The Chancellor said it would be “very foolish” not to take action to prevent another financial crisis.
Although there has been opposition from the banks, next week the Treasury is expected to press ahead and accept the need for stricter “firewalls” in order to insulate High Street retail banks from their extended arms that focus on risky investment banking.
Mr Osborne said: “This country had probably the greatest banking crash in its history a couple of years ago.
“It would be very foolish not to learn the lessons of what went wrong and to protect British families from having to bail out the banks again on the scale they did a few years ago.”
Independent experts have calculated that the cost of the reforms could be as high as £15bn, and with charges expected to rise for customers, it will be them who will be picking up the price.
Sir John Vickers, the chairman of the Independent Commission of Banking, admitted that it was likely that there would be “some effect” on costs to customers.
Mr Vickers said the changes could raise the level of mortgage rates up to around one percent, which would add almost £1,000 a year to the cost of paying a typical mortgage of £140,000.
So how will the money be spent? It is expected the reforms will see High Street banking arms being required to have separate staff, funding arrangements and computer systems from investment banks.
The move is designed to ensure the banking industry will not be thrown into another financial crash, as High Street banks would be unaffected if a bank’s investment divisions is thrown into financial difficulty with the changes in place.
"For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 575 )The Bank of England’s Monetary Policy Committee (MPC) is holding UK interest rates at a record low of 0.5 percent.
Economists had predicted the rate, which has remained the same since March 2009, would remain unchanged due to concerns about the strength of economic recovery.
The MPC also chose not to increase its quantitative easing (QE) programme.
Howard Archer, chief UK and European economist at IHS Global Insight, said: “Evidently, most MPC members maintain the view that further QE is not warranted yet, particularly given current elevated inflation levels and still significant upside inflation risks.
“However, unless the economy shows signs of picking up soon and global financial market conditions stabilize, the pressure for Bank of England action will mount and it could very well pull the QE trigger within the next few months.”
It is bad news for those who rely on the interest on savings for an income, such as pensioners, who will continue to suffer due the low level of rates.
Banks recently revealed that savers have missed out on £43 billion as a result of low rates. The figure comes from comparing their income before and after the Bank cut rates to 0.5 percent.
Whilst savers will continue to bear the brunt, families with mortgages will continue to benefit from the low interest rates. This is due to savings in banks and building societies being outstripped by mortgages, therefore mortgage borrowers have gained by a wider margin.
The figures show that mortgage borrowers have paid £51bn less in monthly interest.
Although the Bank of England issued no comment, minutes from the meeting due in a couple of weeks are likely to show policymakers discussed options for injecting more stimulus into the economy, against a backdrop of sharply weakening conditions in the United States and euro zone and ongoing financial market turbulence.
"For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 482 )Leading economists are calling for the Government to drop the 50p tax rate, claiming that it is doing “lasting damage” to the UK economy.
In a letter written to the Financial Times, which was signed by 20 top economists, they urge the Government to axe the tax rate “at the earliest opportunity” in order to boost economic growth.
The Chancellor George Osborne has said that the 50p rate on earnings over £150,000 is only a temporary measure, and that he would ask the Inland Revenue to review how effective the rate it is at raising tax revenue.
In a speech on Tuesday, he said: "I've said with the 50p rate I don't see that as a lasting tax rate for Britain because it's very uncompetitive internationally, and people, frankly, can move."
Unions say cutting the 50p tax rate would be "monstrously unfair" during a time of austerity cuts.
Brendan Barber, general secretary of the Trades Union Congress, said: “At a time when cuts are biting hard and ordinary people are suffering the biggest squeeze on their living standards in years, the last thing we need is a handout to the wealthiest in our society.”
In the letter, signed by two former members of the Bank of England’s Monetary Policy Committee, DeAnne Julius and Sushil Wadhwani, the economists state that the tax rate is making the UK "less competitive internationally, and making us less attractive as a destination for both foreign investment and talented workers".
The letter was sent as part of a campaign, promoted through PR agency Westbourne, who say that the move is funded by businesses who are concerned about the impact the 50p rate is having on the economy.
This news comes as Mr Osborne announced that short-term economic forecasts for the UK had been revised downwards.
Chancellor George Osborne said recent economic data had led to short term forecasts being revised down over recent weeks. However, he said that he would continue to stick to the budget’s deficit-cutting plan.
"For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 452 )Small businesses are joining forces with universities and corporations and investing in a new “hub” that aims to improve the UK’s ability to commercialise innovation.
The Big Innovation Centre (BIC) is to be launched on Thursday by Business Secretary Vince Cable. BAE Systems, GSK, Unilever, Google and EDF Energy are among the 11 companies that have joined forces with Oxford University to invest in the latest Government scheme to boost innovation.
BIC has mostly been funded by its private sector backers, 80 percent of the initial £1.5 million fund for the project has come from private sector backers.
The innovation hub aims to boost investment in emerging sectors such as health science, virtual reality and cyber-security. BIC will act a bridge between universities and business to enable research to be commercialised.
The body of BIC will be part of the Work Foundation think-tank but will also make “evidence-based” policy recommendations.
BIC’s Director Birgitte Anderson said: “Just talking about tax cuts and R&D (research and development) tax credits is not going to do the job.”
“The UK has a fantastic history in innovation but that hasn’t been the case for the last decade. Radical action is needed if we’re to avoid another decade of stagnation.”
BIC is also hoping to encourage small businesses to participate in its projects, which will include establishing joint research projects and 'pilot-companies', Miss Anderson said.
According to research from IPPR, compared to 80 percent of German firms, only 46 percent of UK businesses are currently carrying out “innovation activity”.
And it could be that businesses are struggling to gain funding to help boost the much-needed innovation activity. Credit-scoring group Experian is helping BIC research the efficiency of bank lending in terms of financing innovation.
“Our preliminary research shows the banks have been lending to large companies in decline rather than growing businesses," Miss Anderson said.
"For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 554 )New research has revealed that average bonuses for directors of FTSE 350 companies have risen by 187 percent since 2002.
The rise in bonuses, however, does not correspond with a rise in the value of companies as share prices continue to crash.
Back in 2002, average annual bonuses were worth 48 percent of salary but are now worth 90 percent, according to the High Pay Commission.
The Department for Business, Innovation and Skills has said that it would now study the “interesting” report.
A spokesman for Vince Cable's BIS department said: "This is an interesting report, which we will study further as part of our wider look into corporate governance."
According to Deborah Hargreaves, the High Pay Commission chairman, the view that bigger bonuses meant businesses were performing better was a “myth”.
Ms Hargreaves said: "The evidence exposes the myth that big bonuses and high salaries result in better company performances.
"There has been massive growth in what has been termed as performance-related pay yet no such corresponding leap forward in company performance."
"Corporate governance reforms attempting to link pay with performance appear to have done little more than add to the huge complexity of executive packages, reward schemes and bonuses that make up the pay of FTSE 100 directors," Ms Hargreaves added.
The report said that although the index had risen by only 21 percent, total wages for company executives in the wider FTSE 350 had gone up by 700 percent.
Whilst boss’ salaries have risen by 63 percent since 2002, pay levels for the average worker in Britain have risen by just 27 percent over the past decade, according to the report.
Ms Hargreaves said that the share prices and performance of companies had not come close to matching the rises in pay and salaries.
The report is due to be published in full in November and has been backed by Compass group and the Joseph Rowntree Trust.
"For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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