Prepare for 'emergency tax rises' in the Spring, economists warn
Daily Business News
The Institute for Fiscal Studies, a left-leaning think-tank with influence at the highest levels of Government, says Chancellor Rachel Reeves may be forced to announce emergency tax rises in the spring if the economy continues to deteriorate. A “quirk” in Reeves’s new tax and spending rules meant she might be required to announce measures to balance the books in March, IFS Associate Director Ben Zaranko says, as she is allowed to borrow only to invest, meaning a deterioration in public finances would require she either cut spending or raise taxes to make her sums add up. “If the growth outlook worsens and a forecast for a small current budget surplus becomes a forecast for a small current budget deficit [which is] very possible, the Chancellor might have to announce tax rises or spending cuts at the March Statement to meet it,” Zaranko explained. A Treasury spokesman did not rule out tax rises in the Spring, telling the Telegraph the Chancellor would “plan for all scenarios”, and that balancing the books was “non-negotiable”. “We’re not going to pre-empt the forecast. However, no one should be under any doubt of the Chancellor’s commitment to economic stability and sound public finances. That is why meeting the fiscal rules is non-negotiable and we will plan for all scenarios,” the spokesperson said.
Wage growth rocketed by 5.2% in the three months to October, including a 4.9% rise in September, the Office for National Statistics (ONS) said this morning, meaning pay outstripped inflation by 3%. The increase was attributed partly to above-inflation public sector pay deals, however private sector earnings growth came in above that of the public sector, at 5.4% versus 4.3% respectively. However, the number of job vacancies fell by 31,000 to 818,000 in the September-to-November period. This is a three-year low, and marks decline for more than two and a half years, equating to the longest slump on record. In a further indicator the jobs market is continuing to weaken, the ONS also said provisional data indicated that the number of staff on payrolls fell by 35,000 in November 2024. However, UK unemployment was unchanged, sticking at 4.3% for the second straight month during October. Work and Pensions Secretary Liz Kendall said: "Today's figures are a stark reminder of the work that needs to be done. To get Britain growing again, we need to get Britain working again – so people have good jobs which pay decent wages and offer the chance to progress."
The inquiry into the Post Office Horizon scandal has heard its final submissions from witnesses, prompting former sub-postmaster and campaigner Sir Alan Bates to say he wants the "real baddies" to be held to account over the scandal. 900 innocent men and women running local post office branches between 1999 and 2015 were given criminal records and in many cases prison sentences when faulty Fujitsu accounting software made it look as if they had been stealing. Most lost their livelihoods and their standing in their communities; many lost their homes; some killed themselves. The scandal is one of the most widespread miscarriages of justice in British history. In an interview with the BBC Radio 4 World at One, Bates said that he hoped public scrutiny would ensure justice was done. Lawyers acting for Bates and the other sub-postmasters told the inquiry on Monday that the Post Office's "cruel" and "malignant culture" had "destroyed the innocent". Edward Henry KC said: "The truth is this tragedy is not about an IT system. Horizon did not destroy the innocent – the malignant culture of the Post Office did." "People were ruined, people were bankrupted, people were imprisoned, there were atrocious miscarriages of justice, people died," he said, adding: "The greatest horrors of the world, man's cruelty to man, are not caused by monsters, malfunctions or misfortune but by those who claim to act in the name of good." The inquiry began in September 2020 and has heard from 298 witnesses, received 780 witness statements, and dealt with more than 2.2 million pages of disclosure. Witnesses have included Paula Vennells, the former Post Office CEO, who has been widely criticised for her handling of the matter. Bates was the star character in the smash hit ITV drama Mr Bates versus the Post Office, where he was played by actor Toby Jones.
Water companies may be forced to pay higher compensation to customers failed by failures such as sewer flooding, supply outages and low water pressure. The Department for Environment, Food and Rural Affairs (Defra) said in a statement yesterday that payouts for internal flooding from sewers could more than double from the current £1,000 level, while those hit by water pressure issues could receive ten times the current payout. The scope of events which demand compensation could also be expanded to include those leading to so-called ‘boiled water’ notices being issued, or when companies fail to check meter readings or complete installations in time, none of which currently require compensation payments to be made. Steve Reed, Defra Secretary of State, said: “Customers have too often been let down by water companies, with supply cut off, low water pressure and in some cases even contaminated tap water. We are clear that the public deserve better compensation when things go wrong, so I’m taking action to make sure that happens.” Defra also said that its new proposals had “overwhelming public support”. A survey showed 84% of residential water customers and 70% of businesses agreed to its proposals.
Energy Secretary Ed Miliband promised household energy bills would fall by £300 under a Labour Government before the General election, but now The Telegraph reports bill-payers face levies of up to £520 more to pay for his controversial carbon capture schemes storing emissions from new gas-fired power plants and some factories. The projects are expected to cost £21.7bn over the next 25 years, but the Government has not yet spelled out how they will be funded. However, Jeremy Pocklington, the permanent secretary of the Department for Energy Security and Net Zero, told MPs on the Public Accounts Committee yesterday that three quarters of the money is expected to come from higher bills paid by households and businesses, an amount that equates to £517 each across the country’s 31.5m domestic and non-domestic power users, spread over 25 years. The Treasury was likely to fund the remaining quarter of costs, although that remained subject to final agreements, he added.
Sir Jim Ratcliffe’s energy firm Ineos says Britain is too “negative” to lure investment and high taxes on oil and gas in the UK make it no longer “economically attractive”. Ineos will be backing Donald Trump’s America instead, it seems, having inked a major US deal on Sunday to buy two offshore oil and gas-producing platforms in the Gulf of Mexico. Writing in The Telegraph, Ineos Chairman Brian Gilvary said: “[The UK’s] current tax regime, its over-regulation and the negative political attitude towards oil and gas are barriers that would deter any investor now. The US, by contrast, has long been an attractive market for energy investment – with a stable fiscal regime, supported by governments that understand the importance of affordable energy security.” Energy Secretary Ed Miliband says he will block any new oil and gas infrastructure development, while Chancellor Rachel Reeves has hiked the net tax on profits from oil and gas to 78%, the highest of any sector in Britain. The US total effective tax rate for oil and gas is roughly half the UK’s, at 40%.
Octopus founder Greg Jackson, Rolls-Royce chair Dame Anita Frew and former Tory business secretary Greg Clark are among those the Government has appointed to a new Industrial Strategy Advisory Council, tasked with helping to stimulate growth. Prudential chair Baroness Shriti Vadera and Legal and General’s Sir John Kingman are also involved in the sixteen strong panel, which also includes trade unions, academics, and industry bodies. It meets for the firsts time today at Lloyd’s of London and will be attended by Chancellor Rachel Reeves and Business Secretary Jonathan Reynolds.
Paul Careless, Spencer Golding, Michael Thomson, John Russell-Murphy and Robert Sedgwick, all former executives of the collapsed London Capital & Finance (LCF), are liable to pay £180m in civil damages to investors, they were told by the High Court on Friday. Careless, a former police officer, was ruled to be liable for 75% of that. The investment company collapsed in January 2019 after the Financial Conduct Authority (FCA) intervened following a discovery it was marketing unregulated mini-bonds and misleading promises of returns. Last month, a Judge ruled that they all participated knowingly in the fraudulent conduct, which he likened to a ‘Ponzi scheme’.
Canal+ shares tumbled as much as 22% during the media firm’s London Stock Exchange debut yesterday. The spin-off from communications giant Vivendi, opened at 290p but fell quickly to 243p, valuing the company at about £2.6bn. The firm is best known for its subscription television services, live sports broadcasting, and Studiocanal, the production arm behind the popular Paddington film franchise.
Ricardo is selling it defence business to Proteus Enterprises and Gladstone Investment Corporation for $85m (£67.5m). The London-listed strategic, environmental, and engineering consulting firm has agreed to buy an 85% stake in Australian consultancy business E3 Advisory for around AUD 101.4m (£51m) and expects to buy the remaining 15% of E3 Advisory by January 2028.
David Lindberg, CEO of NatWest Group's retail banking division, its high street branch network, is leaving his role next Spring, Sky News reports. His move is said to be part of preparations for the bank’s return to full private sector ownership. The Government now owns less than 10% of NatWest.
Oxford BioDynamics’ CEO Dr Jon Burrows resigned with immediate effect yesterday. The AIM-traded biotechnology firm said Iain Ross had been appointed to join the company immediately, and would assume the role of executive chairman in January, pending the completion of an equity fundraise and regulatory due diligence.