become a prolific investor in British technology start-ups.

When he was appointed to the role in January, he said: “Working alongside Curve as an investor, I have had a ringside seat to the company’s unassailable and well-earned rise.

“Beginning as a card which combines all your cards into one, to the all-encompassing digital wallet it has evolved into, Curve offers a transformative financial management experience to its users.

“I am proud to have been part of the journey so far, and welcome the chance to support the company through its next, very significant period of growth.”

IDC Ventures, one of the investors in Curve’s Series C funding round, said at the time of its last major fundraising: “Thanks to their unique technology…they have the capability to intercept the transaction and supercharge the customer experience, with its Double Dip Rewards, [and] eliminating nasty hidden fees.

“And they do it seamlessly, without any need for the customer to change the cards they pay with.”

News of the talks between Lloyds and Curve comes days before Rachel Reeves, the chancellor, is expected to outline plans to bolster Britain’s fintech sector by endorsing a concierge service to match start-ups with investors.

Lord Fink declined to comment when contacted by Sky News on Saturday morning, while Curve did not respond to an enquiry sent by email.

Lloyds also declined to comment, while Stifel KBW could not be reached for comment.

Continue Reading

Business

UK economy figures not as bad as they look despite GDP fall, analysts say

Published

on

By

UK economy figures not as bad as they look despite GDP fall, analysts say

The UK economy unexpectedly shrank in May, even after the worst of Donald Trump’s tariffs were paused, official figures showed.

A standard measure of economic growth, gross domestic product (GDP), contracted 0.1% in May, according to the Office for National Statistics (ONS).

Rather than a fall being anticipated, growth of 0.1% was forecast by economists polled by Reuters as big falls in production and construction were seen.

It followed a 0.3% contraction in April, when Mr Trump announced his country-specific tariffs and sparked a global trade war.

A 90-day pause on these import taxes, which has been extended, allowed more normality to resume.

This was borne out by other figures released by the ONS on Friday.

Exports to the United States rose £300m but “remained relatively low” following a “substantial decrease” in April, the data said.

More on Inflation

Overall, there was a “large rise in goods imports and a fall in goods exports”.

A ‘disappointing’ but mixed picture

It’s “disappointing” news, Chancellor Rachel Reeves said. She and the government as a whole have repeatedly said growing the economy was their number one priority.

“I am determined to kickstart economic growth and deliver on that promise”, she added.

But the picture was not all bad.

Growth recorded in March was revised upwards, further indicating that companies invested to prepare for tariffs. Rather than GDP of 0.2%, the ONS said on Friday the figure was actually 0.4%.

It showed businesses moved forward activity to be ready for the extra taxes. Businesses were hit with higher employer national insurance contributions in April.

Read more:
Trump plans to hit Canada with 35% tariff – warning of blanket hike for other countries
Woman and three teenagers arrested over M&S, Co-op and Harrods cyber attacks

The expansion in March means the economy still grew when the three months are looked at together.

While an interest rate cut in August had already been expected, investors upped their bets of a 0.25 percentage point fall in the Bank of England’s base interest rate.

Such a cut would bring down the rate to 4% and make borrowing cheaper.

Please use Chrome browser for a more accessible video player

Is Britain going bankrupt?

Analysts from economic research firm Pantheon Macro said the data was not as bad as it looked.

“The size of the manufacturing drop looks erratic to us and should partly unwind… There are signs that GDP growth can rebound in June”, said Pantheon’s chief UK economist, Rob Wood.

Why did the economy shrink?

The drops in manufacturing came mostly due to slowed car-making, less oil and gas extraction and the pharmaceutical industry.

The fall was not larger because the services industry – the largest part of the economy – expanded, with law firms and computer programmers having a good month.

It made up for a “very weak” month for retailers, the ONS said.

Continue Reading

Business

UK economy remains fragile – and there are risks and traps lurking around the corner

Published

on

By

UK economy remains fragile - and there are risks and traps lurking around the corner

Monthly Gross Domestic Product (GDP) figures are volatile and, on their own, don’t tell us much.

However, the picture emerging a year since the election of the Labour government is not hugely comforting.

This is a government that promised to turbocharge economic growth, the key to improving livelihoods and the public finances. Instead, the economy is mainly flatlining.

Output shrank in May by 0.1%. That followed a 0.3% drop in April.

Ministers were celebrating a few months ago as data showed the economy grew by 0.7% in the first quarter.

Hangover from artificial growth

However, the subsequent data has shown us that much of that growth was artificial, with businesses racing to get orders out of the door to beat the possible introduction of tariffs. Property transactions were also brought forward to beat stamp duty changes.

More from Money

Read more:
Trump to hit Canada with 35% tariff
Woman and three teens arrested over cyber attacks

In April, we experienced the hangover as orders and industrial output dropped. Services also struggled as demand for legal and conveyancing services dropped after the stamp duty changes.

Many of those distortions have now been smoothed out, but the manufacturing sector still struggled in May.

Signs of recovery

Manufacturing output fell by 1% in May, but more up-to-date data suggests the sector is recovering.

“We expect both cars and pharma output to improve as the UK-US trade deal comes into force and the volatility unwinds,” economists at Pantheon Macroeconomics said.

Meanwhile, the services sector eked out growth of 0.1%.

A 2.7% month-to-month fall in retail sales suppressed growth in the sector, but that should improve with hot weather likely to boost demand at restaurants and pubs.

Struggles ahead

It is unlikely, however, to massively shift the dial for the economy, the kind of shift the Labour government has promised and needs in order to give it some breathing room against its fiscal rules.

The economy remains fragile, and there are risks and traps lurking around the corner.

Please use Chrome browser for a more accessible video player

Is Britain going bankrupt?

Concerns that the chancellor, Rachel Reeves, is considering tax hikes could weigh on consumer confidence, at a time when businesses are already scaling back hiring because of national insurance tax hikes.

Inflation is also expected to climb in the second half of the year, further weighing on consumers and businesses.

Continue Reading

Trending