Redwood: Tax cuts, not increases the answer

With ongoing speculation that the Chancellor will look to increases taxes in a bid to cover the hit to public finances brought about by the coronavirus crisis, Sir John Redwood, chairman of the 1922 Committee’s Treasury group, has suggested that “tax cuts, not increases” are the answer. Writing in the Telegraph, Sir John points to the way the housing market has bounced back with support from a temporary cut to stamp duty, saying: “The Government has just shown how a tax cut can provide a good boost to activity, jobs and incomes.” He added that the Inland Revenue “will probably be a winner too”, with it taxing extra activity among estate agents, conveyancers, mortgage businesses, removal firms and tradespeople. He adds that HMRC will also see a “stamp duty boost from more transactions as an offset to the lower rates.” Sir John adds that the Chancellor should look to “tax reductions and assistance”, saying the economy needs “tax cuts that reinforce recovery and speed the opening up of every type of work.”

The Daily Telegraph, Page: 4 The Daily Telegraph

Raising the wrong taxes can hinder growth – Brady

Sir Graham Brady, chairman of the 1922 Committee representing Conservative MPs, has urged caution over increasing taxes. Appearing on BBC Radio 4’s Today programme, Sir Graham was asked if tax increases were needed to balance the books in the wake of the COVID-19 outbreak. He replied: “Well, I think the necessity is to make sure that we don’t make this crisis any worse than it has to be, and fundamental to that is making sure that the country gets back to work so people resume as far as possible normal life.” Asked what role taxation would have, he offered: “I think we have to be aware that raising taxes, and raising the wrong types of taxes especially, can be a way in which you stifle economic growth and prospects, rather than guaranteeing them.”

The Daily Telegraph Evening Standard

Backbenchers concerned over tax plan

The Telegraph reports that Conservative backbench MPs could vote against parts of this autumn’s Budget if Rishi Sunak rolls out tax rises. This comes after the Chancellor told a meeting on Wednesday that tax rises were on the cards, stressing the importance of being honest with the public about how the cost of the coronavirus response will be covered. The paper cites a former minister who says they won’t be voting for the Budget, adding that MPs are “going absolutely insane in the backbench WhatsApp group.” Another MP tells the Telegraph that they have heard talk of backbenchers protesting against the Budget but suggested this could be avoided if Mr Sunak took their concerns on board.

The Daily Telegraph, Page: 4

Firms passing tech tax onto customers

Hannah Boland and Michael Cogley in the Telegraph reflect on news that Google, Amazon and Apple are set to pass the cost of the digital services tax onto consumers and advertisers, saying that while the levy was designed to pull in more revenue from global tech firms, “it appears the burden will fall elsewhere”. They note that the Treasury will collect as much as £500m a year from the tax which applies to social media firms, search engines and online marketplaces, but instead of large tech companies paying up, it will be small businesses who sell via Amazon’s marketplace, advertisers who pay to have their ads appear on Google, and app developers who use Apple’s App Store. Richard Murphy of Tax Research UK says the levy is “essentially a sales tax levied on top of VAT”, adding that such taxes are “passed straight on to the consumer”. Chris Sanger at EY likens the digital servi ces tax to air passenger duty, saying it “will be included as an extra cost for the buyer or seller”. Writing in the same paper, Barney Durrant of marketing consultancy Bluebell Digital voices concern that the financial hit of the tech tax is being passed on to customers.

The Daily Telegraph, Page: 8

Tax and the cost of COVID-19

Ian Martin looks at the likelihood of taxes rising to cover the cost of the COVID-19 outbreak, with Chancellor Rishi Sunak reportedly mulling increases. He argues that senior Treasury officials, “veterans of the 2008 financial crisis”, know it would be “madness” to introduce large tax rises soon as this “would squash the recovery”. He adds that once a recovery is established, spending should be controlled and some taxes could rise to top up the public coffers. Elsewhere, the FT’s Chris Giles argues that economic recovery from the coronavirus pandemic would be hampered by the tax increases being considered by Mr Sunak. Meanwhile, Ben Chu in the Independent highlights that income tax, national insurance, or VAT are not among the levies reports suggest could increase, despite these accounting for close to 60% of the exchequer’s tax take, with the Conservatives having pledged not to increase these taxes in the run up to the last election.

The Times, Page: 25 Financial Times, Page: 23 The Independent, Page: 11


UK businesses slash investment as coronavirus crisis bites

A Bank of England survey of CFOs shows that average investment by UK firms will be down 32% in Q3 compared to if there had been no coronavirus pandemic.

Financial Times

Pharmacy funding fears

A report from EY shows that community pharmacies are underfunded by £497m a year, with analysis suggesting that 72% of the family businesses will be losing money within four years unless there is increased funding from NHS England.

Daily Mirror, Page: 1 Daily Express, Page: 6

British Gas acquires Robin Hood

British Gas has acquired council-owned supplier Robin Hood Energy. The firm, launched by Nottingham City Council in 2015, fell into financial difficulty last year and hired Deloitte to oversee the sale of its book.

The Daily Telegraph, Business, Page: 1


Pension freedoms age rising

The Government has confirmed that the pension freedoms age is set to rise from 55 to 57, with the increase in the age that people can access personal pensions coming into effect in 2028. The change to defined contribution pensions was confirmed in a written ministerial statement by economic secretary to the Treasury John Glen. Steven Cameron, pensions director at Aegon, said that the Government indicated that the shift was on the cards in 2014, but didn’t include provisions in legislation, leading to uncertainty over whether the change was actually occurring. Pointing to “government communication gaps” which meant many women found out too late that their state pension age was increasing from 60 to 65, he said it is “imperative” that ministers and the industry make sure the change in pension freedoms age is clear to all those saving in pensions.

The Daily Telegraph, Business, Page: 1 The Times, Page: 12 Daily Mail, Page: 2 Daily Express


Home-working steadily decreasing

Figures from the Office for National Statistics show that the proportion of people working exclusively from home is declining, reaching 20% last week compared with a high of 38% recorded in the middle of June. The ONS report said the rate has seen a “steadily decreasing trend” over the last two months. It added that over the most recent week, the proportion of working adults who travelled to work reached 57% – the largest slice of the workforce since the coronavirus lockdown began.

Daily Mail

Kickstart Scheme Launched

The government has launched an innovative new scheme to help young people into work and spur Britain’s economic revival.

Businesses are now able to sign up to be part of the landmark £2 billion Kickstart scheme, giving unemployed young people a future of opportunity and hope by creating high-quality, government-subsidised jobs across the UK.

Under the scheme, announced by Chancellor Rishi Sunak as part of his Plan for Jobs, employers can offer youngsters aged 16-24 who are claiming Universal Credit a six-month work placement.

The government will fully fund each “Kickstart” job – paying 100% of the age-relevant National Minimum Wage, National Insurance and pension contributions for 25 hours a week.

Employers will be able to top up this wage, while the government will also pay employers £1,500 to set up support and training for people on a Kickstart placement, as well as helping pay for uniforms and other set up costs. The jobs will give young people – who are more likely to have been furloughed, with many working in sectors disproportionately hit by the pandemic – the opportunity to build their skills in the workplace and to gain experience to improve their chances of finding long-term work.  Find out more: Here


First home price rises outpace wider average

Analysis by Halifax shows that the price of the average first home has increased by more than two-thirds in the last decade, jumping 69% from £142,473 in 2010 to £241,025 today. In the same period, the average house price has only risen 33%. The report also shows that the number of first-time buyers has fallen by 29% this year, with 116,843 first-time buyers in the first six months of 2020 compared to 164,800 in the same period in 2019.

The Daily Telegraph, Business, Page: 5


A tale of two Hong Kongs: Beijing cracks down while the financial hub thrives

KPMG analysis suggests that while Hong Kong placed third for equity funds raised in H1, Ant Group’s IPO could push it close to the top slot it secured in 2019.

Financial Times, Page: 21


Business activity spikes

The IHS Markit/CIPS Composite Purchasing Managers’ Index (PMI), a monthly gauge of activity in the services and manufacturing sector, points to rapid growth in August, with the index hitting a six-year high of 59.1 from 57.0 in July. The survey’s index of employment revealed the first decline in three months, with concerns that further job losses are on the horizon as the Government’s furlough scheme comes to an end on October 31. Chris Williamson, chief business economist at IHS Markit, said companies’ ability to cope with the withdrawal of economic support measures is the “burning question”, adding: “Policymakers face a huge challenge in sustaining this recovery and avoiding a ‘bounce and fade’ scenario.” The IHS Markit/CIPS UK Services PMI Business Activity Index registered 58.8 in August, up from 56.5 in July. This marks an ongoing increase, with readings of 47.1 in June, 29.0 in May and a record low of just 13.4 in April. August’s figure signalled the fastest pace of output growth since April 2015. Howard Archer, chief economist at the EY Item Club, said the improvement in services activity “was linked to the re-opening of companies’ own sites and their client sites.”

The I, Page: 50 Daily Mail The Sun, Page: 50 City AM

Retail sales climb in August

Retail sales climbed in August, hitting the highest level since the outbreak of the coronavirus pandemic. In-store like-for-like sales were down 28.1% year-on-year in August, marking the best result since February, while non-store sales jumped 72% from a base of 18.6% as the shift toward online shopping driven by the pandemic continued. Sophie Michael, head of retail and wholesale at BDO, commented: “As we enter the largest recession on record, the outlook remains unsettled with constrained family finances and job market uncertainty continuing to impact negatively on discretionary spend.”

City AM

Contact Paul Southward