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Employers voice support for pension auto-enrolment
More than half of employers have given their backing to Government plans for automatic enrolment into a workplace pension scheme, a new report has revealed.
According to a study by the Department of Work and Pensions (DWP), 56% of employers and 64% of staff support the proposals, which will come into effect from 2012.
The report also found that some seven million Britons are not saving enough for their retirement. However, it is hoped that automatically enrolling eligible workers into a pension scheme will encourage more people to set aside funds for their future.
While 94% of employers contributing at least 3% to a pension scheme said they will maintain or increase levels for existing members, 81% said they plan to offer existing contribution levels or higher to non-members and new employees.
'With only around half of employees saving into a workplace pension, our planned reforms are needed to prevent millions of Britons facing a penny-pinching retirement,' said DWP minister Lord Freud.
'It is encouraging that, despite the recession, the majority of employers are still in favour of pension savings. We will work with business and the industry to make automatic enrolment work, so we can give millions more people the chance to save, and an independent review team is currently looking at how we get the details right'.
Workplace parking scheme comes under fire
Government plans to introduce a workplace parking levy (WPL) have been criticised by the Forum of Private Business (FPB), which claims the charge amounts to a 'stealth tax'.
According to recent reports, the Government is expected to impose a £250 levy on firms with 11 or more parking spaces. The charge, which is payable on each space, could rise to £350 over the next two years.
Nottingham City Council will be the first council to implement the scheme, effective from 2012. Other councils reportedly considering the initiative include Bristol, York, Devon, Hampshire, Leeds, Bournemouth, South Somerset and Wiltshire.
While ministers hope the levy will ease traffic congestion, the FPB has warned that the measure will have a 'disproportionate impact on small businesses'.
'It's the equivalent of charging home owners to park on their own driveways and will increase parking problems in town centres and cities,' said the FPB's spokesman, Chris Gorman.
He added: 'Businesses already contribute enormous amounts to public services through existing taxes such as business rates. Whatever its supposed justifications, the danger is that the WPL could open the floodgates to a raft of new taxes and charges being levied onto companies to pay for things which were previously paid for through general taxation'.
However, Stephen Joseph, the executive director of the Campaign for Better Transport, welcomed the move. 'We support any move on a workplace parking levy, but it needs to be part of a broader strategy with the money linked to alternatives to the car, such as in Nottingham where the money is going into a local tram scheme,' he said.
Details of national insurance 'holiday' unveiled
Details of a new regional national insurance holiday for start-up businesses have been published by HM Revenue and Customs (HMRC).
Under the scheme, new businesses in targeted areas of the UK will not have to pay the first £5,000 of Class 1 employer NICs due in the first year of employment.
First announced by George Osborne in the Emergency Budget, the holiday will apply for each of the first 10 employees hired in the first year of business.
Businesses that have set up since 22 June (the date of the Emergency Budget) will be able to claim for the scheme for 12 months from 6 September 2010 until it ends on 5 September 2013.
However, start-up firms in Greater London, the South East and Eastern region of the UK will not be eligible for the tax break.
The Government said it hopes the move will boost enterprise in those areas most dependent on public sector employment and support the 'transition to a new, sustainable model of economic growth'.
For more information on the national insurance holiday, click here.
Inflation slows but still remains above target rate
Inflation slowed in July but still remains above the Government's 2% target.
The Consumer Prices Index (CPI) edged down from 3.2% to 3.1% over the month. Falling petrol costs and second-hand car prices over the month helped ease CPI overall, but pressure from rising food costs has kept the CPI above 3% throughout 2010. Food prices jumped 0.7% between June and July, the biggest monthly rise for two years.
The Governor of the Bank of England has to pen an open letter to the Chancellor when CPI has been more than one percentage point above or below 2% for three months in a row.
In his letter this month, Mervyn King said rate-setters had been "surprised" at the recent strength of inflation, and warned: "How fast and how far inflation will fall are both difficult to judge, with substantial risks in both directions."
The headline rate of Retail Prices Index inflation also fell to 4.8% in July from 5% in June, the Office for National Statistics (ONS) said.
Minimum wage changes to 'cost employers £50m'
Plans to include 21-year-olds in the adult rate of the National Minimum Wage (NMW) will cost employers almost £50 million, according to Government estimations.
Currently only those aged 22 and over are entitled to the main adult rate of the NMW, although this age restriction is set to fall to 21 from 1 October 2010.
In its impact assessment of the changes, the Department for Business predicts that the cost to companies, charities or voluntary bodies of moving 21-year-olds to the adult rate will be around £48.2 million.
From 1 October 2010 the adult rate will rise from £5.80 to £5.93 per hour, while the rate for those aged between 18 and 20 will climb from £4.83 to £4.92. 16 and 17-year-olds will be entitled to a minimum hourly rate of £3.64 from this date.
In addition, apprentices will become entitled to a minimum wage rate for the first time in October, following the Government's acceptance of recommendations from the Low Pay Commission.
The new wage will apply to apprentices who are under the age of 19, or those aged 19 and over who are in the first year of their apprenticeship.
Firms urged to register for energy scheme as deadline approaches
Businesses are being urged to register for a new energy saving scheme to help them save money on their bills.
Eligible firms must register for the Carbon Reduction Commitment (CRC) initiative by 30 September or risk an immediate £5,000 fine, and £500 for each day after that. Some experts have warned that fines could reach a maximum of £45,000.
Yet recent reports have suggested that two thirds of the estimated 3,500 to 4,000 eligible organisations have not yet registered for the scheme.
From April, firms will need to buy permits for each tonne of carbon dioxide emitted. Those organisations which do the most to boost their energy efficiency could receive a 10% bonus, while those that do the least may incur a 10% penalty.
Commenting, the Energy and climate change minister, Greg Barker, said: 'The CRC will encourage significant savings through greater energy efficiency and importantly will make carbon a boardroom issue for many large organisations. My message to businesses today is to register now.'
He added: 'I understand the original complexity of the scheme may have deterred some organisations and I want to hear suggestions as to how we can make the scheme simpler in the future'.
Business welcomes 'one-in, one-out' approach to regulation
Plans to introduce a 'one-in, one-out' regulatory system to help tackle the 'red tape burden' are being welcomed by some of the UK's leading business groups.
From 1 September when Ministers seek to introduce new regulations which impose costs on business or the third sector, they will have to identify current regulations with an equivalent value that can be removed.
The measures are aimed at transforming the relationship between people and Government by changing how regulations are drawn up, introduced and implemented.
Announcing the changes, the Business Secretary Vince Cable, said: 'By ensuring regulation becomes a last resort, we will create an environment that frees business from the burden of red tape, helping to create the right conditions for recovery and growth in the UK economy'.
The Forum of Private Business (FPB), which had previously campaigned for a reduction in the volume of red tape imposed on small firms, has applauded the move.
'It is good to see the Government pushing ahead with its commitment to improving the regulatory landscape,' said the Forum's Head of Campaigns, Jane Bennett. 'The concept of introducing regulations only as they are needed is absolutely necessary given the existing burden on small businesses, but it will require a change in behaviour for many government departments.'
The British Chambers of Commerce (BCC) has also voiced its support for the changes, although added that the new system must 'show tangible results - so that businesses can see the results as soon as possible'.
EU Directive to give self-employed workers new benefits
Self-employed workers and their partners are to receive the right to maternity leave and pension benefits following the introduction of a new European Directive earlier this month.
The Directive grants self-employed women, assisting spouses and life partners of self-employed workers a maternity allowance and a leave period of at least 14 weeks, should they choose to take it.
Assistant spouses and life partners will also have the right to social security coverage such as pensions on an equal basis as formal self-employed workers, if the member state offers such protection.
It is hoped the Directive, which came into force on 5 August 2010, will boost female entrepreneurship throughout the EU.
Commenting, Viviane Reding, EU Commissioner for Justice, said: 'With the entry into force of this new law, Europe takes an important step forward in terms of increasing social protection and providing equal economic and social rights for self-employed men and women, and their partners'.
Member states will have to introduce the new entitlement into their national legislation within the next two years.
Supermarket adjudicator to investigate disputes
A new adjudicator is to be set up to resolve disputes between farmers, suppliers and supermarkets, the Government has announced.
It follows an investigation by the Competition Commission, which suggested that small suppliers were being treated unfairly by large supermarket chains.
The Groceries Code Adjudicator (GCA) will sit within the Office of Fair Trading, although it will remain independent.
It will enforce the Groceries Supply Code of Practice (GSCOP) and investigate complaints from UK and overseas suppliers, who will be able to remain anonymous.
The Government hopes that the new body will be established within the next 18 months to two years.
Consumer Minister Edward Davey said: 'We want to make sure that large retailers can't abuse their power by transferring excessive risks or unexpected costs onto their suppliers.'
He added: 'These sorts of pressures are bad for producers and bad for consumers - ultimately they can lead to lower quality goods, less choice and less innovation. The adjudicator will be able to step in to prevent unfair practices continuing - ensuring a fair deal for producers and safeguarding the consumer interest.'
However, the British Retail Consortium (BRC) has criticised the move, arguing that the new adjudicator is an unnecessary 'quango'.
'An adjudicator will just add unnecessary costs,' said BRC Director General, Stephen Robertson. 'With an independent budget and no direct reporting line to the OFT or Government, this is a quango. Quango's cost. This will reduce the efficiency of the supply chain and customers will pay the price.'
Default retirement age to be scrapped by October 2011
The default retirement age (DRA) will be abolished from 1 October 2011, the Government has announced.
It follows confirmation in the Emergency Budget that the Coalition would speed up the withdrawal of the DRA.
The proposals, which are now the subject of a consultation, allow for a six month transition from the existing regulations. It means that the changes could begin to take effect from next April.
Currently, an employer can force a member of staff to retire at the default age of 65, irrespective of their circumstances. Although staff can request to work beyond the DRA, it is entirely at the company's discretion.
Rachel Krys, Campaign Director at the Employers Forum on Age, described the move as 'an incredible leap forward,' adding that employers have 'nothing to fear' from the proposals.
However, the Confederation of British Industry (CBI) has expressed concerns over the speed of the changes.
'Scrapping the DRA will leave a vacuum, and raise a large number of complex legal and employment questions, which the Government has not yet addressed,' said John Cridland, the CBI's Deputy Director-General.
'This will create uncertainty among employers and staff, who do not know where they stand. For employers, these proposals could make workforce planning and providing some employment benefits, such as critical illness cover, next to impossible.'
In a recent poll carried out by the Federation of Small Businesses (FSB), 80% of respondents said they do not use the default retirement age, while 90% of small firms would consider an employee going into part time or flexible working, rather than retiring.
Government to scale back tax breaks for furnished holiday lettings
Some 65,000 second home owners could lose out under Government plans to reduce the tax benefits available for furnished holiday lettings (FHLs).
In a new Consultation document the Government proposes increasing the minimum period for which a property is available to let to the public from 140 to 210 days each year, and increasing the days when it is actually let to the public from 70 days to 105 days.
It also suggests restricting the use of loss relief from FHLs so it can only be set against certain income from the same business.
The aim is to bring the rules in line with EU law and put the focus on commercial businesses rather than those run for personal use.
In the Emergency Budget in June, the Chancellor confirmed that the previous Government's plans to withdraw the FHL rules from 6 April 2010 would not take effect.
Under the existing rules, FHLs that meet certain qualifying conditions are treated as a trade for certain purposes, which enables them to benefit from more generous loss relief than other types of lettings.
Landlords may also be able to claim capital allowances on furnishings, furniture and fixtures and enjoy capital gains tax reliefs (such as rollover relief and Entrepreneurs' Relief) that are available to traders.
The Consultation will run until 22 October 2010. The Government will then publish its response by the end of the year and intends to implement the changes in the 2011 Budget.
FSB calls for overhaul of maternity leave
A leading business group is calling on the Government to reform statutory maternity and paternity leave to make it easier for small firms to administer the 'complex' employment entitlement.
The Federation of Small Businesses (FSB) has argued that, while small enterprises are the most flexible employers, many often find it difficult to deal with the implementation of maternity and paternity leave.
Unlike large companies, small businesses do not have HR departments that can manage such issues, the FSB said.
Currently, women are allowed to take 52 weeks leave, 39 weeks of these are paid on statutory maternity pay, and men can take two weeks paid paternity leave.
In a new report, entitled 'Flexible Working: small business solutions', the lobby group suggests introducing a 'flexible leave' system to allow parents to choose their leave arrangements. It claims that this would give employers more certainty over an employee's expected return date.
In addition, the organisation is proposing that a national definition of flexible working should be set out to provide clarity to small businesses and employers. Other recommendations include promoting all new posts in the public sector as flexible and part-time and creating a childcare bond to enable businesses to provide sustainable childcare for families.
John Walker, the FSB's national chairman, said: 'Laws surrounding maternity and paternity leave are complex and confusing to administer and can act as a barrier to small firms taking on new staff simply because they do not understand the burdensome system.
'Family leave should be tailored to suit each individual – a one size fits all approach fails to adapt to those needs,' he added. 'Parents should be able to choose not only how long they take leave but how and when they receive the pay they are entitled to. In doing so small firms will have more clarity on when that invaluable and skilled member of staff will return to work.'
Government seeks industry-led solutions for business finance
The Government has launched a Green Paper on access to business finance, which seeks opinions from businesses on the different ways of accessing funding in order to allow them to invest and create new employment opportunities.
The consultation sets out the range of finance options for businesses, and examines gaps in the market and whether existing schemes should be improved or extended.
Acknowledging that small and medium-sized businesses in particular face barriers when accessing finance, Business Secretary Vince Cable said, 'I've heard the problems businesses are facing in getting bank loans up and down the country. They need innovative ways to access finance from other sources to grow our firms and economy'.
George Osborne, Chancellor of the Exchequer, commented, 'As the economy recovers, it is crucial to ensure that the supply of finance supports rather than constrains demand and business confidence'.
'If businesses are to play their part in promoting economic recovery it is important that they are able to access a diverse range of finance choices in a stable macroeconomic environment.'
The closing date for responses is 20 September. Further details can be seen here: www.bis.gov.uk/businessfinance.
Warning over outdated company accounts
As many small companies prepare to submit their accounts, some experts are urging businesses to release up-to-date figures to reflect any recent improvement in their trading performance.
Those companies with 31 December year ends are required to file their accounts with Companies House by September, yet the impact of the recession could mean that many companies' accounts will show losses or a decline in profits.
With such a drop likely to have an adverse effect on a firm's credit rating, industry experts are advising businesses to publish more up-to-date financial information if they have seen a subsequent improvement.
Fabrice Desnos, chief executive at insurance company Euler Hermes UK, said: 'If they feel the information they are publishing in Companies House will reflect negatively on them and they have a better story to tell I can only encourage them to contact credit insurers.
'Every piece of information you publish is important. If you think it's going to be detrimental you need a strategy to proactively explain that it's better than it looks in your numbers.'
We can help prepare your accounts - please contact us for more information.
FSB calls for overhaul of local regulation
A Government review of the Local Better Regulation Office (LBRO) is being welcomed by the Federation of Small Businesses (FSB), although the lobby group has warned against scrapping the body completely.
While the FSB has applauded the Coalition Government's efforts to cut regulation for small firms, it claims that the LBRO is in urgent need of reform if levels of red tape are to be reduced.
Under its proposals, the FSB recommends giving the LBRO power to cover all areas of local authority regulation, as well as the power to guarantee that all small firms are proactively directed to a single point of contact within their local authority for all regulatory matters.
Other suggestions include: allowing the organisation to enforce a regime of compulsory booked inspections; ceasing routine inspections during times of national emergency areas, where possible; and undertaking an annual Regulatory Rating Review of local Government regulatory services.
John Walker, FSB National Chairman, said: 'Creating a robust relationship between small firms and regulatory services locally should be a high priority for the Coalition Government if they are to truly deliver on their pledge to cut red tape.'
He continued: 'LBRO should be a key body that represents the needs and views of small businesses on red tape to local authorities to drive best practice. Yet it has never been given the true powers it needs to fulfil its role.
'The FSB is urging the Government not to bin the LBRO, but to revamp the body. We look forward to working with the Government in this review.'
Government launches new Office for Tax Simplification
The Government is launching its new Office for Tax Simplification, with the aim of streamlining the UK tax system and attracting more international investment.
The Government confirmed its intention to create the organisation in its Emergency Budget.
The body has been set up to analyse tax reliefs, allowances and exemptions, and to conduct a review of business taxation with a view to reducing complexity.
The organisation will be run by former Treasury minister Michael Jack and the Chartered Institute of Taxation's director of tax, John Whiting.
The Institute of Directors (IoD) has welcomed the move to combat what it described as 'one of the most complex tax codes in the world', but warned that the venture will only succeed 'if it has teeth'.
The business group is arguing that the Office should be genuinely independent, that it should report publicly on its plans, and that ministers should be required to respond in detail to each of its proposals.
Richard Baron, Head of Taxation at the IoD, said, 'The important thing now is to make sure that the Office achieves some early successes, and that it goes on achieving. Its recommendations must not end up stamped 'too difficult' or 'maybe in the longer term'.
FSB calls for UK-wide NI holiday
A small business group is calling on the Government to extend the regional National Insurance (NI) holiday to firms in the South East of England, following the findings of a new report.
According to a recent study by the Federation of Small Businesses (FSB), 64% of firms in the South East are likely to be working below capacity.
With the region currently excluded from the recently announced NI holiday, the FSB has warned that entrepreneurs in the area may be dissuaded from starting up and that existing small businesses may not have the support they require to expand.
'With small firms in the South East most likely to be working below capacity, this shows how wrong the Government is to not include this vital region, as well as the East and London, in its proposals for a National Insurance holiday for start-up businesses,' said John Walker, FSB National Chairman.
'While we support the policy we believe that it should be extended to be UK-wide and be available for existing businesses too. With 600,000 public sector jobs expected to be lost, stimulating private sector job creation, especially in small firms, will be vital to rebalancing the economy.'
The regional NI holiday was announced by the Chancellor, George Osborne, in the Emergency Budget last month. Under the proposals, employers eligible for the scheme will not have to pay the first £5,000 of Class 1 employer NICs due in the first 12 months of employment.
This will apply for each of the first 10 employees hired in the first year of business. Subject to meeting the necessary legal requirements, the scheme is intended to start no later than September 2010.
The targeted countries and regions will be: Scotland, Wales, Northern Ireland, the North East, Yorkshire and the Humber, the North West, the East Midlands, the West Midlands and the South West.
Government to scrap compulsory annuities
Plans to abolish the compulsory deadline which requires retirees to purchase an annuity at age 75 have been unveiled by the Government.
The Coalition hopes that the new rules, which will come into effect in April 2011, will simplify the annuitisation process.
Under the new model, an individual will be able to draw down unlimited amounts from their pension pot if they satisfy a minimum income requirement, which has yet to be confirmed.
Currently those with a personal or company money purchase pension must buy an annuity once they reach age 75.
In his Emergency Budget in June, Chancellor George Osborne announced his intention to increase this age to 77, although this deadline now looks set to be scrapped.
'To encourage people to take greater responsibility for their financial future, including in retirement, we need to give people greater flexibility over how they use the savings they have accumulated,' said Mark Hoban, financial secretary to the Treasury.
'This consultation puts forward reforms that will replace outdated and overly complex pensions tax rules with a new system that gives individuals greater freedom and choice.'
However, General Secretary of the Trades Union Congress, Brendan Barber, has expressed concerns over the reforms. 'There is a lot wrong with money purchase pensions and our annuities system, but changes to the age limit without a more fundamental look at the whole issue is not the way to proceed,' he said.
He continued: 'The millions of pensioners who have lost out from switching indexation from RPI to CPI and the increase in VAT will wonder about the Government's priorities.'
We can help you plan for a comfortable retirement – please contact us for advice.
Pensioners 'using equity release' to pay off their debts
An increasing number of pensioners in the UK are using the equity from their homes to pay off their debts or to improve their quality of life during difficult economic times, new research has warned.
Following a study conducted by the University of Birmingham, the charity Age UK has reported that three quarters of equity release customers are tapping into the value of their property in order to raise money to help clear their debts, and to boost their standard of living in retirement.
Meanwhile, a quarter of those surveyed have used the equity from their home to make early bequests to their family or to make large one-off purchases.
Commenting on the findings, Michelle Mitchell of Age UK said, 'The ageing of our society is a triumph of modern life, yet brings with it some real challenges. Equity release is clearly a useful tool to ease financial pressures in later life, but anyone considering it as an option should first seek good quality information and advice'.
We can help you to plan ahead for a comfortable retirement - please contact us for advice and assistance.
Proposals to 'cut excessive mortgage lending'
The Financial Services Authority (FSA) has called for the introduction of tough new measures aimed at cutting levels of mortgage lending to individuals who cannot afford to make the repayments.
Following a five-year review of the mortgage market in which it analysed the causes of arrears and repossessions, the financial watchdog has revealed that nearly half of households are left with no money remaining, or a financial shortfall, after paying their mortgage bill and allowing for monthly living costs.
Together with the introduction of new 'affordability tests' for all mortgages, the FSA is calling for individuals to be required to verify their income, following the discovery that around half of mortgage customers have not been asked to provide proof of their level of income when taking out a mortgage, over the course of the last three years.
Meanwhile, the share of interest-only mortgages is also the rise, despite the fact that many individuals have no definitive plan for repaying the capital loan in the future.
Lesley Titcomb of the FSA said, 'There is a clear link between financial overstretch and mortgage arrears and repossessions, and we are determined to protect vulnerable consumers by making sure that everyone who takes on a mortgage can afford it'.
The FSA is seeking responses to its proposals by 16 November. The proposals can be viewed in more detail on the FSA website: www.fsa.gov.uk.
VAT rise one step closer as Coalition wins Commons vote
Efforts to block the proposed increase in VAT have been quashed after the Coalition Government secured a majority in a House of Commons debate.
There had been calls for the Finance Bill, which enacts the measures outlined in the Chancellor's June Budget, to be amended in order to prevent VAT rising to 20% next year.
However, the amendment was defeated by a majority of 295, while a separate vote saw MPs approve the 2.5% VAT rise by 321 to 246, a Government majority of 75.
The Chancellor, George Osborne, hopes the increase will net the Treasury an estimated £13 billion and go some way to reducing the UK deficit.
Treasury minister David Gauke said VAT was 'one of the few levers available' to the Government to address the shortfall in the public finances. 'We had to raise VAT because there was no money left,' he added.
But opponents have argued that the move will hit many of Britain's most vulnerable groups hard, with the shadow chief secretary to the Treasury, Liam Byrne, warning that pensioners could face 'an £8bn VAT bill over the course of this Parliament'.
In his austerity Budget last month, Osborne announced that the standard rate of VAT will rise from its current rate of 17.5% to 20% with effect from 4 January 2011.
Business welcomes Government efforts to 'cut red tape'
Business leaders have welcomed the launch of a new Government website aimed at cutting 'pointless regulation and unnecessary bureaucracy'.
The 'Your Freedom' project is inviting UK citizens to suggest ideas on how the Government can cut excessive red tape, restore liberties and ease the regulatory burden on businesses.
Billed as a 'call to arms against pointless regulation', visitors to the site will be asked to consider three questions:
- Which current laws would you like to remove or change because they restrict your civil liberties?
- Which regulations do you think should be removed or changed to make running your business or organisation as simple as possible?
- Which offences do you think we should remove or change and why?
The Federation of Small Businesses (FSB), which has been lobbying for a reduction in the volume of red tape encountered by small and medium-sized enterprises, has applauded the initiative.
Mike Cherry, FSB Policy Chairman, said: 'Giving the public and business owners the chance to shape the regulation and legislation which directly affects them is a welcome move by the Government.
'We have seen similar initiatives from previous administrations and we hope that the Government puts the needs of the 4.8 million small businesses in the UK first.'
In an FSB survey carried out last year, 33% of respondents said that regulation was the biggest barrier to growth.
The Your Freedom website can be viewed at: yourfreedom.hmg.gov.uk
Government urged to get tough on bank lending
The Coalition Government is being urged to revive a small business lending forum in a bid to boost the supply of credit to UK firms.
The Small Business Finance Forum was set up by the previous Labour Government and was designed to monitor high street banks' lending to small and medium-sized enterprises (SMEs) at the height of the recession.
However, the forum has not met since before the General Election, prompting calls for the Business Secretary Vince Cable to reintroduce the initiative.
It follows concerns over the amount that banks are currently lending to SMEs under the Enterprise Finance Guarantee (EFG) scheme.
According to reports, lending under the EFG has fallen by 23%, with high street banks handing out £365 million from September to March this year. The total number of individual loans also fell by 18% to 3,583 during this period.
The EFG was extended by £200 million to £700 million in the Emergency Budget, but some business groups have suggested that the cost of the scheme needs to be cut to encourage more firms to apply.
The Federation of Small Businesses (FSB), which was a regular attendee at the Small Business Finance Forum, is among the bodies calling for more action on bank lending.
An FSB spokesman said: 'We want the forum to carry on. The banks were there, and they were open to criticism and liked the praise when we thought things were working. It needs to carry on for the Enterprise Finance Guarantee to prosper.'
He added: 'The EFG is expensive with too many conditions and the marketing of it between September and March was poor. The ebb and flow of it depends on ministers having their eye on the banks.'
Consumers to 'save millions' as ISA transfer times cut
Providers of Individual Savings Accounts (ISAs) have agreed to speed up the process for switching accounts following a new report by the Office of Fair Trading (OFT).
The OFT has agreed with the banking industry to reduce the time it takes to transfer an account to 15 days by the end of the year, with the long term aim of lowering this to just a 'handful' of days.
It currently takes an average of 26 days for customers to move their cash to an alternative provider.
The protracted process also means that account holders often miss out on interest that they would have accrued during this period.
Consumer Focus, the body which brought the supercomplaint to the OFT, estimates that lowering the transfer time will gain customers up to £14.5 million a year in interest.
Mike O'Connor, Chief Executive at Consumer Focus, welcomed the move. 'We live in the age of keyboards, not quills. ISA transfers should take days not weeks, certainly not over a month,' he said. 'For competition to work for consumers, they need to be able to switch simply, quickly and with the right information.'
His thoughts were echoed by the watchdog's senior director of services, Clive Maxwell: 'The voluntary changes announced will give consumers a fairer deal. This will give consumers much better tools to shop around.'
It is thought that around two million people switch their tax-free ISA accounts every year.
Budget pension plans come under scrutiny
The 2010 Emergency Budget revealed a number of measures that will affect the pension system.
Chancellor George Osborne has announced plans for a swift review of the system, with a view to accelerating an initial rise in the state pension age for men to 66, which could come into force as early as 2016.
In addition, a consultation will be launched on phasing out the default retirement age. Currently an employer can refuse to employ or to continue to employ an individual once they reach the age of 65, although the employer is required by law to consider any request by an employee to stay on beyond this age.
Meanwhile, from April 2011 the Government will increase the state pension either by the increase in average earnings, or in line with prices or 2.5%, if either of these options is higher.
The Government is also removing the requirement to buy an annuity by age 75, from 2011/12. In the meantime the age by which an annuity must be bought has been raised to 77 for individuals who had not reached 75 before 22 June 2010.
Labour leader Harriet Harman has criticised the Government's stance on pensions, arguing that no funds have been put aside to pay for the decision to re-link the state pension to earnings, and that next year prices will rise faster than earnings, leaving pensioners worse off.
Meanwhile, the TUC welcomed plans to scrap the default retirement age, but warned that raising the state pension age will hit lower earners hard.
A range of consumer groups has also written to the Department for Work and Pensions, warning that implementing too broad a review of the 2012 pension proposals could threaten the consensus for a new system based on auto-enrolment.
Public sector 'should learn from recession' as spending cuts loom
The Confederation of British Industry (CBI) has called on the public sector to use the lessons learned from the private sector's experience of the recession, as Government departments prepare for the unprecedented spending cuts announced in the Emergency Budget.
Speaking ahead of the CBI's Business Summit on workforce issues, the organisation advised that flexible working and employee engagement played an essential role in minimising redundancies among the private sector during the recession.
Richard Lambert, CBI Director-General, said, 'The employment relations landscape has changed dramatically because of the recession. When industrial unrest might have been considered inevitable, instead we saw private sector employers and staff working together to find ways to cut costs and safeguard jobs'.
Mr Lambert said that good communication and cooperation between public sector employees and unions should help to avoid the potential for industrial action.
A recent survey conducted by the CBI revealed that 91% of employers communicated with their staff regarding the impact of the recession, and that as a result 87% of businesses believe that staff understood the need to make change to their working patterns, while 56% showed a 'flexible attitude' to change.
Osborne declares Britain 'open for business'
Billed as a 'tough but fair' Budget, Chancellor George Osborne has announced his plans to tackle the UK's record deficit while sustaining the economy, in the Emergency Budget.
Setting out the Government's target of bringing the current structural deficit into balance by 2016, the Chancellor said that it was on course to meet this goal a year early. However, the newly created Office for Budget Responsibility has revised down its forecasts for economic growth in the short term, cutting them from 1.3% to 1.2% for 2010, and from 2.6% to 2.3% in 2011. Public sector net borrowing is expected to be £149bn this year, falling to £60bn in 2013/14.
In order the meet the fiscal mandate, the Chancellor announced a combination of tax rises and spending cuts. A rise in VAT was a hallmark of the Chancellor's so-called 'unavoidable Budget', and following much prior speculation it was confirmed that VAT will rise from 17.5% to 20% with effect from 4 January 2011. Capital gains tax will also rise from 18% to 28% for higher rate taxpayers, from midnight.
Declaring Britain to be 'open for business', the Chancellor outlined plans to reform the corporation tax regime, with the main rate being reduced from 28% to 27% on 1 April, followed by reductions of 1% a year thereafter until it reaches 24% in 2014. The rate for small companies will also be reduced from 21% to 20%.
Meanwhile, the threshold for employer national insurance contributions will be increased by £21 a week above indexation. New businesses outside London, the East and the South East of England will enjoy a national insurance 'holiday' of up to £5,000 for the first 10 employees.
Wide-ranging changes to the welfare system will also result in savings to the tune of £11bn by 2014/15, with cuts in Child Tax Credit for households with income of over £40,000 a year coming into force next year, together with new limits on housing benefit. Child Benefit will be frozen at its current rate for the next three years.
In a bid to protect lower earners from the financial crunch, the basic personal income tax allowance will be raised from £6,475 to £7,475 from April 2011. Pensioners will see the restoration of the earnings link from next April. The banking industry, meanwhile, will share in the squeeze by means of a bank levy, which from January 2011 will generate an estimated £2bn of revenue each year.
Emergency Budget 2010: the political reaction
Following the Chancellor's Emergency Budget speech, the opposition has voiced its opinions on the measures announced.
Responding to the programme of spending cuts and tax rises announced by George Osborne, Labour leader Harriet Harman described the changes as 'reckless', labelling the forthcoming rise in VAT to 20% as 'unfair' and warning that thousands of people would face unemployment as a result of the Chancellor's tough Budget measures.
Arguing that the Budget was driven by ideology rather than economics, she commented, 'It is the Chancellor's first Budget but we have seen it all before. It is the same old Tories, hitting hardest at those who can least afford it and breaking their promises'.
The Labour leader also criticised the Liberal Democrats for agreeing to the Budget measures.
'The Lib Dems denounced early cuts, now they are backing them; they denounced VAT increases now they are voting for them. How could they support everything they fought against?' she commented.
Emergency Budget 2010: the business reaction
Business leaders have given their initial reactions to the Emergency Budget announcements, following Chancellor George Osborne's speech to the House of Commons.
Richard Lambert, Director General of the Confederation of British Industry (CBI) said that the Chancellor had 'achieved his twin objectives of setting out a credible plan for the public finances and producing a convincing growth strategy for the longer term'.
'There was clear recognition in the Budget of the role that business needs to play in getting the economy back into shape, and generating the jobs and wealth needed to sustain economic recovery', he added.
The Federation of Small Businesses (FSB) also welcomed many of the Chancellor's announcements, but expressed disappointment that the rise in employer national insurance contributions was not completely reversed.
John Walker, FSB National Chairman, said, 'We welcome moves to give a national insurance holiday to start-up firms, but are concerned that with 70% of firms operating below capacity, those businesses already trading will not be helped'.
The British Chambers of Commerce (BCC) agreed that the moves to cut the deficit will have 'positive effects' on business and investor confidence, and welcomed the Chancellor's message that Britain is 'open for business'.
David Kern, BCC Chief Economist, said, 'Today's Budget could be a defining moment in Britain's economic history', although he warned that the latest economic growth forecasts from the new Office for Budget Responsibility were still overly optimistic.
Meanwhile, the TUC described the Budget as 'dangerous and devisive', and expressed concerns that the spending and benefit cuts, combined with the increase in VAT, will slow the recovery, and could even stop it in its tracks.
Brendan Barber, TUC General Secretary, said, 'This Budget was economically dangerous and socially divisive. The one thing we can now say is that we are very definitely not all in this together'.
The Emergency Budget 2010: what the changes mean for you
Sweeping changes to taxation and the welfare system announced by Chancellor George Osborne in the Emergency Budget mean that the majority of taxpayers will be affected.
Taxation: some key changes
An increase in VAT on goods and services comes into effect on 4 January 2011, and will see the main rate rising from 17.5% to 20%. The move is expected to raise more than £13bn a year by the end of this Parliament. Zero-rated items, such as food and young children's clothing and footwear, will continue to remain exempt from VAT.
Meanwhile, higher rate taxpayers will be hit by a rise in capital gains tax (CGT), which increases from 18% to 28% with effect from midnight. The Treasury is expected to gain an additional £1bn as a result of the changes.
There are some concessions for those with lower incomes, with CGT remaining static at 18% for low and middle-income earners. The 10% rate for entrepreneurs will be extended to the first £5m of qualifying gains. The income tax personal allowance will also rise by £1,000 to reach £7,745 in April. This will remove 880,000 people from the need to pay income tax at all, while an estimated 23 million taxpayers will benefit by up to £170 a year.
However, higher rate taxpayers will be excluded from reaping the benefits of the changes by means of a reduction in the higher rate income tax threshold.
Employers will see an increase in the threshold at which they start to pay national insurance contributions, which will rise by £21 a week above indexation. Corporation tax will also be reduced to 27% from next year, followed by a further series of 1% cuts taking place each year until it reaches 24%. The small companies rate will also be cut from 21% to 20%.
The Government did not announce any additional increases in duties on alcohol, tobacco or fuel, while the previous Labour Government's plans to increase cider duty by 10% will be scrapped from the end of this month.
Changes to the welfare system
Meanwhile, many recipients of state benefits are set to feel the pinch. Benefits, tax credits and public service pensions will in future be uprated in line with the consumer prices index of inflation (CPI), rather than the retail prices index.
Next year will also see a cut in Child Tax Credits for households earning more than £40,000 a year. However, for people earning lower incomes the child element of the Child Tax Credit will rise by £150 above inflation.
Child benefit will be frozen at its current level for the next three years, and new maximum limits will be introduced for housing benefit. In addition, the Health in Pregnancy grant will be abolished from April 2011, and the Sure Start maternity grant will be restricted to the first child.
CBI calls for 'bold and ambitious Budget'
The Confederation of British Industry (CBI) has called on the Chancellor George Osborne to deliver a 'bold and ambitious Budget' which concentrates on reducing Britain's record deficit.
In a letter to the Chancellor ahead of the emergency Budget on 22 June, the CBI argues that the public finances should be repaired without damaging prospects for growth. It states that there should be £4 in spending cuts for every £1 in tax increases and that the public sector should bear the brunt of the cuts.
'Tax may sound an easy way out but it is actually very damaging,' commented CBI chief economic advisor Ian McCafferty. 'Deficit reduction through adjustments to spending is less damaging in the medium term than an equivalent increase in the tax burden.'
The business lobby group also urged the Chancellor to scrap the 50p top rate of income tax as soon as possible, claiming that it had 'damaged the UK's reputation as a business location'.
In addition, the CBI wants to see the coalition reverse the previous Government's plans to restrict tax relief on pensions, which are scheduled to take effect in April 2011. It warns that the changes will 'act as a deterrent to mobile talent as well as a significant disincentive to long-term saving.'
However, it welcomed the Government's ambition to reform the corporation tax system and proposals for continuing with a loan guarantee scheme.
The submission has attracted criticism from the Trades Union Congress (TUC), which accused the CBI of 'social pleading.' Brendan Barber, the TUC General Secretary, said: 'Not only do they want the deficit closed quickly, but they're saying that business should play no part in this. It beggars belief that they are calling for spending cuts when many businesses stand to suffer from cuts in public procurement. There will be many smaller businesses who will not want to pay for tax cuts for the super-rich.'
New fiscal watchdog downgrades growth forecasts
The new Office for Budget Responsibility (OBR) has cut the previous Labour Government's economic growth forecasts after it found that they were 'too optimistic'.
In its inaugural statement, the fiscal watchdog downgraded the UK's 2011 growth estimates to 2.6%. The former Chancellor Alistair Darling had predicted that the economy would grow by 3.25% next year.
The OBR's estimates will form the basis for the Chancellor George Osborne's emergency Budget on 22 June and could pave the way for substantial spending cuts and tax rises.
Last week Prime Minister David Cameron said that the OBR's figures would 'show the scale of the problem we are in today' and warned that 'painful' spending cuts would affect everyone over the coming years.
The OBR, which was set up shortly after the coalition Government came to power, will make an independent assessment of the public finances and the economy for each Budget and Pre-Budget Report.
George Osborne said its creation would 'remove the temptation to fiddle the forecasts', adding that it would create 'a rod for my back down the line and for future Chancellors'.
Chaired by former Treasury official Sir Alan Budd, the OBR will present an updated forecast alongside next week's Budget, which will take into account the policies announced.
Bank payments system comes under fire
The Faster Payments system has been criticised for failing to make banking transactions simpler and more efficient for consumers.
The system was introduced two years ago, but many consumers still have to wait three or four days for their money to clear, according to consumer group Which?
As many as a quarter of credit card companies are not able to receive faster payments, and while a majority of telephone and internet transfers clear on the same day, the amounts allowed vary significantly, ranging from £250 to £10,000 with different institutions.
Phil Jones from Which? commented, 'It's unacceptable that, two years on from the introduction of faster payments, many customers are still having to wait three to four working days for money to clear'.
'The limits set are confusing and customers can be caught out with default fees which could affect their credit rating if the money does not clear in time', he added.
VAT hike could have an 'adverse impact on the economy'
Raising VAT to 20% would have a 'deep and long-lasting' impact on the economy, the British Retail Consortium (BRC) has warned.
With speculation rife that a VAT rise could be in the pipeline, the BRC has published independent analysis on the possible effects. It warns that such an increase would cost 163,000 jobs over four years and reduce consumer spending by around £3.6 billion over the same period.
While a VAT rise would reduce Britain's deficit by some £11.3bn in the first year, the retail body claims that it would also lead to lower demand on the high street as prices rise and retailers' margins are hit.
Ultimately this could result in companies making job cuts or freezing recruitment, the BRC stated. It predicts that higher VAT could lead to 30,000 fewer jobs during the first year, before climbing to 163,000 within four years of a rise.
The organisation is now calling on the new coalition Government to prioritise spending cuts over tax rises, although it conceded that there was no 'silver bullet' that would reduce the deficit without having a significant impact on the economy.
BRC Director General Stephen Robertson said: 'For the first time we have clear, independent evidence showing VAT and NI increases will have a deep and long-lasting impact on jobs and growth.
'The budget deficit is serious. It has to be tackled but proposals must be judged against the implications for jobs and growth.'
He added: 'Business growth will get the country out of the hole it's in, led by retail. The Government must now deliver a route to stability that supports companies and customers by avoiding damaging tax rises.'
However, a Government spokesperson said: 'The Chancellor's position has not changed. There are no plans to raise VAT.'
Government 'listening to concerns' over capital gains tax
The new Government has pledged to 'listen to concerns' over its plans to increase capital gains tax (CGT), as the emergency Budget looms closer.
Iain Duncan Smith, Work and Pensions Secretary, stated the plans will include 'major exemptions', amid criticism that they could have a detrimental impact on entrepreneurs and families.
The Government intends to significantly increase CGT for non-business assets, such as profits from the sale of second homes, to bring them in line with income tax rates. Such a move could see rates rising from their current figure of 18%, to 40% or 50%.
However, Mr Duncan Smith said that the rates have not yet been finalised and that the Government is listening to concerns.
Meanwhile, Prime Minister David Cameron has pledged that the next decade will be 'the most entrepreneurial and dynamic in our history'.
Mr Cameron cited cutting red tape as one of the Government's top priorities, together with improving trade and transport links and increasing bank lending to businesses.
Chancellor George Osborne will set out the Government's plans in more detail in the emergency Budget on 22 June.
Employers urged to avoid 'own goal' during World Cup
The TUC is calling on UK employers to demonstrate flexibility during the forthcoming World Cup tournament, by allowing their staff to take time off to watch the televised football matches.
The union believes that offering flexible working hours to employees to enable them to watch the games will be preferable to taking disciplinary action against staff who take unofficial sick leave.
It argues that by accommodating employees' requests, employers could help to boost morale and reduce absenteeism.
Brendan Barber, TUC General Secretary, said, 'Rather than impose a blanket ban on football, and run the risk of demotivating staff and losing hours through unauthorised sick days, we would encourage employers to let people watch the games if they like – and claim back their time afterwards. That way, everyone wins'.
The call follows recent confirmation in the Queen's Speech that the new coalition Government will seek to remove barriers to flexible working for all employees.
Osborne pledges corporation tax reform
Newly appointed Chancellor, George Osborne, has pledged to cut the headline rate of corporation tax in an effort to tempt multinational businesses back to the UK.
Speaking at the annual dinner of the Confederation of British Industry (CBI), Osborne revealed that he will set out a 'five year road for a big reform of corporation tax' in the emergency Budget next month.
He added that the coalition was committed to creating the most competitive corporate tax regime in the G20.
'We will reform the corporate tax system by simplifying reliefs and allowances, and tackling avoidance, in order to reduce headline rates,' he said. 'And I want to help new businesses by abolishing employers' national insurance contributions on the first ten jobs they create.'
Osborne concluded his speech by declaring that 'Britain is once again open for business.'
Experts have calculated that a 3% reduction in the corporation tax rate would cost the Treasury some £4.5 billion a year, revenue that the Chancellor hopes to recoup through allowance cuts and a crack down on tax avoidance.
Responding to the speech, John Cridland, deputy director-general of the CBI, said: 'The Chancellor hit the right note. We are pleased that he has recognised that the tax competitiveness of the UK is challenged, and business will warmly encourage a five-year road map which will encourage economic growth.'
Business group calls for 'urgent review' of red tape
The British Chambers of Commerce (BCC) is calling for an 'urgent and sweeping review' of business regulations, after it was revealed that red tape cost UK firms £88.3 billion last year.
According to the BCC's Burdens Barometer, the regulatory burden climbed by £11bn in 2009 following the introduction of 40 additional laws. Although 21 of these led to a recurring annual benefit for companies, the BCC said that this resulted in a new, annual recurring cost to business of over £1bn.
The lobby group is now urging the new coalition Government to conduct a review of all regulations that incur costs for business and introduce a 'moratorium on new employment laws until at least 2014.'
'During this critical time for the economy, we need businesses to be driving recovery and creating jobs. But, the Government must play its part by putting the brakes on the relentless flow of red tape,' commented David Frost, BCC Director General.
'Tuesday's Queen's speech is the perfect opportunity for the new Government to prove its commitment to job creation and a better business environment by repealing regulations where it's clear the costs outweigh the benefits to the economy and society.'
The Conservative Liberal Democrat coalition Government has said it is committed to reducing the volume of regulation to help ease the strain on UK firms.
Queen's speech proposes 'extension to flexible working'
The right to request flexible working could eventually be given to all employees, under new plans outlined in the Queen's speech.
Yesterday the Queen set out the coalition Government's legislative agenda for its first year, which includes a proposed extension of the current rules on flexible working.
At present, parents of children up to the age of 16 or parents of disabled children up to 18, have the right to request flexible working patterns, providing that they have at least 26 weeks of service. Carers of adults with disabilities also share this right.
The plans have prompted a mixed response from business and employment groups.
The British Chambers of Commerce said it had 'serious concerns over any additional Government regulation in this area', while TUC General Secretary Brendan Barber claimed that the move could 'bring positive changes to UK workplaces.'
The Government has vowed to consult with businesses on how best to implement the plans, although it is thought that the changes will not take effect in this Parliament.
A total of 22 Bills were unveiled in the Queen's speech, which Prime Minister David Cameron hailed as a 'radical programme for a radical Government'. Other legislation announced includes:
- A National Insurance Contributions Bill to block next year's 1% rise in NI contributions by employers
- A Pensions and Savings Bill which will restore the link between earnings and the state pension from 2012 . It will also phase out the default retirement age and set a timetable for raising the state pension age
- A Financial Reform Bill to address the regulation of the financial services.
The coalition will hold its 'emergency Budget' on 22 June.
Boiler scrappage scheme 'proves a success'
The Government's boiler scrappage scheme has proved to be a popular measure, with all of the vouchers available to English households having been claimed by 26 March.
The key aim of the scrappage scheme was to kick-start the industry and to help householders to reduce CO2 emissions.
The scheme was announced in the 2009 Pre-Budget Report, and offered households with a G-rated boiler a £400 voucher to help with the cost of installing an energy-efficient model.
Under the rules of the scheme, eligible householders sent details of their chosen installer, together with quotes for the work, to the Energy Saving Trust (EST).
As long as the work was completed within 12 weeks of the voucher being sent out, the householder could expect to receive a rebate from the EST. However, a significant proportion of householders are yet to receive their rebate.
The scheme is now closed to households in England. Wales currently has a separate scheme in operation, which offers £500 of assistance to those aged 60 and over, and Scotland launches its own scheme on 24 May.
New Government 'set to increase VAT'
The rate of Value Added Tax is set to increase under the new Government, according to a recent study.
In a survey of independent economists conducted by the BBC, 24 out of 28 experts predicted that VAT will rise in the coming parliament.
Most of the economists interviewed believe that the rate will increase from 17.5% to 20% before the end of next year.
Such a rise would bring in additional revenue of around £11.5bn a year.
The standard rate of VAT was temporarily reduced to 15% in December 2008, in a bid to boost consumer spending during the recession.
The Conservative-Liberal Democrat coalition has committed to making £6bn of spending cuts this year with the aim of reducing the deficit.
The new Government will hold an emergency Budget on 22 June.
Osborne sets date for emergency Budget
Chancellor George Osborne will deliver the emergency Budget on 22 June, it has been announced.
The new Office for Budget Responsibility will also provide the forecasts for the economy and public finances alongside next month's statement, which will be the first Budget of the new coalition Government.
The Tories had committed to delivering a Budget within 50 days of taking office in an effort to tackle Britain's structural deficit.
A number of proposed measures affecting business and personal taxation have already been outlined as part of the coalition agreement. These include £6bn in spending cuts to non-front line services, the abolition of the previously announced rise in National Insurance Contributions and an increase in the income tax threshold for lower and middle income earners.
CGT hike would hit an 'extra one million investors'
Proposals by the new Government to increase capital gains tax (CGT) in line with income tax rates could mean that more than a million extra people will be liable to pay the tax, according to some financial experts.
A document published by the Conservative Liberal Democrat coalition signals that the incoming Chancellor, George Osborne, will look to increase CGT for 'non-business gains' such as buy-to-let properties. If implemented, the measure would be used to fund a 'substantial increase' in the personal allowance.
Charging CGT at rates similar to those levied on income could see the current rate of 18% increased to 40% or even 50%, although the document states that 'generous exemptions' will apply for 'entrepreneurial activities'.
Yet many commentators have claimed that the changes could still double the CGT bill for hundreds of thousands of investors.
Speculation over a possible hike has also prompted fears that investors and entrepreneurs will rush to dispose of assets to avoid being hit by the predicted increase, while some economists believe that a rise in CGT would penalise companies financing themselves through equity rather than debt.
Philip Booth, at the Institute of Economic Affairs said: 'The doubling of capital gains tax would be a huge mistake for Britain.'
'Surely we have learned from the financial crash that we should not be artificially encouraging companies to take on more debt.'
Earlier this week it was announced that the Chancellor will deliver the emergency Budget on 22 June. It is unclear whether the proposed tax changes will be implemented immediately after the Budget or will be deferred to the start of the new tax year.
Business reacts to latest unemployment figures
As the latest figures reveal that UK unemployment has increased, business groups are highlighting the need for an incoming Government to invest and create jobs.
Data released by the Office for National Statistics (ONS) shows that the number of people out of work in the UK rose by 43,000 to 2.5 million during the three months to February.
The British Chambers of Commerce (BCC) has described the figures as ‘disappointing but not surprising,’ and is now calling on ministers to make the changes necessary to ensure that businesses are able to take on more staff during the economic recovery.
‘Whatever the result of the election, a new Government must enable businesses to invest and create jobs,’ commented David Kern, Chief Economist at the BCC. ‘Scrapping the proposed employer National Insurance increase next year appears even more important in the light of these figures. It is equally important that the regulatory burdens on business are limited in the coming years.’
Meanwhile, the Federation of Small Businesses (FSB) has warned that the latest statistics confirm that the recovery is still ‘too fragile’ for small firms to take on extra staff.
In a survey of over 1,400 of its members, some 63% said they plan to keep employment levels on hold over the next three months.
John Walker, FSB National Chairman, said: ‘The rise in unemployment confirms that the economy is still too fragile for small businesses to take on new staff. […] The ‘FSB Voice of Small Business Index' shows that small firms are at the heart of the recovery but still need support if they are to get us firmly on that road to recovery and if they are to begin taking on staff again.’
He added: ‘The FSB is calling for a renewed economic stimulus to help small businesses continue to create jobs, get access to crucial finance, innovate and start up new businesses, to get us squarely on the road to recovery.’
UK firms ‘concerned’ about prospect of hung parliament
Nearly two-thirds of British businesses are uneasy about the prospect of a hung parliament after the General Election, according to a new study.
In a poll by the British Chambers of Commerce (BCC), 65% of companies said they were ‘concerned’ or ‘very concerned’ about the impact of a hung parliament on their business.
Of the 300 firms questioned, 13% of respondents claimed that failure to establish a working parliamentary majority would be a ‘good thing,’ and 22% stated that they were ‘not concerned’.
‘Instinctively, companies prefer a clear mandate to lead and govern,’ said BCC director-general, David Frost. ‘With our economy still fragile and the public finances in a dire state, the overwhelming concern is whether a hung Parliament will provide decisive action around the UK's unsustainable deficit.’
He continued: ‘Whatever the outcome of the election, whether we have a coalition government or not, we must see a credible plan to reduce the deficit and restore confidence within 90 days.’
Study warns of '£55 billion' of hidden debts
A recent survey has warned that as many as one in three Britons has hidden debts, amounting to a total of £55 billion.
The study, carried out by OnePoll for the Post Office, suggests that 31% of people hide the level of their personal debt from other family members.
One in six women, and more than one in four men, keep their true financial situation a secret, even from their partners.
While spouses or civil partners may jointly own an asset, such as the family property, a credit card company is under no obligation to inform a co-owner about their partner's debts.
This means that an individual could amass substantial debts over a period of time, potentially placing the family home or other assets at risk.
Lesley McLeod, from the British Bankers' Association, commented that where customers are unable to keep up their repayments, banks will try to establish a suitable repayment plan, and that forcing the sale of the family home would be a 'last resort'.
Fresh warning over UK ISA market
Some Individual Savings Accounts (ISAs) promoted on comparison websites could be in breach of guidelines set out by HM Revenue and Customs (HMRC), experts have warned.
It has been reported that products known as ‘kick-out plans’, which are sold on many of the UK’s major comparison sites, may be ineligible for equity ISAs because they can mature early in certain circumstances.
The Revenue is currently investigating the issue, but if the schemes are found to violate the rules then investors could lose their tax breaks.
Commenting, James Daley, editor of the consumer magazine Which? Money, said: ‘The vast majority of investments being offered on comparison sites are structured products, which often carry much greater risk than might at first be apparent.’
However, Matthew Hunter from comparison website Confused.com said: ‘Our aim is always to offer the most comprehensive service we can, but with stocks and shares ISAs we have sought to give consumers a good selection without claiming to cover the whole market.’
The warning comes just days after Consumer Focus appealed to the Office of Fair Trading (OFT) to investigate the ISA market.
In its super-complaint, the watchdog alleges that many banks and building societies are ‘baiting’ consumers with eye-catching short-term interest rates which than fall to uncompetitive levels after a year.
Consumer Focus estimates that around 15 million cash ISA holders could consequently be losing out in interest worth up to £3 billion a year.
With the average interest rate now 0.41%, the group has criticised the market for making it difficult for customers to switch providers and compare accounts.
It also called on the OFT to address the ‘lack of clarity’ and ‘confusion’ in the market, as well as the arbitrary rules imposed by cash ISA providers forbidding transfers into some of the most attractive accounts.
Government launches Small Business Credit Adjudicator task force
The Department for Business, Innovation and Skills has launched a new task force, which will advise the Government on the role and responsibilities of the new Small Business Credit Adjudicator (SBCA).
The SBCA was announced in the 2010 Budget, and the task force will be run by Lord Alan Sugar, outgoing Federation of Small Businesses chairman John Wright, and former Lloyd’s TSB deputy chief executive Mike Fairey.
The aim of the SBCA is to ensure that small businesses are treated fairly when accessing bank finance. Once it has been established, the SBCA will hear cases where a business may have been unfairly denied credit.
Commenting on the launch, business secretary Lord Mandelson said, 'There is a perception among small business owners that banks are unfairly denying them credit. This task force will help us understand the root of these concerns'.
The task force will produce a consultation document in the summer which will consider potential powers and sanctions for the SBCA, such as powers to demand bank information and the naming and shaming of banks found to have denied credit unfairly.
The SBCA will work in conjunction with Business Link’s Financial Intermediary Service.
Business groups set out Election priorities
Some of the UK's leading business groups have been setting out their priorities ahead of the General Election on 6 May.
Launching its 2010 Election Manifesto, the Forum of Private Business (FPB) has called on the next Government to rebalance UK workplace law in favour of employers.
According to the FPB, small businesses are reluctant to hire new staff as a result of ever-increasing legislation.
Matthew Goodman, FPB Policy Representative, said, 'Many of our members feel that the current burden of employment law weighs disproportionately on their business, creating unreasonable compliance burdens on most small businesses and ruining relationships between employers and employees'.
Meanwhile, the Confederation of British Industry (CBI) is highlighting the need for the Government to set out a 'clear and credible plan' that will return the budget to balance by 2015/16.
Releasing the CBI's 12-point plan for a new administration, Richard Lambert, CBI Director-General, commented, 'Other areas for urgent action include establishing a competitive regime for business taxes so that companies can drive the recovery forward, as well as minimising the scarring effects of youth unemployment'.
The organisation wants the Government to establish clear timetables for implementing its 12 points within 100 days of taking power.
New tax year heralds 50% income tax rate
The start of the 2010/11 tax year sees the introduction of a new 50% top rate of income tax for individuals earning in excess of £150,000 a year.
Plans to introduce the new top rate were first announced in the 2009 Budget, in a bid to boost public finances.
However, some business groups have warned that the move will damage business confidence and have a negative impact on investment and innovation.
The new financial year also sees a number of other changes to tax and employment legislation, including the introduction of new 'fit notes'.
These replace the traditional sick notes provided by GPs, and allow doctors to specify whether an individual is capable of carrying out any aspect of their normal work. Employers will be expected to take appropriate steps to accommodate their employees' needs.
New fathers also have a new right to take up to 26 weeks of paternity leave, if the mother returns to work after the first six months of her maternity leave.
Meanwhile, the savings limit for Individual Savings Accounts (ISAs) has risen from £7,200 to £10,200 for 2010/11 for all adult savers, half of which may be saved in cash.
We can help with all your tax and financial planning needs - please contact us for assistance.
Government scraps three tax rises as Election looms
The Government has dropped plans to impose three controversial tax rises in an effort to push through new legislation ahead of the General Election.
With Parliament set to be dissolved on 12 April, ministers have abandoned the proposed 10% tax increase on cider after it was met with fierce criticism from opposition parties.
The Chancellor is also thought to have backtracked on plans to levy a 50p per month charge on landlines to fund super-fast broadband and a tax on furnished holiday lettings.
The 10% above inflation tax rise on cider was announced in the 2010 Budget and came into effect at the end of March. However, the increase will now cease on 30 June and prices will be reduced.
Ministers are often forced to make concessions in the rush to ensure that legislation is passed before Parliament breaks up in the run-up to an Election.
While the Conservatives have declared the tax reversal ‘a major victory for businesses and consumers across Britain’, Labour has insisted that the measures will be re-introduced if the party is re-elected.
Online filing changes come into effect
Businesses will now only be able to file and pay certain taxes online, following the introduction of new rules by HM Revenue and Customs (HMRC).
From 1 April 2010, HMRC will begin the process of phasing out paper VAT returns in an effort to encourage more people to manage their tax affairs electronically.
Businesses with an annual turnover of more than £100,000 (excluding VAT) will need to file returns online and make payments electronically, for accounting periods beginning on or after that date.
Firms with an effective VAT registration date on or after 1 April 2010 will need to have returns filed and payments made online, regardless of their turnover. The remaining VAT registered businesses may continue to file paper returns for the time being, but the situation is set to be reviewed by 2012.
Penalties for failing to make an electronic return will be applied to periods ending on or after 31 March 2011.
The changes come as a result of a review of HMRC’s online services and reflect the growing trend towards electronic filing.
Almost all employers are now required to file their employer annual return online, while corporate tax returns due after 31 March 2011 will also need to be submitted online.
We can help with all your tax planning needs, including dealing with your tax returns on your behalf – please contact us for information and assistance.
