The Confederation of British Industry (CBI) has downgraded its forecast for the economy from 1.4 per cent growth to 1 per cent but any growth at all will still prevent the country from sliding back into recession. The group kept its forecast for 2014 at 2 per cent.
The forecast comes after the economy shrunk in the last quarter of 2012, which was the first period in what some feared might be another six months of negative growth.
The reason for the guarded optimism is that it believes the country is seeing a return to organic growth, with trade, manufacturing and business investment expected to pick up in the months ahead.
However, the group warned that households will feel the squeeze for a third successive year, as average earnings grow at 1.7 per cent in 2013 against inflation of 2.6 per cent and does not believe that will earnings and inflation will equalise until 2014.
The employers’ group was more optimistic about jobs, though, saying that unemployment will fall by 40,000 this year.
The CBI said it believes the UK government had the right plan for growth but should look at projects which could have a quick impact, such as giving local authorities money for infrastructure.
It is expected that the Bank of England will also downgrade its growth forecast later today because of what it sees as "weakness in the economy and the prospect of a further prolonged period of above-target inflation".
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 389 )According to data published today (February 12th) by the Office for National Statistics (ONS), the rate of consumer price inflation (CPI) remained the same in January as for the previous four months, at 2.7 per cent. However, the rate of Retail Prices Index (RPI) inflation rose to 3.3 per cent in January from 3.1 per cent in December.
The statistics were disappointing, as most economists had been expecting a fall, but the biggest upward contribution was from alcohol and tobacco prices, which were up 4.3 per cent from December.
However, clothing and footwear prices rose just 0.2 per cent on the year and fell 5.4 per cent on the month as the January sales kicked in. Prices in the miscellaneous goods and services category, which includes personal care products such as toothbrushes as well as things like money transfer fees, fell 0.7 per cent from December.
The ONS said that the CPI rate had now remained unchanged for the longest period since records began in 1996 and inflation is expected to rise this month as a price hike from energy giant E.ON on January 18 takes effect. The ONS said the final of the “big six” energy hikes would be taken into account in February’s figures.
The Bank of England will publish its inflation outlook tomorrow (February 13th) and it is widely expected that it will predict inflation to remain above the Government’s target of 2 per cent for as much as the next two years. It has already been above the target for the last 37 months.
However, there was encouragement in the core inflation figures, which strips out volatile food and energy costs. Core CPI was down to 2.3 per cent from 2.4 per cent in December.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 543 )Health Minister Jeremy Hunt will announce in Parliament later today (February 11th) that the inheritance tax threshold is to be frozen at £325,000 for individuals and £650,000 for couples for three years from 2015.
Speaking on TV yesterday (February 10th), Mr Hunt said that he wants the UK to be amongst the first nations where the elderly do not have to sell their homes to pay for care.
He was speaking ahead of his statement to MPs in which he will outline the Government's response to the report written by economist Andrew Dilnot in 2010 on funding social care.
The Dilnot report recommended setting a lifetime cap of £35,000 on the total people would have to pay towards care at local authority prices, excluding living costs, and raising the value of assets people could hold before having to pay the full cost of their care from £23,250 to £100,000.
However, Mr Hunt’s statement will reveal that, from 2017, the costs of personal care for the elderly in England will be limited to £75,000, although the cap will not apply to the cost of accommodation in residential care homes, which averages around £7,000-£10,000 a year.
The plan would also let people in England with assets of up to £123,000 qualify for some state help, up from the current limit of £23,250 and it is believed that the proposals could help up to 100,000 people who struggle to pay for care.
The measures will see 5,000 more people paying inheritance tax, which some critics are calling a stealth tax, and are expected to contribute about £1 billion over the next five years towards the cost of care.
However, they go against Chancellor George Osborne's Autumn Statement pledge, in December, which was to raise the threshold by 1 per cent, to £329,000 for individuals and £658,000 for couples, in 2015/2016.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 411 )According to recent research, the UK’s small and medium-sized enterprises (SMEs) receive the lowest level of government support for R&D funding than any other major economy.
An analysis by the Organisation for Economic Co-operation and Development suggests that a lack of taxpayer support over the past decade may have “eroded” Britain’s competitive edge, given that R&D capital is seen as one of the major drivers of economic productivity.
Based on spending figures from 2008-9, the analysis shows that the UK ranks last for funding support out of all 27 OECD countries, including America, France and Germany.
According to the study, small firms, meaning those with fewer than 50 employees, fare the worst, although those with between 50 and 249 workers attract only marginally more support.
The OECD said that indirect government support, such as through R&D tax incentives, ranks higher than America, but it is still a long way below that of Canada and France.
According to the report, the decline in R&D spending in this country is largely “historical”. The share of R&D expenditure in output fell from around 2.2 per cent in 1985 to 1.8 per cent in 2010, with both public and business R&D contributing to the decrease.
The Government has been attempting to increase support for R&D by small firms since 2009, including increasing the rate of relief under the tax credit scheme to 225 per cent from last April, making it one the of the most competitive rates in the world. It has also ring-fenced the £4.6bn annual science and research budget amid austerity cuts.
However, the report concludes that there are concerns that the failure to maintain and expand the research capacity over this period at the same rate as elsewhere may have eroded the UK’s competitive edge and that the country may therefore find it more difficult to take a leading role in the next product innovation cycle.”
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 548 )According to a report published today (February 7th) by the National Audit Office (NAO), HM Revenue & Customs (HMRC) has made good progress on reducing costs in the past year but isn’t doing so well with customer service
The NAO report says that the department maintained its performance in key strategic areas, such as improved cost effectiveness and value for money at the same time as reducing its staff and spending.
However, the public spending watchdog has warned that it is too early to tell what the long-term impact of cost reduction will be on HMRC’s performance, as it faces major challenges, such as making more and deeper reductions over the spending review period while increasing tax revenues, improving customer service and introducing its ‘real time information’ project and changes to benefits and credits.
HMRC made £296 million of savings in the year 2011-12, exceeding its target by 19 per cent. This is about a third of the total savings it is required to make over the four years of the spending review period.
The department exceeded its overall 2011-12 target for collecting additional tax revenues, maintained tax collection and reduced the level of tax debt. It also restored customer service performance from a low point in 2010-11, but did not meet all of its customer service targets.
In total, HMRC is targeting a £955m annual reduction in running costs, as well as bringing in an extra £7bn in tax. This will include cutting the equivalent of 10,000 full-time staff, with 2,400 of these having already gone, while other savings plans include cutting computer costs, moving out of scores of buildings, and improving staff efficiency.
The UK's head of tax, Lin Homer, admitted to the Commons Public Accounts Committee recently that around 20 per cent of people faced waits of more than 10 minutes to get through. However, from April, the department will have a target of making 80 per cent of people wait no longer than five minutes to speak to a member of staff.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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