Latest news
Chancellor vows to 'protect against the debt storm'
With the latest report from the Office for Budget Responsibility painting a sombre outlook for the UK economy, Chancellor George Osborne has vowed that the Government will do whatever it takes to protect against 'the sovereign debt storm'.
In line with predictions, the Chancellor announced a reduction in the economic growth forecasts for the UK, revising the forecast for 2011 down from 1.7% to 0.9%. This was accompanied by an increase in Government borrowing, with the forecast for 2011/12 rising to £127 billion. However, the Chancellor rebuffed recent reports that the UK is set to slip back into recession by the end of the year.
Key announcements for business include a new £40 billion credit easing scheme, which will underwrite loans for small and medium-sized businesses. A £1 billion business finance partnership will help to secure funding for medium-sized firms. The business rate relief 'holiday' for small firms will be extended to April 2013, and a new seed enterprise investment scheme for small businesses will offer 50% income tax relief for those investing up to £100,000 in start-up businesses, together with a one year freeze on capital gains tax. A £1 billion youth contract will also aim to boost employment by means of subsidised work placements for young workers.
Also central to the announcements was a National Infrastructure Plan to boost the UK's road, rail and broadband facilities, to be funded by £5 billion of Government spending, with a further £20 billion investment from British pension funds.
Other significant announcements include a mortgage indemnity scheme aimed at helping 100,000 people to buy homes, a doubling of the number of childcare places for disadvantaged two-year-olds in England, a new 6.2% cap on regulated rail fare increases, and a cancellation of the rise in fuel duty scheduled for January, accompanied by a further increase in the bank levy.
Business reacts to Autumn Statement announcements
The UK's leading business organisation, the Confederation of British Industry (CBI), has given a broad welcome to the 2011 Autumn Statement, which it has described as the Government's "Plan A Plus" in all but name.
John Cridland, CBI Director General, said, 'This Autumn Statement works with the realities of today and provides an imaginative framework for UK businesses as it strives to secure growth and jobs'.
'We particularly welcome the new emphasis on capital spending, and the measures to leverage private sector investment on infrastructure for roads and energy'.
Meanwhile, the Federation of Small Businesses (FSB) has labelled the Autumn Statement 'a step in the right direction' for small firms.
According to the FSB, the new Seed Enterprise Investment Scheme will allow small firms to bypass the high street banks and access alternative sources of finance. The business group also welcomed the additional funds being made available to small businesses through the credit easing scheme.
However, the FSB expressed its concerns that guaranteeing the loan books of existing high street banks 'may service to reinforce their market position', and has called on the Government to go further to promote alternative forms of finance and increase competition in the banking sector.
John Walker, FSB National Chairman, said, 'Taken as a package, the announcements in the Autumn Statement address many of the concerns raised by small businesses and are therefore to be welcomed. The key now is for the Government to be consistent, and set to the task of translating these policy intentions into tangible actions on the ground'.
The British Chambers of Commerce also welcomed a number of the measures announced by the Chancellor, but warned that UK businesses remain concerned about the wider economic environment.
2011 Autumn Statement: the political reaction
Opposition politicians and public bodies have given mixed reactions to Chancellor George Osborne's 2011 Autumn Statement.
The Government's economic plans have 'failed colossally', according to Shadow Chancellor Ed Balls, who stated that the Chancellor's austerity agenda had 'backfired', with growth flatlining, unemployment rising and borrowing £158 billion higher than previously expected.
'As a result, his economic and fiscal strategy is in tatters', said Mr Balls.
The teachers' union NASUWT have condemned the Chancellor's plans for education as 'elitist', arguing that the Government has chosen to benefit 'the few not the many'.
Meanwhile, the charity Age UK has warned that the proposals on pensions could hit the disadvantaged the hardest. Bringing forward the increase in the state pension age to 67 will be 'a bitter blow' for those approaching retirement, particularly those who have ill health, care for relatives, or are out of work, the organisation said.
Age UK is calling on the Government to introduce an independent Pensions Advisory Commission, to ensure that decisions on pensions take into account all of the necessary factors, including inequalities in life expectancy, employment opportunities, trends in private provision and prospects for older workers.
However, the organisation welcomed the decision to increase both the basic state pension and pension credit by 5.2%, in line with CPI inflation.
The Autumn Statement: welfare benefits
The Chancellor made a number of announcements relating to welfare benefits in his 2011 Autumn Statement.
From April 2012, the basic state pension will rise by £5.30 to £107.45 a week, representing the largest cash increase to date.
The minimum income guarantee for Pension Credit will also rise by 3.9% in April, reaching £142.70 a week for single pensioners and £217.90 for couples.
Working age benefits will also rise in line with CPI inflation of 5.2%, as will the child element and the disability elements of Child Tax Credits.
However, the planned over-indexation in the child element of Child Tax Credit, of £110 above inflation, has been cancelled, and the couple and lone parent elements of Working Tax Credit will not be uprated.
Meanwhile, plans to increase the state pension age to 67 have been brought forward by eight years, to 2026, saving the Government an estimated £60bn.
Leaked report calls for unfair dismissal rules to be scrapped
The unfair dismissal rules should be scrapped to make it easier for employers to sack unproductive workers, a leaked Government report suggests.
A document obtained by The Daily Telegraph argues that the current unfair dismissal rules make it difficult for bosses to fire underperforming members of staff, enabling some to simply 'coast along'.
Currently workers who feel they were unfairly dismissed can make a claim after 12 months in a job.
However the leaked report, which was written by venture capitalist Adrian Beecroft, calls for the unfair dismissal rules to be abolished completely.
The document, dated 12 October, says the first major issue for British enterprise is 'the terrible impact of the current unfair dismissal rules on the efficiency and hence competitiveness of our businesses, and on the effectiveness and cost of our public services'.
It continues: 'The rules both make it difficult to prove that someone deserves to be dismissed, and demand a process for doing so which is so lengthy and complex that it is hard to implement. This makes it too easy for employees to claim they have been unfairly treated and to gain significant compensation.'
Earlier this month the Government announced changes to the rules on unfair dismissal, which it claims could save British businesses nearly £6 million a year.
Under the changes, which come into force on 1 April 2012, employees will only qualify for the right to claim unfair dismissal after two years of employment, rather than one.
In addition, a fee system will be introduced for those employees who wish to raise a tribunal claim, with a view to reducing the number of 'vexatious' claims. With effect from April 2013, employees must pay a £250 application fee, with a further charge of £1,000 if a hearing is granted. If successful, the money will be refunded to the claimant.
Paper Tax Return deadline looming
Taxpayers only have a few days to file their Tax Return on paper without incurring a penalty.
Individuals have until 31 October 2011 to submit a paper Self Assessment Tax Return, although a later deadline of 31 January 2012 applies to those wishing to complete the process online.
Tax Returns filed after the deadline will attract a £100 fine, even if there is no tax to pay or it is eventually paid on time.
As previously announced, new Self Assessment penalties for late Returns and late payments come into effect this autumn and apply to Returns for 2010/11, and all future financial years.
The new penalties for late Self Assessment Returns are:
- an initial £100 fixed penalty, which will now apply even if there is no tax to pay, or if the tax due is paid on time;
- after 3 months, additional daily penalties of £10 per day, up to a maximum of £900;
- after 6 months, a further penalty of 5% of the tax due or £300, whichever is greater; and
- after 12 months, another 5% or £300 charge, whichever is greater. In serious cases, the penalty after 12 months can be up to 100% of the tax due.
New penalties for paying late are 5% of the tax unpaid at 30 days, at 6 months, and at 12 months. Interest will also be charged on top of these penalties.
Call to boost support for 'forgotten army' of medium-sized firms
The Confederation of British Industry (CBI) has called on the Government to provide more support to the UK's 'forgotten army' of medium-sized businesses.
In a new report, the business group urges ministers to improve firms' access to finance, adding that many medium-sized enterprises are 'under the radar' of policymakers.
The CBI said firms with a turnover between £10m and £100m represented less than 1% of UK businesses but generated 22% of revenues and 16% of all jobs.
'Medium-sized businesses are truly a forgotten army, and now is the time to unlock their potential,' commented CBI director general, John Cridland.
'We should be championing, nurturing and encouraging our mid-sized firms so that more of them grow and create jobs. For too long these companies, which could inject tens of billions of pounds into our economy, have fallen under the radar of policymakers'.
The report also suggests that the UK should replicate the German model of the 'Mittelstand', where specific support is given to medium-sized businesses.
'I want the UK to have its own version of the German 'Mittelstand' - a backbone of medium-sized firms which export, innovate and generate growth,' said Cridland. 'These future champions would help the UK weather unexpected economic shocks, and act as a new engine for growth.'
He continued, 'To achieve extra growth, medium-sized firms must have access to new kinds of finance. This means opening UK bond markets to medium-sized businesses, encouraging use of venture capital, and making it easier for large companies to invest in medium ones, possibly in their supply chains.'
Responding to the report, a Department for Business spokesperson said, 'We welcome the CBI's focus on the UK's mid-sized companies [...] The Government is already focused on this group as part of the growth review, and we will be setting out our proposals alongside the autumn statement in November'.
HMRC closes the 'tax gap'
The difference between the amount of tax that should in theory be collected by HMRC and what actually is collected - known as the 'tax gap' - has fallen by £4 billion.
The amount of tax that went uncollected in 2009-10 was estimated to be £35bn, HMRC has said. That represents 7.9% of all tax, compared with 8.1% the previous year, and is the lowest gap since 2004-05. According to HMRC, this is at "the lower end of the range of countries who publish their tax gaps."
The annual amounts of tax lost to deliberate evasion are relatively small. Of the £14.5bn of direct taxes (income tax, national insurance and capital gains tax) not collected, £1.3bn was attributed to "ghosts", who are people who fail to declare their taxable income, while some £1.8bn was attributed to moonlighters who fail to declare income from a second job.
£5.8bn of lost income tax was due to inaccurate self-assessment returns, but VAT is the tax with the biggest shortfall. An estimated £11.4bn - nearly 14% - of VAT went uncollected in 2009-10. That meant 13.8% of the total amount of VAT due was not collected in 2009-10.
Exchequer Secretary, David Gauke MP said: "Although these numbers show continued progress by HMRC in reducing the tax gap, there is no room for complacency. Just in the last few weeks we have challenged offshore tax evaders, closed tax avoidance loopholes and created a new HMRC unit to ensure that the wealthier members of society pay their way. We will continue to take action to prevent a minority of rule breakers dodging their responsibility to pay the right tax at the right time."
Warning of 'soar' in fake HMRC phishing emails
HM Revenue and Customs has reported a 300% rise in fraudulent 'phishing' emails over the past year, with over 24,000 scam emails reported to HMRC in August alone.
The emails provide a click-through link to a cloned replica of the HMRC website. The recipient is then asked to provide their credit or debit card details, which enable criminals to not only empty victims' bank accounts, but also to sell their personal details on to other organised criminal gangs. Around 100 such websites are being shut down with the help of HMRC every month.
The scam email often begins with a sentence such as "we have reviewed your tax return and our calculations of your last year's accounts a tax refund of XXXX is due."
But in reality HMRC only ever contact customers who are due a tax refund in writing by post, not by email, telephone calls or through external companies, and the department has stated that legitimate tax rebate forms (P800s) will contain a payment order and will never ask for credit or debit card details.
HMRC has issued the following advice:
- Check the advice published at www.hmrc.gov.uk/security/index.htm to see if the email you have received is listed
- Forward suspicious emails to HMRC at phishing@hmrc.gsi.gov.uk and then delete it from your computer/mail account
- Do not click on websites, links contained in suspicious emails or open attachments.
If you have reason to believe that you have been the victim of an email scam, report the matter to your bank/card issuer as soon as possible. If in doubt, you can check with HMRC at http://www.hmrc.gov.uk/security/fraud-attempts.htm
'Urgent action' needed to boost creative industries skills gap
The Confederation of British Industry (CBI) is calling for urgent action to be taken to boost the UK creative industries sector.
A report from the business group suggests that while the sector will be a key driver of economic recovery, it risks being held back by a lack of relevant skills.
The sector will employ an estimated 1.3 million workers by 2013, and the CBI is calling for a number of changes to be implemented in schools and colleges, which include: ensuring that all young people continue to study maths after the age of 16; introducing an automatic opt-in to a triple science GCSE for the most able pupils; the introduction of higher level computer courses; and including a creative or technical subject within the specification of the English Baccalaureate.
Commenting on the report, CBI Director for Education & Skills, Susan Anderson, said, 'First and foremost we must ensure that all young people leave school with a strong grasp of the basics. Solid maths and science ability is particularly vital'.
'As well as getting the basics right at a school level, we want to see greater collaboration between universities and companies so that courses keep up-to-date with the realities and needs of today's creative industries market.'
