IFS director: Tax increases may be required

Paul Johnson, director of the Institute for Fiscal Studies, has said Chancellor Rishi Sunak faces having to raise billions of pounds through tax increases if spending is not reduced in the autumn Budget. Mr Johnson told the House of Commons’ Treasury Select Committee that if Mr Sunak opts to increase taxes, it is likely to be “a fairly substantial increase – that might be 2% of national income, for example”. He added that if increases are on the cards, policymakers “would have to look at the substantial taxes”, noting that close to two thirds of tax revenues come from NI, income tax and VAT and saying he would expect increases in those taxes “in the medium run”. He also suggested there are “some arguments” for removing tax advantages for higher earners saving for their pensions. Philip Booth of the Institute for Economic Affairs said Mr Sunak could increase taxation while limiting the hit to economic growth by levying VAT on more goods and services. Mike Brewer, chief economist at the Resolution Foundation, does not expect tax increases in the next 12 months but told the committee that “wealth taxes on immovable sources of wealth” would be sustainable for decades.

The Daily Telegraph, Page: 6 The Times, Page: 2 Financial Times, Page: 3

Crunching the corporation tax numbers

The Telegraph’s Tim Wallace looks at corporation tax, saying that while the UK’s 19% headline rate is the joint-fourth lowest of any OECD economy, accounting for reliefs and allowances, the effective rate falls to 13.6%. If other nations’ reliefs and allowances are also factored in, Britain places 25th in the table. Mr Wallace says that in regard to funds raised by corporation taxes, Britain pulls in the equivalent of 2.8% of GDP, just shy of the OECD average of 3%. Elsewhere, David Smith in the Times looks at the potential impact of cutting corporation tax. He cites Mark Gregory, EY‘s chief economist, who says that for foreign investors, “their ability to move tax liabilities [between different jurisdictions] means low corporation tax is of limited benefit. ”

The Daily Telegraph, Business, Page: 4 The Times, Page: 37

Chancellor weighing Budget options

With Rishi Sunak said to be considering options to boost public finances in the wake of the coronavirus crisis, Larry Elliott in the Guardian says the Chancellor has four options for his autumn Budget: Cut taxes and raise spending; leave things as they are; take steps to cut the deficit immediately; and pre-announce future measures to raise taxes or cut spending. Mr Elliott adds that another option would see a combination of these, such as providing short-term stimulus but outlining a future shift in taxation.

The Guardian, Page: 13

Could Treasury plans hit tax-take?

Jeremy Warner in the Telegraph considers proposals reportedly being considered by the Treasury, including decreasing pensions tax relief, aligning capital gains and income tax rates, and raising the rate of corporation tax. He says policymakers must weigh up whether the plans would actually result in the additional £30bn a year suggested and questions if the overall tax-take would be damaged by consequent poorer rates of economic growth .

The Daily Telegraph, Business, Page: 2


City expects most workers to stay at home

Large City companies say they are not expecting a rush to the Square Mile despite ministers urging people to get back to their desks. Financial institutions say they expect their London skyscrapers to stay largely empty this month as they go “slow and steady” on getting people back in. PwC is aiming to be operating at 50% of its pre-pandemic capacity by the end of September, while KPMG, which currently has capacity for 30% of its workforce to return to its London base, hopes to have 60% back by the end of October.

The Daily Telegraph The Times, Page: 7


Google to pass digital services tax onto advertisers

Google is passing on the costs of a new digital services tax to British advertisers by charging an additional 2% in fees from November 1. The digital services charge, a 2% levy on revenues generated in the UK from search engines, social media websites and online sales by internet companies, is expected to make the UK £400m by 2021, and ultimately raise £500m per year. Google said it will also charge advertisers in Austria an additional 5% to cover the costs of its digital services tax.

The Daily Telegraph, Business, Page: 1 Financial Times, Page: 7 The Times, Page: 2

Ann Summers moots CVA

Lingerie chain Ann Summers is considering a CVA, with a spokesman saying the retailer has had constructive conversations with many of its landlords to ensure rental costs “are appropriate for the new market conditions”. However, they added that this “has not been the case with all landlords”, prompting the firm to consider a CVA which would only affect stores where new terms have not been agreed. Chief executive Jacqueline Gold told Retail Week: “We want to work in partnership with our landlords and our interests should be aligned. That’s why we, like many retailers, think turnover-based rents are the way forward.”

The Times, Page: 41 Daily Mail, Page: 67 Evening Standard

Debenhams sets bidding deadline for potential buyers

A deadline for potential buyers for Debenhams to make offers has passed. With administrator FRP Advisory reported to be aiming for a sale of the business by the end of the month, advisers at Lazard, the investment bank who are running the sale process, informed interested suitors that they needed to submit bids by 5pm yesterday. The Times reports that if no buyer is found by the end of this month, the company will start exploring other options that could put 14,000 jobs in jeopardy, although it is understood that liquidation remains a last resort.

The Times, Page: 34 The Sun, Page: 43 City AM

Law firms launch new round of cost cuts as pandemic bites

With law firms cutting costs in the wave of COVID-19, Giles Murphy at Smith & Williamson says activity levels are likely to fall and expensive staff “may be at risk”.

Financial Times, Page: 10


Mortgage approvals jump

Mortgage approvals have reached levels nearly equal to those seen before coronavirus, with 66,300 in July, up from 39,900 a month earlier. July’s total is the highest since February, where 73,700 were recorded, and close to July 2018’s total. In terms of value, mortgage approvals hit a record high of £16.7bn in July, a 64% month-on-month increase and 7.3% up on July 2019. Hugh Wade-Jones, the managing director of Enness Global Mortgages, said a surge in buyer demand seen once the market reopened following the coronavirus lockdown “has been seriously turbo-charged” by the stamp duty holiday announced by the Chancellor at the start of last month.

The Daily Telegraph The Times, Page: 36 Financial Times Daily Express

CGT plans could deliver £27k hit for BTL landlords

Research by estate agent Hamptons International suggests that proposed changes to capital gains tax could cost buy-to-let landlords up to £27,000 more for each property sold. With the Chancellor reportedly considering increasing the CGT rate from 28% to 40% for a higher-rate taxpayer and from 18% to 20% for a basic rate taxpayer, analysis suggests that lower-rate taxpayers will be worse off by an average £1,130 when selling up, while higher-rate payers will pay on average £6,800 more. Meanwhile, John Cronin, a banks analyst at Goodbody, said the mooted reform of CGT could shake up the housing industry by putting off part-time landlords and creating a gap that professional landlords could fill.

The Times, Page: 2 The Daily Telegraph, Business, Page: 4


Firms and staff divided over office returns

A survey of 100 businesses by Blick Rothenberg shows that while 60% of employers believe staff should return to offices by the end of this year, almost the same percentage of employees either feel they would return in 2021 or remained undecided. On a move toward increased remote working, 60% of employers and 58% of employees believe staff will spend only two or three days in the office when they do return. The poll also saw 51% of businesses say they are considering a reduction in office space while 46% have already attempted to renegotiate rental terms with landlords.

The I, Page: 8

Pandemic prompts women to set up businesses

A new study has found that one in four women are setting up their own business as a result of the coronavirus crisis, with the Making It Work survey from AllBright showing that 74% of members of the women-only members club feel inspired to start a business after the pandemic. It was found that 25% have already started a new business while 61% are planning to change career as a result of the pandemic. The report also reveals that 65% of those polled plan to invest in upskilling as a result of the crisis, while 50% believe the pandemic will provide new job opportunities.

The Daily Telegraph


BoE data fuels hope of V-shape recovery

Bank of England (BoE) figures for July have raised hopes that the economy may be heading toward a V-shaped recovery, with borrowing on the up. July saw households borrow an extra £1.2bn in personal loans and credit card debt – more than the average £1.1bn seen in the 18 months to February. Credit card borrowing hit £622m during July, the highest rise in a single month since June 2018, while mortgage approvals rose 26,000 over the month to 66,300, with £2.7bn in new mortgage borrowing. The BoE report shows that lenders have put up the cost of consumer loans amid economic uncertainty driven by the coronavirus crisis, with the cost of new loans up by 0.22 percentage points to 4.64% in July and overdraft charges rising by 1.6 percentage points to 14.84%. The figures reveal that households saved an extra £7bn in July, an increase on the £5bn average seen pre-pandemic but down on the £19.1bn recorded at the peak of the crisis. Companies saved an extra £11.8bn during July as overall deposits rose by £26.3bn. Howard Archer, senior economic adviser at the EY Item Club, warned of “challenging fundamentals for consumers”, saying people have already lost jobs, despite Government support, while others will be concerned they may lose their job once the furlough scheme ends. He added that incomes have been hit and consumer confidence remains low “compared to long-term norms”.

The Daily Telegraph

Manufacturing expands

Output from Britain’s manufacturing sector expanded at the fastest rate for more than six years last month, with the IHS Markit/Cips manufacturing purchasing managers’ index registering a score of 55.2 in August. This is up from 53.3 in July on an index where a reading above 50 denotes expansion. Simon Jonsson, head of industrial products at KPMG, said: “The index reading for August gives hope for recovery in UK manufacturing, but it’s still very early days and the next few months will be crucial for the confidence of manufacturing businesses.”

The Scotsman, Page: 43

Contact Paul Southward