Campaigners in tax credit debt call

Campaigners have called on ministers to write off old tax credit debts after it emerged payments to a number of Universal Credit (UC) claimants have been cut during the pandemic. HMRC has been deducting up to £100 a week from benefits to recoup mistaken tax credit overpayments and an investigation has shown that officials have targeted 47,000 low earners a week since January 18 because they were overpaid credits from up to 17 years ago. The analysis shows that HMRC has sent over 2.2m letters to UC claimants since 2016 telling them to expect deductions due to historical tax credit overpayments amounting to over £2bn, with claimants seeing £63m deducted from April to November last year. Sir Iain Duncan Smith, the former Work and Pensions Secretary, said clawing back tax like this was “a major mistake” causing “profound difficulties”. Stephen Timms, Labour chairman of the Work and Pensions Committee, said the process is “deeply unfair”, adding: “It shouldn’t be happening. These reductions ought to be suspended until the pandemic is over.” StepChange, Britain’s largest debt advice charity, said that almost one in five of its clients with Government debts had been told they had been overpaid tax credits.

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Top tips ahead of the new tax year

Shashi Prashad and Jo Bateson of KPMG offer advice to businesses going into the new tax year, with guidance on issues including the super deduction which will allow companies to cut their tax bill by up to 25p for every £1 invested – a policy that was described by the Chancellor as “the biggest business tax cut in modern British history”. They also offer advice on research and development tax credits; emergency measures rolled out amid the pandemic, including VAT and business rates reductions; and a possible move to near real-time collection of income tax, corporation tax for small companies, and capital gains tax.

The Times


Business insolvencies set to rise 26%

A report from trade credit insurer Atradius suggests global insolvency rates are set to rise by 26% this year, with state support amid the coronavirus pandemic having delayed insolvencies that would have occurred in 2020. The report, 2021: A turn of the tide in insolvencies, suggests that a number of markets are set to exceed the average by a significant margin, with failure rates in the UK expected to rise by 56%. The report also says 2021 will bring “new hope” as recovery sets in after a year of global recession. Global GDP saw a 3.7% contraction in 2020 but 2021 is expected to deliver growth of 6%. While the UK saw a 9.9% drop in GDP in 2020, Atradius forecasts the UK economy will expand 5.9% in 2021.

Financial Times London Loves Business

Trade body warns over Liberty collapse

ADS Group, a trade body that represents more than 1,100 employers in the aerospace, defence, security and space sectors, has written to Business Secretary Kwasi Kwarteng warning that the potential failure of Liberty Steel could see supplies of specialist metals disrupted. Liberty is under threat after the collapse of Greensill Capital, the commercial lender and main backer of the steel business’s owner, GFG Alliance. Liberty’s immediate survival depends on a standstill agreement being reached with Grant Thornton, Greensill’s administrator.

The Times, Page: 32

Flybe set to take-off again

Flybe is set to be relaunched after regulators granted the airline permission to return to the skies. The airline closed down in March 2020 but a new company affiliated with Cyrus Capital, which was part of a consortium that bough the airline in 2018, has bought Flybe’s business and assets. It will be known as Flybe Limited and is expected to fly many of the previously operated routes. The deal between Cyrus Capital and administrators at EY excludes Flybe’s aircraft, which were mortgaged to lenders by the previous owners, but includes Flybe’s take-off and landing slots.

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Financial services firms see optimism increase

Financial services companies are seeing confidence in the economy surge at the fastest pace in more than seven years, according to a report from the CBI and PwC. The analysis shows that optimism rose at the fastest rate since December 2013 in March. A net balance of 52% of respondents said that they felt confident about the future, up from 44% in December. While businesses were hit during the most recent lockdown, a net balance of 43% said that they expected volumes to improve over the next three months. Businesses in the financial services sector expect profitability to rise in the next quarter, with a net balance of 32% forecasting higher profits. While employment fell for a fifth consecutive quarter in March, with a net balance of -12% reporting increased headcount, the pace of decline is expected to ease in Q2. Rain Newton-Smith, chief economist at the CBI, said: “It’s encouraging that financial services firms are feeling optimistic about the months ahead, likely warmed by the prospect of a phased reopening of the economy.”

The Times, Page: 34 City AM

City job listings surge

Morgan McKinley’s quarterly London Employment Monitor shows that financial services job posting s returned to growth in March. The sector saw a 70% increase in job postings and a 4.8% rise in job seekers. Available roles were up 50% year-on-year. Hakan Enver, managing director at Morgan McKinley UK, said: “As the vaccine rollout continues apace and the road out of lockdown clears, we are seeing the sector recover at a faster rate than anticipated.” Separate analysis shows that London remains a global financial centre, retaining second place behind New York in the Global Financial Centres Index, while PwC’s annual survey of chief executives revealed that the UK is a more attractive investment proposition than it was before Brexit. The Telegraph’s Simon Foy says the Morgan McKinley report appears to pour cold water on suggestions that Brexit would lead to a mass exodus of financial services professionals from the City. He notes EY analysis showing that 7,600 financial service s jobs have moved out of the UK due to Brexit, a “tiny proportion” of the UK’s finance sector roles and far less than many analysts had predicted.

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Young black workers hardest hit by pandemic

Young black and Asian workers have been the hardest hit by the rise in unemployment during the coronavirus pandemic, a study by the Resolution Foundation think-tank has found. Over the past year, the UK jobless rate for young black people rose by more than a third to 35%, while for young people of Asian descent saw the jobless rate increased to 24%. For young white people, the unemployment rate hit 13%. Overall, the unemployment rate among 18 to 24-year-olds rose from 11.5% to 13.6% between Q2 and Q3 2020. The 18% increase marks the largest quarter-on-quarter rise among this age group since 1992. Kathleen Henehan, a senior research and policy analyst at the Resolution Foundation, said the furlough scheme “has done a fantastic job of minimising job losses amidst unprecedented shutdowns of our economy” but warned that the pandemic “has created a highly generationally unequal unemployment surge and widened pre -existing gaps between different ethnic groups”.

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House prices hit record high

Analysis from Halifax shows that house prices have hit a record high despite rising at a slower rate than a year ago, hitting an average of £252,765. The report reveals a 5.7% year-on-year increase in Q1, with this down from a nearly five year high of 7% recorded last year. On a quarterly basis, prices rose 0.3% in the first three months of the year, marking a slowdown on the 2.5% increase seen in Q4 2020. Reflecting on the figures, AJ Bell analyst Laith Khalaf was optimistic about the outlook for the sector, saying: “While there might be a few bumps along the way, particularly at the end of the stamp duty…the property market has proved itself to be unbelievably resilient.” He notes that much of this “comes down to the efforts the Government and the Bank of England have made to make mortgage borrowing incredibly easy and cheap.”

Daily Express City AM


Productivity rises amid the pandemic

Office for National Statistics data show that productivity increased last year, with output per hour, the main measure of productivity, increasing by 0.4%. The climb comes despite lockdowns causing economic output to shrink by almost 10%, with the headline figure increasing largely because the lower-paying and least productive jobs had borne the brunt of the pandemic. Output per worker in 2020 was 9.5% lower than in 2019. Howard Archer, chief economic adviser to the EY Item Club, said that “the sectors which saw a fall in their relative share of hours worked typically had lower productivity levels”, while higher productivity industries “increased their relative share of hours worked”.

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Contact Paul Southward

Paul Southward