The new index will use the same formula as the Consumer Price Index (CPI) to calculate average prices and will be published alongside the RPI measure from March onwards.
The way RPI is calculated, using the arithmetic formula known as the “Carli” formula, means that it is around 1 per cent higher than the CPI. As a result of this method of calculation the RPI tends to overstate the pace at which the cost of living is rising.
If it had been decided to alter the current RPI index so that it rose more slowly, it would have reduced the future pension increases of millions of private sector pensioners and cut the income of investors in index-linked government bonds and savers with index-linked savings certificates.
However, as it is, the current RPI calculation will be maintained for those in defined benefit pension schemes linked to RPI, who could otherwise have seen their incomes fall by up to 1 per cent.
Employers sponsoring final salary schemes may not be as happy with the news, however as some were hoping that a re-calculation of RPI would lower their pension scheme liabilities.
It was also confirmed that the Treasury would continue using the RPI measure for calculating the return on both old and new index-linked bonds and that the Government will continue to issue new index-linked gilts linked to the RPI.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 583 )According to a bi-annual survey of small businesses, almost half of the business owners who started their new venture in the last two years are looking to expand their business operations this year.
The Pulse survey measures confidence in small and medium-sized enterprises (SMEs) and found that not only did 48 per cent want to scale up business activity in 2013 but 65 per cent of them expect average to strong sales in the first half of the year, compared with just 32 per cent in 2012.
The most optimistic tranche are firms with between 11 and 25 employees, with just under three-quarters of those surveyed expecting average to strong sales this year.
The general air of optimism has translated into ambition and 80 per cent of those surveyed are keen to boost revenues and almost half have set themselves more ambitious business plans for the year.
The business owners surveyed were also focussed on the wider economic landscape and political measures aimed at helping them, with 60 per cent believing that improvement in policies and measures to help firms, such as relief on business rates, were important in influencing their business confidence.
In fact, 65 per cent of firms with 26-100 employees reported that lending schemes targeted at SMEs are the most important factor in influencing business confidence, while over 40 per cent believe that economic statistics, such as the 1 per cent growth in GDP reported last October, can have a measurable financial impact on business performance.
With the right support and action from the Government, most small business owners appear to believe that they can do well this year, which is a great sign for the economy as a whole, as SMEs lie at the heart of the UK's economic recovery.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 523 )House prices rose unexpectedly in December by just over 1 per cent, although they are expected to remain fairly flat this year, according to new figures from the Halifax.
In December the average price of a house was £163,845, with the figure, when measured on a quarterly basis, up for the first time in seven months amid signs of a firming in housing market towards the end of 2012. Prices also rose 0.6 per cent in the three months from October to December.
There were six monthly rises and six decreases during 2012 as underlying prices remained little changed over the course of last year, the mortgage lender added.
In general, surveys show that London and the South East of England have seen price rises, but there have been falls elsewhere, notably in Northern Ireland.
According to the Halifax, the picture for this year is ambiguous, as there were few clear signs of direction in 2012. Last year saw an even mix of monthly rises and falls as prices lacked any real direction as both demand and supply pressures remained largely unchanged during the year.
However, this month, the Nationwide Building Society said that UK house prices fell by 1 per cent on average in 2012, but this is because the way the two lenders calculate the annual rate of change differs slightly.
The Halifax compares the average house price over the past three months with the average for the same three-month period the year before, while the Nationwide conducts a straightforward monthly year-on-year comparison, which could be affected by short-term blips. However, the Nationwide also expects prices to remain static in 2013, saying that conditions in the housing market remain "fragile".
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 388 )In a press conference later today, both Prime Minister David Cameron and Deputy Prime Minister Nick Clegg will announce that working mothers will be given thousands of pounds-worth of support for child care to help them to return to work.
The childcare plans form the centrepiece of new proposals set out in the Coalition’s mid-term review and under the measures, working parents could be entitled to claim up to £2,000 per child every year from their tax bills to cover the cost of childminders and nurseries.
This could mean working parents becoming entitled to claim a flat-rate tax allowance to help cover the costly bills in a move that would replace the £700m voucher and allowances scheme.
The proposals form part of a review to mark the midway point of the Coalition's government and other measures include action on state pensions, infrastructure investment to help boost the economy and help towards care costs for the elderly.
Details of some policy pledges are still being finalised and announcements fleshing out the proposals are expected to be rolled out in the coming months at a rate of almost one a week.
In a foreword to their speech to be delivered later, the two leaders have said that they will support working families with their childcare costs and build more houses to make the dream of home ownership a reality for more people.
They also pledged to set out plans for long-term investment in Britain's transport infrastructure, while under plans to improve help for the elderly, they have said they will implement an improved state pension that rewards saving, and more help with the costs of long-term care.
They have also listed welfare reform and fuel duty cuts, along with help towards energy bills and the rise in the personal income tax allowance as being amongst the Government's achievements so far.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 539 )In one of his first big policy announcements to be made later today (January 4th), Shadow Chancellor Ed Balls will propose a new tax on the pension savings of more than 300,000 wealthier Britons, claiming that those earning more than £150,000 should only receive basic rate tax relief on their retirement savings.
Costing high earners thousands of pounds a year, the proposal would mean that they could only get tax relief of 20 per cent on their savings, compared with 50 per cent today, and 45 per cent from April this year.
Under the proposed scheme, the money raised, which is estimated to amount to around £1bn annually, would be used to subsidise private companies to take on people over the age of 25 who have been out of work for at least two years, which number around 129,400. The new workers would be offered 25 hours of work for six months and be paid at least the minimum wage.
Mr Balls went on to say that if the unemployed people refuse the offer of work, they would be excluded from claiming benefits. This plan follows his previously proposed £2bn tax on bank bonuses, which would partly fund a youth job scheme.
The powers that be in the party have been saying for some time that Labour needs to set out concrete policies this year in a bid to boost its economic credibility and to answer Tory claims it has no strategy for tackling welfare costs.
However, Prime Minister David Cameron said the Government's welfare-to-work scheme was "massive", while the Treasury said Labour was trying to spend the same money twice and that Mr Balls had already earmarked cuts in pension tax relief to reverse austerity measures.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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