Former Chancellors warn against tax increases

Three former Chancellors yesterday took questions from the Treasury Select Committee in a session considering the impact of the coronavirus pandemic. Alistair Darling, George Osborne and Philip Hammond said that the Government should avoid tax rises and consider tax cuts either through a VAT reduction or national insurance payments, with Mr Hammond saying there was “no economic logic to increasing taxes in the short term”. He added that there “may be a need for some short-term fiscal stimulus to the economy and that could be delivered most obviously through tax cuts.” Lord Darling said that cutting VAT could have an immediate effect by pushing down costs for consumers and increasing spending, saying: “If you want to stimulate the economy, the most obvious thing to do is a time-limited VAT reduction.” Mr Osborne suggested business taxes should be lower, saying he “wouldn’t have gone ahead with scrapping the 2p reduction in corporation tax”, suggesting it would “send a big signal that Britain is open for business around the world.”

The Daily Telegraph, Business, Page: 1 The Times, Page: 9 The Guardian, Page: 29 The Sun, Page: 11 Daily Mirror

Workers would pay more tax to fund recovery

More than three quarters of workers would be willing to pay more income tax to cover the cost of the Government’s coronavirus rescue package, according to a survey of 2,000 people by stockbroker AJ Bell. The poll saw 77% of respondents say they would be willing to pay higher income tax, potentially in a time-limited “surcharge”. On average, those polled would accept a 3.9% increase in the basic rate, which currently stands at 20%. While 38% would be willing to pay at least 3% more than the existing rate, 23% said they would be unwilling to pay any extra income tax.

The Times, Business, Page: 32 Daily Mirror, Page: 10

Alliance calls for tax reform

The Taxpayers’ Alliance says taxes on employment and wealth should be scrapped, while business tax relief should be increased and stamp duty abolished on home sales under £1m. The Alliance says “bold, powerful action” should be at the centre of measures designed to boost the economy amid the COVID-19 pandemic. It says removing employers’ national insurance and replacing it with a 10% payroll tax would cut business payroll costs by 38%, while a temporary pause on employee national insurance would see the average worker pay £1,622 less tax this year. Taxpayers’ Alliance chief executive John O’Connell said: “Now more than ever, Britain needs tax cuts, not taxpayer austerity. With the economy on its knees and millions facing unemployment, trying to tax our way out of it would be madness.”

The Times, Business, Page: 32 Daily Express, Page: 2


PwC offices to reopen

PwC has announced that its offices across the UK will reopen their doors from 8 June, with London, Birmingham, Manchester, Leeds, Reading, and Bristol offices to resume operations. Kevin Ellis, PwC UK chair and senior partner, said: “Just because we can work from home I don’t think we should, at least not all the time. We’re a people business and the virtual world isn’t a substitute for human contact for a business like ours.” He went on: “Physical proximity helps with ideas, helps with teamwork, helps with mentoring and developing our staff and is important for mental health.”

The Daily Telegraph, Business, Page: 7 City AM


Hodge: Block risky firms from state loans

Dame Margaret Hodge, former chairwoman of the Public Accounts Committee, has called on the Government to deny coronavirus loans to companies deemed risky by HMRC. In a letter to Chancellor Rishi Sunak, Dame Margaret said: “If a company does not pay their fair share in the good times, they should have no access to public bailouts when times are tough.” She also called for companies receiving state support to be barred from intra-company loans, with it noted these can be used to extract profits without attracting corporation tax. Dame Margaret’s letter comes ahead of the Bank of England naming 60 businesses, including several of the country’s biggest, that have been granted a slice of £19bn in coronavirus corporate financing. The Times’ Philip Aldrick says the list will raise questions over whether multinationals, many of which use legitimate tax avoidance schemes, should be banned or subjected to tougher anti-avoidance conditions.

The Times, Page: 31 Daily Express, Page: 49

Travelodge outlines CVA plan

Travelodge has launched a CVA under which landlords would receive 62% of rent due between the conclusion of the insolvency deal and the end of next year, with the proposal suggesting that if the restructuring plan fails to secure approval, the hotel group is a “likely to enter into administration or liquidation”. Under the terms of the proposal, which is being run by Deloitte, Travelodge’s owners would provide £60m of a new £100m debt injection, plus up to £40m of additional equity. This would be used to pay landlords £230m until the end of December 2021, at which point full rents become payable. Some landlords have criticised the proposal, with the Travelodge Owners Action Group, whose members own 400 sites, saying the tenants “are multi-billion-dollar offshore hedge funds” while the landlords are “for example, pensioners.”

The Times, Business, Page: 36 Daily Mail, Page: 73

Payouts for Jamie’s staff

An employment tribunal has awarded 64 staff from Jamie Oliver’s collapsed restaurant empire nearly three months’ worth of wages, having agreed with their claims that the redundancy process had been flawed. Up to 1,300 jobs were lost in May last year when Jamie’s Italian chain, Barbecoa and Fifteen restaurants collapsed, with Deloitte handling the administration.

Daily Express, Page: 23

Wirecard forecasts no damage to business from pandemic

The FT looks at Wirecard, noting that release of full-year figures approved by EY has twice been delayed, while a KPMG special audit did not resolve questions over its financial statements.

Financial Times


PM warns of mass unemployment

Boris Johnson has warned of “many, many job losses” after the coronavirus crisis, saying high levels of unemployment as a result of the pandemic were “inevitable”. Vowing that the Government will be “activist and interventionist” in tackling the matter, the Prime Minister pledged to invest in youth training and guaranteed apprenticeships for young people would be part of any jobs programme. Meanwhile, two former Chancellors have warned that unemployment is set to hit levels not seen the 1980’s. Both Alistair Darling, the last Labour Chancellor, and Tory successor George Osborne voiced warnings before the Treasury Select Committee. Mr Darling said the UK needs to “get into the frame of mind where we’re thinking of 1980’s levels of unemployment”, adding: “If it doesn’t happen, that’s great but I think we need to be ready for that and if we’re not people will ask why.” Mr Osborne, when asked how the COVID-19 crisis compares with the financial crisis, said the country “didn’t really have to deal with mass unemployment” during the latter, adding: “We never faced the structural unemployment that we saw in the 1980’s.”

The Times, Page: 9 The Guardian, Page: 29 The Sun, Page: 11 Daily Mirror City AM


FCA tells insurers to review product value

The Financial Conduct Authority (FCA) has directed insurance firms to consider the impact of COVID-19 on the value of their products, saying they should evaluate services and detail any alterations within six months. Examples of changes given by the FCA include changing how benefits are delivered, refunding some premiums or suspending monthly payments for a certain period of time. Sheldon Mills, interim executive director of strategy and competition at the FCA, said: “Customers should expect value from the insurance products that they buy, but the exceptional circumstances of coronavirus may have materially reduced the value they are getting”. Mark Turner, managing director at Duff & Phelps, comments: “Firms cannot rely on customers identifying inappropriate cover themselves.” “It’s critical that firms assess a customer’s risk of financial distress in a dynamic w ay – customers that were not even on the radar of vulnerability two months ago may now be exposed to serious financial difficulty,” he added.

City AM


Public participation in equities is flagging when we need it most

KPMG analysis shows that while overall equity financing has held stable at around 50% of total funding for non-financial companies, the share of public equity is 55%, down from 75% in 2000.

Financial Times, Page: 14


ECB set to add €500bn of QE

With the European Central Bank (ECB) set to detail forecasts pointing to the impact the coronavirus pandemic has had on the eurozone, it is expected to announce a further €500bn of quantitative easing. The Times notes that a German court recently ruled that the 2015 version of QE, the public sector purchase programme, should be reviewed, with PwC economist Barret Kupelian commenting: “We expect the ECB to remain undeterred by the recent ruling of the German constitutional court and to expand its programme.”

The Times, Page: 34


Services sector activity declines

The IHS Markit purchasing managers’ index (PMI) for May has revealed that activity in the services sector shrank last month to a reading of 29, up from all-time lows of 13.4 a month earlier but well under the 50 mark signalling growth. IHS Markit’s Tim Moore remarked: “A number of firms cited limited opportunities to win new orders with clients placed on furlough, as well as a hit to workloads from the postponement of new projects Consumer demand also remained very subdued, with large areas of the service economy still in the planning stage of restarting business operations.”

The Daily Telegraph The Sun, Page: 44 Daily Express, Page: 49 City AM


Banks warned to prepare for no-deal Brexit

Lenders including Barclays, HSBC, Lloyds Banking Group and RBS have been urged to prepare for a no-deal Brexit by Bank of England governor Andrew Bailey, according to Sky News. A banker briefed on the call between Mr Bailey and industry chiefs said Brexit had been “the number one agenda item” during the discussion. Commenting that it is “fundamental to the Bank of England’s remit that it prepares the UK financial system for all risks that it might face,” the BoE said: “The possibility that negotiations between the UK and EU over a future trading relationship might not conclude in a deal is one of a number of outcomes that UK banks need to prepare for over the coming months.”

Sky News BBC News The I, Page: 5 Daily Express, Page: 2 Daily Mail The Guardian City AM

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