Sunak: No ‘horror show’ tax rise

Chancellor Rishi Sunak has insisted that a “horror show of tax rises” are not on the horizon, with this coming on the back of recent reports that the Treasury is considering a number of tax increases to cover the cost of the coronavirus crisis – including changes to corporation tax and capital gains tax. In a statement given to a meeting of recently-elected Conservative MPs, Mr Sunak said that while the Government “will need to do some difficult things” in an effort to “overcome short-term challenges”, this did not mean “a horror show of tax rises with no end in sight.” Mr Sunak also said that ministers will need to be honest with the public about the challenges ahead and show them how the Government plans to “correct our public finances and give our country the dynamic, low-tax economy we all want to see.” Considering the tax increases that the Chancellor had reportedly be en mulling, a Times editorial says increasing CGT and corporation tax and “tinkering with” tax relief on pension contributions would be counterproductive in the short term.

The Daily Telegraph Financial Times, Page: 1 The Times, Page: 6 The Times, Page: 31 The Guardian, Page: 1 The Independent, Page: 13 The I, Page: 4 Daily Mirror, Page: 9 Daily Mail Daily Express, Page: 6 Daily Star, Page: 2 BBC News

Minister calls for tax cuts…

Work and Pensions Secretary Therese Coffey has suggested that taxes should be cut in the Budget, telling Times Radio: “I will point out to you that in the past when we’ve actually cut tax rates, we’ve actually seen taxes increase.” Describing tax rates as a “very dynamic situation”, she added: “Some people might assume the only way to get tax up is to increase tax rates but we have shown in our economic history the opposite.” Meanwhile, former Cabinet minister Sir John Redwood also urged Mr Sunak to resist short-term tax rises, saying “blundering in” with tax increases may produce less revenue and further lift the deficit.

Daily Mail, Page: 15 The Guardian

… while Clarke urges increases

Former Chancellor Ken Clarke has warned Rishi Sunak that he must raise taxes in order to avoid financial disaster in the wake of the coronavirus crisis. Mr Clarke said the current Chancellor must “raise some taxation to show common sense.” He suggested that by letting debt pile up “you are waiting for inflation to come back” but warned: “When it does come back a financial crisis will hit you and a disaster will occur.”

Daily Express


Audit fee increases hit contractors

The Times reports that firms with government contracts are bearing the brunt of accounting failures surrounding the collapse of Carillion, with the construction and outsourcing sector facing “spiralling” audit fees. Analysis shows that fees paid by Capita to KPMG have risen from £3.4m a year to £5.9m in three years, while Serco’s audit fee last year, also paid to KPMG, was up 58% to £1.9m. The figures, which are quoted on a like-for-like basis for the statutory audit, show that other companies in the sector have seen audit fee increases of between 10% and 20%. The Times says the fallout from Carillion failing – including criticism from the Cabinet Office – has “effectively … put up a red flag over the audits of government contractors”, with KPMG, Deloitte, PwC and EY understood to have been increasing resources in audits in the sector to produce higher-quality checking of supposedly higher-risk clients.

The Times, Page: 45


Analysing the collapse of Wirecard

Risk Channel , sister publication to The Morning Account, has been following developments at failed German payments firm Wirecard and has now created an interactive Media Insight Guide examining the media events shaping public opinion in the aftermath of the company’s collapse. The Munich-based group was forced to file for insolvency in late June after admitting that €1.9bn of its cash probably did “not exist.” It later emerged that auditor EY had failed to check some of the company’s bank balances for more than three years. The report analyses coverage from mainstream and social media channels from 95 countries. You can read it here .

Deutsche unit drops EY over Wirecard

KPMG will carry out the audit of DWS’ 2020 financial statements, with Deutsche Bank’s asset management arm opting against using EY due to the accounting scandal at payments firm Wirecard.

Financial Times, Page: 10

Head of German financial watchdog resists calls to resign over Wirecard

Felix Hufeld, head of German financial regulator BaFin, has rejected calls to resign over the Wirecard accounting scandal, with pressure growing over failure to investigate irregularities more thoroughly.

Financial Times, Page: 6


Apple app developers to shoulder cost of tech tax

Apple has said app developers will bear most of the cost of the 2% digital services tax, with the levy set to be charged on apps in the coming days. Developers on Apple’s App Store take at least 70% of an app’s sales after taxes, meaning the cost of the new tax will hit the companies that design and engineer the apps. Adding the 2% levy to existing VAT charges will reduce the amount that both developers and Apple itself receive from app sales.

The Daily Telegraph, Business, Page: 3

Questor sweet on Honeycomb

The Telegraph’s Questor weighs the merits of Honeycomb, giving the trust a ‘buy’ rating. It notes that the trust is audited by PwC and that Jim Coyle, chairman of the audit and risk committee, is an independent non-executive member of the UK oversight board of Deloitte.

The Daily Telegraph, Business, Page: 6


House prices hit all-time high

Figures from Nationwide show that house prices have hit an all-time high, with the average home now worth £224,123. Prices rose by an average of 2% in August, the biggest month-on-month increase since February 2004 as values saw a post-lockdown surge. Year-on-year, prices have risen 3.7% compared to August 2019. The analysis also reveals that demand is 34% up on August last year. With property prices reversing losses recorded in May and June, Nationwide chief economist Robert Gardner said: “The bounce-back in prices reflects the unexpectedly rapid recovery in housing market activity since the easing of lockdown restrictions.” Separate data from Zoopla show that housing market activity is running at its strongest pace in over half a decade, with agreed sales in August up 76% against the five year average.

The Independent, Page: 42 Daily Mail BBC News


Small firms voice concern over jobs scheme

Small firms have voiced concern that they may struggle to access Chancellor Rishi Sunak’s £2bn flagship jobs scheme. Smaller businesses say they are disadvantaged as the Kickstart initiative bars firms taking on fewer than 30 new young workers from applying directly for funds. The scheme offers six-month paid placements for young people on universal credit, with the Government paying 100% of the national minimum wage for up to 25 hours a week. Mike Cherry, chairman of the Federation of Small Businesses, said: “Small firms, who are the largest employers across the business landscape, have long expressed interest in this scheme and will be disappointed to find it harder than expected to take part.” He added: “To put it bluntly, this scheme has not been designed with small businesses front of mind.” Joe Fitzsimons, of the Institute of Directors, said the 30 placement requirement “could give cause for concern”, adding: “With so much on their plate, many small firms will be put off by any unnecessary hurdles.”

The Daily Telegraph, Business, Page: 1 Financial Times, Page: 2 The Independent, Page: 44 The Sun, Page: 2


PM rules out furlough extension

Prime Minister Boris Johnson has ruled out extending the furlough scheme, saying it is not in workers’ interests to keep them in “suspended animation” with “indefinite furlough”. Labour’s Kate Osborne asked the PM if the Government would follow other countries in extending the initiative, to which Mr Johnson replied: “I don’t think that’s the right thing. I think the best way forward for our country is to get people as far as we possibly can back into work”.

Daily Mail, Page: 14


Italy lures super-rich with tax break

Figures show that wealthy Brits are taking advantage of tax breaks designed to lure the super-rich to Italy, with a €100,000-a-year flat tax, payable on money earned abroad by anyone who transfers their tax residence to Italy, seeing 78 high-worth Britons relocating since 2017. In total, 784 wealthy individuals have made the switch, with Britain accounting for the biggest proportion, followed by France (58), the US (20) and Russia (19).

The Times, Page: 17


BoE: Economic outlook remains uncertain

Bank of England (BoE) governor Andrew Bailey has warned of uncertainty around the economy and its recovery from the coronavirus crisis. He told the Treasury Select Committee that latest forecasts from the BoE were highly uncertain, pointing to a lack of clarity on whether “natural caution” would prevent people from “reengaging” with the economy. Mr Bailey also said that the BoE no longer expects inflation to turn negative, suggesting there is evidence that companies have pocketed the Government’s VAT cut, with people perhaps “absorbing increased costs by not passing it on” as much as had been anticipated. Despite higher than expected short-term inflation, Mr Bailey said he is confident that “inflation expectations are pretty stable”. He added that household spending is “close to its pre-pandemic levels, but it is a pretty uneven picture”, with a “rapid recovery” in the housing market while social spending “still has not recovered strongly.” Meanwhile, Sir Dave Ramsden, the Bank’s deputy governor for markets, said policymakers have capacity for more quantitative easing if the economy does not recover as fast as expected, adding that the BoE has “the operational capabilities to do it fast if market dysfunction required that.”

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Paul Southward