The Treasury Select Committee have claimed within their report that the cost of reducing the level of top tax from fifty-pence to forty-five pence “could be significantly more or less” than the £110 million citied by the Chancellor; adding: “The cost and benefits of reducing the additional tax rate to 45p are both highly uncertain, and could be significantly more or less than the cost included in the Budget.
"We recommend that HM Revenue & Customs publish in due course a comprehensive assessment of the effect on the Exchequer of the new 45p rate."
Along with being critical of the decision to reduce the top rate tax, the Committee have also cited within their report the need for the government to offset the pain quantitative easing is causing savers, by saying ore information was needed on the effects of the £325 billion of new money effectively "printed" by the Bank of England.
“Loose monetary policy, achieved through quantitative easing and low interest rates, has redistributional effects, particularly penalising savers, those with 'drawdown pensions' and those retiring now.
“The Bank of England has argued that some of those effects may be mitigated by the increase in asset prices stimulated by quantitative easing. While the aggregate of savers and pensioners may have received some benefit from higher asset prices, there will be many individuals who will not have benefited.
“The Bank of England, after, where appropriate, consultation with the Treasury, should provide its estimate of the overall benefit and loss to pensioners and savers from quantitative easing.”
Following the highly critical report, a Treasury spokesperson has said they will “study the report and respond in due course.”
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 98 )The inflation rate within the UK rose during March, as a result of higher food and clothing prices, reinforcing expectations that the Bank of England will not provide further stimulus for the economy.
According to the Office for National Statistics, the Consumer Price Index (CPI) rose from 3.4 percent in February to 3.5 percent last month, with the slight increase putting a halt on the five-month run of declines, which has seen the CPI inflation rate fall from its peak of 5.2 percent in September 2011.
The Office for National Statistics have attributed the rise in inflation to the rise in food and clothing prices, with supermarkets last year during February and March heavily discounting, which saw food prices fall by a record 1.5 percent during February and March 2011 – this year, the prices have only fallen by 0.3 percent.
An increase in inflation will heighten the concerns of the Bank of England policy makers, who have recently expressed concerns that the inflation rate may not fall as much as hoped; and have also indicated a reluctance to sanction another bout of quantitative easing when the current programme is complete in May.
More worryingly for the Bank of England, is that the core consumer price inflation, which strips out the volatile food, energy, tobacco and alcohol components – increased slightly to 2.5 percent.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3.1 / 112 )An independent forecasting group has claimed that although the UK has avoided a double-dip recession, the economy is set to stall for the next twelve months.
According to the group, although the Bank of England’s monetary policy measures have boosted confidence, big businesses need to fuel the growth.
The group claim that UK corporates have stockpiled cash on their balance sheets and now need to increase investment; as this chief economic advisor for the group says there is only so much central banks could do.
He added: “The problem is that they can keep us away from disinflation and depression but they can't really pump any more in than that for fear of inflation.
“Business investment has picked up nicely in the US but UK companies remain extremely risk averse, which is sapping strength from the economy.
“Until these companies stop stashing the cash and start increasing levels of investment and dividends, the economy will remain on the critical list.”
The warning comes after the group forecast “dismal” growth of 0.4% during 2012, rising to 1.5% next year; which differs considerably from the predictions provided by the independent Office for Budget Responsibility, which recently suggested the economy would grow by 0.8% during this year and 2% next year.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3.1 / 96 )The Organisation for Economic Cooperation and Development (OECD) have forecast that the UK faces decades of tax increases and spending cuts, if it wants to bring the national debt under control.
A recent study carried out by the OECD, whose findings were published yesterday, highlighted that the Coalition’s current austerity programme will not be enough to bring the current debt down to “prudent” levels – and instead recommended an additional and “sustained period of fiscal tightening.”
Currently, despite the five-year programme of tax increases and spending cuts which have been put in place by the government, Britain’s national debt is estimated to rise from seventy-two percent of gross domestic product (GDP) to seventy-six percent by 2014/2015; whilst it is also estimated that the national debt will peak at £1.5 trillion during 2016/2017.
The French-based organisation, along with suggesting the UK is set for decades of tax increases, warned that the recent financial crisis and economic downturn will be relatively minor on the economy, compared to the ageing population; with the report suggesting: “spending pressures, principally from health and long-term care, will continue to mount.”
As a result of the study, the OECD has suggested that the UK, along with other developed countries, has a long-term goal of bringing debt down to fifty-percent of GDP. If the UK is to hit such a target, it will need austerity measures to equal about eight percent of the economy – roughly £126 billion.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 2.9 / 98 )Following heavy criticism from cabinet ministers and senior Tory MPs, it has been reported that the Chancellor, George Osborne, could soften his blow to charities in regard to his proposals on introducing a cap on tax relief for donations.
During the budget in March, the Chancellor announced his plans to bring in an annual cap of tax-free giving of £50,000 or twenty-five percent of an individuals earnings – whichever is the highest figure – from April next year.
However, following increasing pressure from those opposed to the idea; it is believed that the Chancellor will consider introducing the changes over a two or three year period, to give charities time to prepare, as requested by ministers.
Further signs that the Chancellor could be about to soften his stance on his tax relief proposals, came yesterday when the Prime Minister, speaking at a press conference during his tour of Indonesia promised he would “look very sympathetically” at the concerns raised by charities about losing big donations.
David Cameron said: “There's no doubt abuse is taking place. Some people have been using charities established in other countries to funnel money into those so they're not paying 50p tax or even 45p tax but in some cases are paying 10 or 20 per cent tax. I think that isn't right.”
Despite David Cameron promising to look at the concerns raised by charities in regard to the tax relief cap, Downing Street sources denied that a climb-down had been issued, saying that the Prime Minister and the Chancellor were united in wanting to achieve the goals of increasing charitable giving whilst making sure the tax system isn’t abused; although it is thought the original proposals will now be “tweaked” in an attempt to allay the charities fears.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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