NEWS – WEDNESDAY 7TH OCTOBER 2020
NEWS – WEDNESDAY 7TH OCTOBER 2020
TAX NEWS – WEDNESDAY 7TH OCTOBER 2020
Practical difficulties and low revenues mean a wealth tax won’t work
With the idea of a wealth tax becoming more popular amid the coronavirus downturn, the Telegraph’s Russell Lynch explains that fewer countries impose one on their citizens now than in 1990 due to the practical difficulties of such a levy and the relatively low revenues. There are now just four developed countries using a wealth tax: Spain, Norway, Switzerland and Belgium. That compares with 12 in 1990, according to the OECD. Helen Miller, deputy director of the IFS, says wealth taxes “have never raised very much money” and they are notoriously hard to design without creating distortions. That is before the administrative issues are considered. “The big challenge of practicality is that we don’t have a comprehensive measure of people’s wealth,” Miller adds. Lynch goes on to cite Labour chancellor Denis Healey, who in his memoirs said, “you should never commit yourself in Opposition to new taxes unless you have a very good idea how they will operate in practice. We had committed ourselves to a wealth tax: but in five years I found it impossible to draft one which would yield enough revenue to be worth the administrative cost and political hassle.”
Sunak to hold off on tax hikes until the dust settles
A day after saying that the Tories had a “sacred responsibility to future generations to leave the public finances strong” the Chancellor has signalled that he will hold off on tax rises and Budget cuts until the UK’s economic recovery is further along. Rishi Sunak told Sky News that he would restore the public finances to a more sustainable level “over time” as the country’s main priority now should be restoring jobs and getting the economy moving again. HIs comments come as Tory MPs back a call from the Institute of Economic Affairs for the top rate of income tax to be capped at 40% and for VAT to be slashed to 17.5% for all industries.
SMEs NEWS – WEDNESDAY 7TH OCTOBER 2020
BBLS losses could top £26bn, NAO says
Analysis by the National Audit Office suggests British taxpayers could lose £26bn on the Government’s Bounce Back Loan Scheme due to a lack of credit controls and exploitation by criminal gangs. The audit office forecast costs of between £15bn to £26bn based on losses of between 35% and 60%, on the assumption that lending reached £43bn. But a worse-case scenario puts defaults as high as 80% or £34bn. A government spokesman said: “Our loan schemes have provided a lifeline to thousands of businesses across the UK. We targeted this support to help those who need it most as quickly as possible and we won’t apologise for this. Any fraudulent applications can be criminally prosecuted for which penalties include imprisonment or a fine or both.” The Mail’s Alex Brummer comments: “This whole episode is a warning of the dangers of being seduced by well-intentioned but badly-thought-out credit plans. Authors of Boris Johnson’s 95% mortgage loans have been warned.”
Struggling SMEs locked out of bounce back loans
City AM reports on the small businesses unable to get state-backed bounce back loans because lenders are turning down new customers. Just five of the 28 accredited lenders are currently accepting applications from new customers, despite Chancellor Rishi Sunak extending the deadline for applications to 30 November. David Clarke, chairman of the Fraud Advisory Panel charity, says banks are wary of fraud with lenders having now tightened checks “so much that genuine companies are being denied help which seems unfair.”
Sunak prepares new support for businesses hit by local lockdowns
The Chancellor is preparing new support measures for those businesses worst affected by new local lockdown restrictions. The new package comes ahead of a new three-tier local lockdown system designed to end confusion over Covid restrictions.
Financial Times Daily Mail
INDUSTRY NEWS – WEDNESDAY 7TH OCTOBER 2020
Whitehall consultants earn £450m in fees
Fresh analysis shows Government spending on consultants has risen by 45% to more than £450m in three years, with Deloitte the biggest winner, earning fees of £147m from public funds in 2019-20, compared with £40m two years earlier. PwC was the second biggest-earning consultancy from the public purse last year, receiving £106m. Over the last year, EY earned fees across Whitehall worth £75m, while KPMG was paid £57m from government departments.
The Guardian, Page: 1
CORPORATE NEWS – WEDNESDAY 7TH OCTOBER 2020
Auditors ‘uncertain’ over viability of Seedrs
KPMG has said there is “significant doubt” over the ability of Seedrs, the equity crowdfunding platform, to continue trading for the next 12 months, primarily because of fears over the impact of COVID-19. The auditors said that there is “material uncertainty” over the company’s status as a going concern without additional capital being raised. The platform announced merger plans with rival Crowdcube on Monday, the day before its 2019 accounts were published.
Clarks set to close stores
British shoemaker and retailer Clarks is set to close as many as 50 stores as part a rescue deal worth more than £100m. Deloitte is believed to be advising on a company voluntary arrangement the company previously denied was under consideration.
REGULATION NEWS – WEDNESDAY 7TH OCTOBER 2020
FCA takes action on fraud related to pandemic
The Financial Conduct Authority (FCA) has introduced new sandbox services under which companies can innovate new products while avoiding the usual regulatory obstacles, in a bid to stamp out coronavirus-related fraud. The watchdog said applicants who can “detect and prevent fraud and scams, support the financial resilience of vulnerable consumers and improve access to finance for small and medium sized enterprises” are being sought, with director of innovation Nick Cook adding: “The FCA is a strong believer in the positive power of innovation. Today we are strengthening the range and scale of support we are providing to innovative firms to deal with the challenges raised by the pandemic.”
PROBATE NEWS – WEDNESDAY 7TH OCTOBER 2020
Bereaved face hardship amid inheritance delays
The accountancy firm Moore has warned that probate applications are now taking three times longer than they were pre-coronavirus, leaving heirs and other dependants facing long delays before receiving any assets that have been left to them. “Probate delays put a lot of heirs in a really tough spot financially,” Lynne Rowland, partner at Moore, says. “Executors can be held personally liable for any payments made from an estate before the grant of probate is obtained, so they are often understandably reluctant to transfer funds to a beneficiary without the grant being in place. One month of that is difficult but three months or longer is unsustainable for many beneficiaries.”
The Independent, Page: 48
PROPERTY NEWS – WEDNESDAY 7TH OCTOBER 2020
Banking industry sounds alarm on Johnson’s housing plan
Eric Leenders, managing director of personal finance at banking trade body UK Finance, has warned against irresponsible lending after Boris Johnson promised a big increase in low-deposit mortgages for first-time buyers. The PM told the Tory party conference yesterday that he wanted to expand home ownership by giving “first-time buyers the chance to take out a long-term, fixed-rate mortgage of up to 95% of the value of the home – vastly reducing the size of the deposit.” Mr Johnson said the policy could create two million more owner-occupiers.
Financial Times Daily Mail
Covid-hit companies facing £6bn rise in business rates, CBI warns
The CBI has warned that unless the business rates system is changed the tax would cost companies in England at least an extra £6bn before 2026.
SUPPORT NEWS – WEDNESDAY 7TH OCTOBER 2020
Finance bosses issue warning over zombie companies
Oliver Baete, the CEO of Allianz, has warned that government loans are camouflaging the underlying economic effects of the pandemic. Speaking at the Wall Street Journal’s CEO Council, he said: “We have a lot of zombie companies now that are just surviving because they are getting government money, we have a lot of jobs around furlough or part time that will be lost, certainly in 2021.” Baete went on to say that households were proving more resilient than many thought and that government spending needed to shift from consumption to investment following the COVID-19 pandemic. Speaking at the same event, Santander executive chairman Ana Botin added that it was important not to withdraw stimulus or support too early but “companies that deserve to be alive” should be supported.
EMPLOYMENT NEWS – WEDNESDAY 7TH OCTOBER 2020
Employers planned 58,000 redundancies in August
Statutory filings indicate that employers planned to make 58,000 workers redundant in August. Some 966 separate employers informed the Government of plans to cut 20 or more jobs – more than four times as many as during August last year, according to the BBC. The figures are lower than during June and July, with 150,000 job cuts indicated during each.
The Daily Telegraph BBC News
ECONOMY NEWS – WEDNESDAY 7TH OCTOBER 2020
Freeports set to open next year
Rishi Sunak has announced that freeports will be opened within a year stating that bidding for “freeport” status will start soon. The tax-free trade zones will allow goods in these areas to be able to be imported, stored, and exported without tariffs being imposed. The Chancellor said: “Our new freeports will create national hubs for trade, innovation and commerce, regenerating communities across the UK and supporting jobs. They will attract investment from around the world as we embrace new opportunities following our departure from the EU, and they will be a key driver for economic recovery as we build back better.”
Daily Express, Page: 5 The I, Page: 11
IMF chief warns of hard recovery
International Monetary Fund Managing Director Kristalina Georgieva said on Tuesday that governments must continue with fiscal and monetary support or risk their economies crashing again. The IMF will make a small upward revision to its global economic output forecasts next week, Georgieva said, adding: “My key message is this: The global economy is coming back from the depths of this crisis. But this calamity is far from over. All countries are now facing what I would call ‘the long ascent’ – a difficult climb that will be long, uneven, and uncertain. And prone to setbacks.”
The Guardian, Page: 33 CNBC Reuters
Consumers upbeat but still not prepared to splash out
A survey by PwC reveals consumer confidence had rebounded back to pre-pandemic levels and was now the highest it has been in September for seven years as people are “genuinely confident in the strength of their personal finances”. Despite the confidence, PwC said the majority of people were planning to cut back their spending in almost every area.
The Daily Telegraph, Business, Page: 4
OTHER NEWS – WEDNESDAY 7TH OCTOBER 2020
Banking lobby group names new boss
UK Finance has appointed David Postings as its new chief executive. He will take up the post from next January. Mr Postings is currently a non-executive director at UK Finance and is the former chief executive of Bibby Financial Services and Moneycorp.
The Daily Telegraph, Business, Page: 1 The Times, Page: 44
Contact Paul Southward