In the committee’s report on the chancellor’s Autumn Statement, published this week, MPs say they are concerned about reports that businesses are not benefiting as they should from the FLS.
December’s mortgage approvals rose to 55,578, compared with November’s 54,011, in what is traditionally a quieter month for the housing market, and on the back of the figures, the Council of Mortgage Lenders is predicting gross lending of £156bn this year, up from £143bn in 2012.
However, the Select Committee’s report calls on the Treasury to review the scheme’s impact and report back to it, saying that it is concerned by reports there may be a bias in the effect of the scheme that favours lending for mortgages rather than lending to SMEs.
The report adds that the Bank of England and the Treasury should assess whether this is the case and report their findings and any proposed action to the Treasury committee.
In addition, businesses are not the only ones to feel let down, as the Bank’s data also showed that the average rate paid by lenders on new savings fell 0.2 percentage points to 2.11 per cent over the month, which is the lowest return since the depths of the recession in March 2009.
The FLS, which allows participants access to cheap funds in return for growing their lending, is expected to see a “significant” boost in credit availability this year.
However, Executive Director of the Bank, Andrew Bailey told MPs last week that lenders had slashed deposit rates much more than mortgages, saying that “the jury is still out on whether we have seen as much adjustment as we ought to see”.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 569 )The Financial Services Authority has ordered the big four banks to conduct a review into all interest rate hedging products they may have mis-sold to small businesses and to compensate the firms accordingly.
The announcement follows on from the regulator’s own review of 173 such sales last year, of which more than 90 per cent broke regulations and it accused the banks of selling small businesses “absurdly complex products”.
The products were typically sold to "protect" borrowers from rising rates but in many cases, lenders insisted that small business clients had to take out the hedging products as a pre-condition for receiving a loan.
Businesses that bought the products before the 2008 financial crisis were then unable to benefit from the Bank of England's decision to cut interest rates to a historically low 0.5 per cent and many found they could not terminate the arrangement without paying huge fees to their lenders and in some cases, the product was for a larger amount or lasted many years longer than the loans they were supposed to be hedging.
Knowing that the review was coming, the banks have already set aside more than £700m against potential swap mis-selling claims, with Barclays making the largest provision so far of £450m.
However, with the FSA’s findings these provisions are likely to be increased, with the total bill expected to reach at least £1.5bn, though it is believed that the final cost could easily exceed £10bn.
The banks have been given six months to complete their reviews of mis-selling, though the Authority said that lenders with large numbers of customers could take up to 12 months.
The regulator said it hoped that five other lenders, Allied Irish Banks, Bank of Ireland, Clydesdale and Yorkshire, the Co-operative Bank and Santander, would launch their own reviews by 14 February.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 551 )The tax agreement between the UK and Switzerland, which was struck in August 2011 and came into force on 1 January 2013, has just delivered £342m to the Treasury in the first tranche of revenue from UK taxpayers in Switzerland.
According to HM Revenue & Customs (HMRC) this is the first instalment of a levy on these taxpayers’ accounts to cover arrears of tax, while current and future tax liabilities will be covered by a new withholding tax of 48 per cent on income.
Under the agreement, people with taxable assets in Switzerland have a choice of authorising their financial institution to disclose the details to HMRC or have the levy and withholding tax applied by the institution.
Until now, HMRC has only been able get details of interest payments on Swiss accounts by providing the Swiss with complete details of specific accounts, information that is rarely available.
Exchequer Secretary David Gauke said that the agreement with the Swiss government will deliver around £5bn of previously unpaid tax to the UK and added that offshore evasion costs the UK billions of pounds every year, which the Government is determined to tackle.
He said that one of the ways to do this is through information exchange, so this agreement makes it easier for HMRC to obtain information about UK taxpayers suspected of hiding money in Switzerland.
Chancellor George Osborne also hailed the payment and joked that it was the first time “that money due in taxes has flowed from Switzerland to the UK", as the nation has been famously secretive about its banking arrangements.
In fact, its reputation for financial discretion has helped Switzerland build up a $2 trillion offshore financial sector. But, since the financial crisis, the country has faced an international campaign against tax evasion from governments with big budget deficits. The agreement with the UK follows a similar agreement struck recently with Germany.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 680 )According to new research by the Taxpayers’ Alliance, taxes will have been increased almost 300 times by the coalition Government before its term of office ends in 2015.
Despite 119 historic or impending cuts in taxation, 254 tax rises have come into effect, with 45 more planned before the next election, with the result, according to the Alliance that the amount of tax paid in Britain will rise in real terms by 15 per cent by the end of the Government’s tenure.
The Taxpayers’ Alliance (TPA) forensic study of Treasury and HMRC documents looks at how many different tax reliefs, allowances and rates the Government has changed, along with the number of new taxes that have been levied or abolished during its time in office.
In 2009-10, the last year of the previous Government, £513 billion was paid in taxes, which amounts to £549 billion at 2012-13 prices, while by 2015-16, the Government plans to increase that amount to £671 billion or £633 billion in today’s money.
Meanwhile, through other research, the TPA has found that the average family pays £656,000 in tax over their lifetime in direct and indirect tax both over their working lifetimes and in retirement.
Based on the current level of taxes applying over a working lifetime of 40 years and 15 years of retirement the TPA has calculated the total taxes paid by households broken down by income.
This amounts to £1.3m in the highest income quintile, falling to £235,000 in the lowest income bracket. The research also revealed that the four most burdensome individual taxes over a lifetime are Income Tax, VAT, employee National Insurance contributions and Council Tax.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 749 )Speaking at the World Economic Forum in Davos over the weekend, incoming Governor of the Bank of England, Mark Carney, said he will be putting growth at the heart of his approach to the job and is willing to see higher inflation for longer in order to support the economy.
Mr Carney hinted strongly at a new approach during his speech, when he said that central bankers should be prepared to take aggressive measures to help economies achieve what he called an "escape velocity".
He added that these include the use of unconventional measures and he would suggest keeping interest rates lower for longer while considering further quantitative easing, which is the indirect provision of monetary stimulus via the financial system.
Although he was speaking generally rather than specifically about the UK, Mr Carney's comments will be seen as evidence that he is preparing a substantial change of direction when he takes up his new post this summer.
While suggesting that he might act quickly, perhaps with a pledge to hold interest rates low for a prolonged period, he said: "Monetary policy can be more nimble than fiscal policy."
Meanwhile, the atmosphere at Davos on the final day was guardedly optimistic, as the collapse of the Euro now looks much less likely, while a hard landing in China, or debt crisis in the US, also look more distant.
The optimism has translated to the stock markets especially in the US, with the S&P 500 closing above 1,500 points on Friday for the first time since 2007,and the FT's "all-world" index is the highest it has been in 20 months.
There was also that good news from the European Central Bank this week, as it announced that a large proportion of the emergency lending it had offered to European banks just over a year ago was being repaid early.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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