Sunak warns of bill to be paid to tackle UK’s ‘exposed’ finances

In an interview with the FT, the Chancellor has said Britain’s finances are “exposed” to rising interest rates and the public need to be told the truth about the challenges facing the country. Meanwhile, a Treasury decision to hold a “tax day” three weeks after the Budget will be a bellwether for long-term changes in government policy, experts have said. Separately, Conservative party doners have warned Rishi Sunak that raising taxes in his Budget would be “utterly wrong” and risk sending Britain into another recession. Property developer Steve Morgan said: “One of the advantages of leaving the EU is that we can become a low-tax, dynamic society which can become Europe’s go-to country for investment. Increasing corporation tax and CGT flies in the face of this.” Banker Sir Henry Angest was particularly blunt, adding: “I suspect there is a mindset at the Treasury that just doesn’t believe in the capitalist economic model.”

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Allowance freeze could prove costly for some

The Times talks to accountants about the effect freezing tax thresholds would have on workers following speculation the Chancellor could use the tool in his Budget. PwC said that a 2% increase in wages would push the income of 1% of the working population over the £50,000 threshold. With 32m people in work, this would mean an extra 320,000 paying 40% tax on some income. If income tax thresholds were frozen until the next election, the average family would be £250 a year worse off by 2024-25. Pay rises for those who earn close to the £12,500 personal allowance could tip some of their earnings into the 20% tax zone – another blow for those who have suffered the most from the pandemic. Zena Hanks, an analyst from Saffery Champness, said: “The less that you earn, the more a frozen allowance will influence your take-home pay, so some may consider this a highly inequitable way of increasing tax revenue.”

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Higher business taxes cost us all

The Telegraph’s Matthew Lynn reminds readers that a hike in corporation tax will ultimately mean higher prices and pay cuts for workers. He states: “Sure, the crisis needs to be paid for, but we need to do that with long-term restructuring of the national debt, by rethinking the role of the state and with faster growth – not with panicky tax rises on the one part of the economy that might lead us out of this mess.” Meanwhile, a poll for the paper reveals that nearly 60% of Tory voters polled said they supported an increase in corporation tax to help pay for the Government’s pandemic and recovery spending. Half said CGT should remain the same, 34% stated it should increase and just 16% think it should decrease. Elsewhere, the i suggests the Chancellor will leave tax rises for the autumn and focus on job support instead in his Budget on Wednesday.

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Pandemic losers could cut future tax bills while Covid boomers pay more

Treasury officials have reportedly considered increasing corporation taxes on businesses that profited during the pandemic while expanding the so-called loss carry-back rules, which allow firms which previously made a loss to cut their tax bills when they return to profit. Chris Sanger, head of tax at EY, said: “If you’re incurring losses and you’ve got the history of taxable profits, then the banks can be pretty assured that you’re going to be able to get relief for those losses as you incur them. This would be quite an attractive move in order to help those kind of businesses move forward.” Ministers are also considering a shake-up of research and development (R&D) tax credits to help spur investment by firms after the pandemic.

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Corbyn loyalists warn of Budget tax trap for Labour

Allies of Jeremy Corbyn have warned his successor that failure to back an increase in corporation tax in next week’s Budget would cost the Labour party dearly. Sir Keir Starmer has faced anger on the Labour left after he told MPs it was not the right time for tax rises on families and businesses.

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Chancellor considers tax raid on parcels and freelance workers

The Sunday Telegraph reports that the Chancellor will launch a series of consultations later in the month on tax increases to pay for the cost of the pandemic, including new levies on online retail including for internet deliveries and an increase in National Insurance Contributions paid by the self-employed. Treasury sources said Mr Sunak’s concerns about the different tax treatment of the employed and self-employed have not changed since his first Budget last March. The consultations will be launched on March 23rd – dubbed “tax day” in Whitehall. The Sunday Times runs over some of Rishi Sunak’s fundraising plans, including freezing income tax thresholds and hiking corporation tax rises, both of which are approved of by Mike Brewer, chief economist at the Resolution Foundation, who says the measures “would have the triple benefit of raising about £16bn a year by 2025, while also protecting families that have been hit hardest by the crisis, and not holding back the recovery.” The CBI is less than impressed with proposals to increase taxes on businesses, however, with its chief economist Rain Newton-Smith stating that any rise should wait until after the economy has recovered.

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Tories to blame for 1,000 tax rises in the last ten years

Research by the TaxPayers’ Alliance shows Conservative prime ministers have pushed through more than 1,034 tax rises over the past decade. A total of 1,651 tax changes were made since 2010 with VAT, vehicle excise duty and Income Tax seeing the most adjustment. Income Tax was changed 180 times, going up 61 times while cuts were made 119 times. The Alliance is calling for a recovery budget on Wednesday, giving taxpayers a respite from rises. John O’Connell, chief executive of the Alliance, said: “The tax burden is at a 70-year high, and it’s not hard to see why after a decade of tax increases. All too often we’ve seen Conservative chancellors give with one hand but take back a good deal more with the other, meaning every aspect of every-day life comes with a sizeable tax bill.” Meanwhile, former Tory Chancellor Lord Ken Clark has said Rishi Sunak should not be afraid to raise income tax, VAT or national insurance because people would understand that when the Tory manifesto was written the pandemic could not have been predicted.

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Return deadline tonight

Self-assessment taxpayers have until midnight tonight, February 28th, to file their return and avoid a £100 fine. The deadline to submit tax returns for 2019/20 was January 31 but HMRC waived the late filing fine as long as they are submitted by February 28.

The Sun on Sunday



New ‘shareholder spring’ looms for companies tapping furlough scheme

Fidelity International has joined the Investment Association in calling for companies that used schemes such as furlough without repaying the money to show restraint when it comes to executive pay this year. “We are communicating that this is a red-line policy,” said Jenn-Hui Tan, Fidelity’s global head of stewardship. The Sunday Times notes that rows over taxpayer funds have already led to Tesco paying back £585m in business rates relief and BDO giving back £4.1m of furlough cash. In a letter to FTSE 350 companies the pension fund manager says it expects “companies that have participated in taxpayer-supported staff furlough schemes not to pay bonuses (cash or otherwise) to executive directors and senior management”. Stock-based long-term incentive plans should be scaled back, Fidelity says, and salaries for senior management should be frozen or increased only modestly.

The Sunday Times

UK carmakers may need state aid to survive

The Sunday Telegraph reports on the challenges ahead for Britain’s automotive sector, with Covid and Brexit stunting production to 1984 levels the industry faces tough decisions regarding the investments required for the transition to electric vehicles. Andrew Burn, head of automotive at KPMG says CEOs of carmakers are likely to put off investments in the near term, adding: “Manufacturing in the UK is down to government’s appetite for it. Does it support it or not?”

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Business leaders alert to task force transition

The Sunday Times speaks to businesses about the Brexit transition, with some expressing concern about Lord Frost replacing Michael Gove as chair of the Brexit business task force, suggesting his “sovereignty-first” ethos may put business second. Mike Cherry, the national chairman of the Federation of Small Businesses, comments: “Against a backdrop of continued trading restrictions, we need to see policy-makers pulling out all the stops to both introduce additional easements for small firms where the EU-UK deal is concerned and strike fresh deals with nations outside the bloc.”

The Sunday Times

UK Government to take stakes in tech start-ups

The Chancellor is preparing to launch a £375m fund to invest in fast growing UK tech companies as part of a series of policies focusing on the sector.

Financial Times



Covid widening pension gender gap

Laura Miller in the Sunday Times looks at how the pandemic has widened the pension gap, with women more likely to have lost their jobs in the first lockdown. Kate Smith, the head of pensions at Aegon, comments: “There’s no escaping that Covid is widening an already extensive gender pension and savings gap.” Miller also touches on how maternity leave has affected pensions, with analysis from Aegon showing that women who had paused their pension saving for two years while on maternity leave and then reduced their hours had up to £50,000 less in their pot when it came to retirement.

The Sunday Times



Accountants have a 99% chance of being automated

Tom Knowles considers the threat to jobs from automation in the Times and reviews the book Futureproof: 9 Rules for Humans in the Age of Automation by Kevin Roose. The New York Times journalist argues that all types of AI are advancing so fast and appearing in so many fields that the only way humans will thrive and hold on to their jobs is to become more human rather than trying to compete directly with machines. “Most of the promising applications of AI and machine learning are in fields like accounting, law, finance and medicine, which involve lots of tasks like planning, prediction and process optimisation.” the book states. Knowles notes a study showing that accountants have a 99% chance of being automated, while solicitors and financial analysts are also in trouble. The less exciting AI is largely overlooked, Roose says, but we “underestimate boring bots at our peril”.

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Downing Street hesitates over audit reform after bosses’ backlash

Proposals to hold directors responsible for inaccurate accounts have led to a backlash from business leaders who argue the move would stifle innovation and harm inward investment. The proposals form part of a series of reforms designed to improve audit standards that were recommended following three independent reviews. Legislation is needed to implement many of the proposals, including replacing the Financial Reporting Council with a tougher watchdog called the Audit, Reporting and Governance Authority and having the Big Four ensure their audit and consulting arms are independent. Delays in passing the law are frustrating the accounting sector with ICAEW chief Michael Izza saying: “We seem to be mired in treacle.” Now, the business community is hitting back at the crackdown on directors, rattling Downing Street and as a result, the audit reforms are said to be still awaiting the prime minister’s sign-off.

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UK urged to create a fintech taskforce

The Times carries news that Ron Kalifa is urging the Government to establish a high-profile taskforce to lead innovation in financial technology as part of the UK’s growth plans after Brexit. Mr Kalifa, the former boss of the payments processor Worldpay, was asked by the Treasury to review the sector in July. The Chancellor said yesterday that the review “will make an important contribution to our plan to retain the UK’s fintech crown, create more skilled jobs and deliver better financial services for people and businesses.” Rachel Kent, a partner at Hogan Lovells Financial, who led some of the work for the report, said: “While the UK’s position is well established its future is not assured. Being outside the EU has created an opportunity to re-examine and reshape our regulatory framework to ensure it remains attractive and enabling to fintechs.”

The Times



Carney’s green boasts highlight need for ESG audits

The former Bank of England governor has been accused of using an unrecognised and widely discredited definition of “net zero” to promote the green credentials of Brookfield Asset Management, the Canadian investment company he joined last year. The Times’ Patrick Hosking suggests Mark Carney has inadvertently drawn attention to the problem of ESG auditing: “Auditors pore over claims made for companies’ finances and there is still fraud and rule-bending. Why would unaudited environmental boasts be more reliable or honest?”

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Sunak to announce £126m boost for traineeships

The Chancellor is set to funnel a further £126m into training and apprenticeship schemes in his Budget on Wednesday. Rishi Sunak said it was “vital” support continued to get people back into work. Currently, firms in England are given £2,000 for every new apprentice they take on under the age of 25, and £1,500 for those over 25, in addition to a £1,000 grant they are already getting under another project. The Government’s planned investment could therefore enable a further 40,000 traineeships.

BBC News

Boris Johnson: Remote working won’t be the new normal

The Prime Minister has said in only a few months people will be commuting back into the cities and returning to their offices to work. Boris Johnson dismissed fears that Britain is facing a new age of remote working claiming in a video message that, as the economy reopens, “the British people will be consumed once again with their desire for the genuine face-to-face meeting.” The PM’s comments come after Goldman Sachs boss David Soloman rejected remote working as the new normal and labelled it an “aberration”.

The Times



264,800 Help to Save accounts opened

More than 264,000 individuals have opened a Help to Save account and could be earning money on their savings, statistics from HMRC have revealed. Help to Save is the Government backed savings scheme that allows individuals to earn a 50 pence bonus for every £1 saved over four years. The 50% bonus is payable at the end of the second and fourth year and is based on how much account holders have saved.

Press Release



Treasury to introduce mortgage guarantee scheme

The Chancellor will outline a new scheme on Wednesday that will see the Government guarantee part of a 95% mortgage for first-time buyers, up to a property value of £600,000. Banks are expected to have capacity to lend to about 3,000 individuals a month under the scheme. First-time buyers accounted for just 31% of all sales last year – the lowest proportion since 2016.

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Rishi Sunak to launch new Covid fraud team

The Chancellor is to launch a £100m taskforce to crack down on Covid fraud. Based in HMRC, the new Taxpayer Protection Taskforce will focus on tracking down the criminal gangs thought to have stolen billions of pounds by posing as legitimate businesses.

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Government borrowing costs rise as inflation fears grow

Yields on US and UK government bonds rose yesterday hitting one year highs and driving further the worldwide equities sell-off. The FTSE 100 dropped 2.5% while the Cac 40 and the Dax were also off by 1.5% and 0.8% respectively as concerns about inflation grow. “In the short term, volatility is likely to persist, and yields may rise further still,” said Salman Ahmed, global chief investment officer at Fidelity International. “However, while further rises in real rates and tightening of financial conditions may be needed before any real action is taken by central banks, we are closer to a turning point than a week ago.”

The Times The Daily Telegraph

Hospitality sector calls for further support

Hospitality firms have warned that one in five businesses in the sector could run out of cash in the next week unless more emergency support is confirmed. In a letter to the Government, signed by companies including Carlsberg, Intercontinental Hotels, pub chain Wetherspoons and Legoland owner Merlin Entertainment, they warned they faced a “truly perilous” situation with months of continued restrictions ahead. The letter said: “There is a significant gap between the current support provided by the government and the fixed outgoings associated with a closed hospitality business.”

City AM

Sunak to pledge £5bn in grants for the high street

In his Budget on Wednesday, the Chancellor will announce a £5bn fund to help high street pubs, restaurants and non-essential shops that have remained closed as a result of the Covid lockdown. Nearly 700,000 companies will be eligible for new direct cash grants of up to £18,000. Rishi Sunak said on Saturday night: “Our local businesses have been hit hard by the pandemic, which is why we went big and went early with a multi-billion pound package of support. There’s now light at the end of the tunnel, and this £5bn of extra cash grants will ensure our high streets can open their doors with optimism.” Craig Beaumont, chief of external affairs at the Federation of Small Businesses, heralded the “significant cash injection”, which he said would “help thousands of businesses survive through these final restrictions, and then help drive the vaccine-enabled recovery”.

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US removes stumbling block to global deal on digital tax

Janet Yellen, the US Treasury secretary, has told G20 finance ministers the US will remove the “safe harbour” requirement from proposals for global digital taxation reforms, potentially unlocking long-stalled multilateral negotiations at the OECD. The measure, which Donald Trump’s administration insisted on in 2019, would permit US tech companies to opt out of having to pay such taxes abroad. The German finance minister Olaf Scholz said Ms Yellen’s statement was a major breakthrough.

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Former Spanish king pays £3.8m in taxes

The former King of Spain, Juan Carlos, has made a payment of close to €4.4m (£3.8m) in unpaid taxes to Spain’s authorities in a move designed to avoid an embarrassing lawsuit. It is the second settlement Juan Carlos has paid in less than three months. Under Spanish law, someone cannot be prosecuted for tax offences if they settle an outstanding debt before formal charges are brought.

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Paul Southward