Category: Economics


Can the British high street be saved?

Back in 2018 Mike Ashley, owner of Sports Direct and other high street brands, famously declared that ‘the British high street will be dead by 2030.’ The targets of his anger were MPs in general and the then-Chancellor Philip Hammond in particular. Any more taxes on the high street, Ashley argued, and it would collapse in the face of increasing competition from online retailers. 

In particular, Ashley and many other high street chains had business rates in their sights. Many shops were paying more in business rates than they were paying in rent. Unless the system was reformed, they argued, that would be it for the national high street. 

That was in 2018, well before coronavirus and well before lockdown. Anyone who has been into a town centre lately will know the devastating effects lockdown has had. 

The second round of lockdown measures were reported to have ‘battered’ footfall in the run-up to Christmas, with Bonmarché becoming the latest chain to collapse into administration. 

Figures for Boxing Day, traditionally one of the busiest shopping days of the year, suggested that footfall was down 60%. 2020 was reported to be the worst year for retail job losses for 25 years. 

Now we are in the third lockdown and Chancellor Rishi Sunak is extending the furlough scheme into the summer. 

Politicians are talking about there being ‘no guarantees’ of lockdown being lifted by the spring. Meanwhile we go on Amazon and buy everyday items we would previously have bought in our local shops…

One day all this will come to an end. Life will go back to ‘normal.’ But will that be too late for the British high street? Will we have become so used to working from home that, to take just one example, ‘the commuter economy’ will never recover? 

If the national high street is to be saved there has got to be some new ideas and an acceptance that the high street does not just equal retail. 

Local councils will need to become proactive and high streets will need to become a mix of retail, leisure and public space. In short, the best way to save our high streets may be to stop thinking of them as traditional high streets…


Spelling out the Chancellor’s Spending Review

Last month Chancellor Rishi Sunak delivered his Spending Review for next year to the House of Commons. In the absence of an Autumn Budget, the statement to the Commons set out the Government’s spending commitments for 2021/22. 

The Chancellor had announced some time ago that there would not be a formal Budget this autumn, because of the current economic uncertainty. Instead, the rather less formal Spending Review took centre stage. 

The overall theme of the speech was “jobs, businesses and the public services” as Sunak promised a “once in a generation investment in infrastructure, creating jobs, growing the economy and increasing pride in the places we call home.” 

What were the pundits expecting? 

The Treasury had trailed beforehand that the Chancellor will spend £4.3bn on new unemployment programmes, including a new Restart scheme to help people find work. Almost 1m people have lost their jobs in the pandemic, a figure which is expected to rise dramatically as the furlough scheme winds down. 

There was expected to be a £3bn package to support the NHS, with £1.5bn allocated to ease existing pressures, £1bn to allow the NHS to address the backlog of scans, checks and operations, and a further £500m to support mental health services. However, many commentators also expected a public sector pay freeze, with public sector pay having outstripped that in the private sector over the last year. 

It was widely expected that there would be at least £100bn for the National Infrastructure Project, including a tranche of road, housing and green energy projects as the Chancellor sought to ‘level up’ the Midlands and the North. 

‘Spooks’ could, apparently, look forward to ‘tens of millions’ going into a ‘world leading’ counter terrorism operation bringing together intelligence agencies and senior police officers. Another measure that had been widely trailed, not least by Conservative MPs, was a reduction in the foreign aid budget from 0.7% of GDP to 0.5%. 

The Economic Background 

Clearly, the pandemic has left the UK poorer. By the end of this year the economy is expected to be at least 10% smaller than it was before the pandemic. Alongside the Spending Review, the Chancellor was due to disclose the latest forecasts for the economy and the public finances from the Office for Budget Responsibility. 

Earlier this year the OBR had been forecasting a 13% contraction in GDP. It is now not expected to be that bad, but the reduction is still likely to be in double digits, with government borrowing topping £350bn – a level never before seen in peacetime. 

The Chancellor was slightly hamstrung by the spending commitments, for example to the NHS, already made. Would the remaining money be enough to go round? The Institute for Fiscal Studies thought the answer was ‘no,’ suggesting that courts, prisons and local government are likely to face cuts, as well as the widely trailed overseas aid budget. 

The Chancellor’s Speech 

Getting to his feet in a very socially distanced House of Commons, the Prime Minister answered the weekly PMQs via a video link from 10 Downing Street and the Chancellor immediately set out the scale of the problem. “The health emergency is not yet over,” he said. “The economic emergency has only just begun,” 

Nevertheless, ‘spending was the key word.’ There was no mention within his address of the fact that all of this must, at some point, be paid for, with the Chancellor seemingly happy to defer any hint of tax changes until the March Budget. Surprisingly, with just over a month to go to the end of the transition period, there was no mention of Brexit either. 

He stated that total spending on Coronavirus to date amounted to £280bn, with an expectation that public services funding to tackle the pandemic next year will be £55bn. 

Rishi Sunak said that he wanted to prioritise “jobs, businesses and the public services.” But there was no mention of any further support packages for business: you feel that once the current measures wind down, that will be that. As he has said many times, ‘we cannot protect every job and every business.’ 

The Numbers 

It wouldn’t be a set piece speech from the Chancellor without him giving us the numbers on growth and borrowing. If you are nervous you should, perhaps, look away now. 

The Office for Budget Responsibility (OBR) has forecast that the UK economy will contract by 11.3% this year – the worst performance for more than 300 years. It is expected to recover by 5.5% next year and 6.6% in 2022 but, said the Chancellor, the economy will not be back to its pre-Covid level until the fourth quarter of 2022. 

Even by 2025, by when we’ll have had another General Election, the economy will be 3% smaller than forecast in the March Budget. “The economic damage is likely to be lasting. [There will be] long-term scarring,” said the Chancellor. 

Government borrowing will be £394bn this year, that is equal to 19% of GDP and is the highest figure recorded in peacetime, before falling to £164bn next year and £105bn in 2022/23. It will then ‘hover around £100bn for the remainder of the forecast’ with underlying debt as a percentage of GDP rising 97.5% in 2025/26. 

Rishi Sunak said that this debt was “unsustainable in the medium term” but this was an “economic emergency.” The government had a “responsibility” to cut spending at some point, which rather translates into tax rises for you and me. 

The OBR had said the UK’s response to the pandemic had been good, with business insolvencies down and our unemployment rate comparing favourably with other major economies. 

Despite pledging £3.5bn to help people back into work, the Chancellor accepted that by the second quarter of next year the unemployment rate would reach 7.5% with approximately 2.6m people out of work before it started to fall, hopefully dropping to 4.4% by the end of 2024. 

The Specific Measures 

Public Sector pay

“Coronavirus had,” said the Chancellor, “deepened the pay divide between the public and private sectors.” While pay in the private sector was, on average, down by 1%, that in the public sector had risen by 4%. “I therefore cannot justify an increase in public sector pay across the board” said Sunak, which is exactly what most people had been expecting. 

Instead there were to be pay increases for doctors, nurses and other NHS staff, but other pay rises in the public sector would be ‘paused.’ However, there would be a pay rise, worth up to £250 per year, for the 2.1m people in the public sector earning less than £24,000 per year. 

Hand in hand with this went an increase in the National Living Wage to £8.91 an hour for everyone aged 23 and above. This increase will benefit 2.2m people, giving them a pay rise of £345 per annum. 

Departmental and Devolved Spending 

This was the section of the speech where we were expecting some reductions. But no, the Chancellor continued to spend, saying that he was ‘looking beyond’ the current crisis.

Total government departmental spending will rise by 3.8% next year, the biggest increase for 14 years and taking it to £540bn. There will be £2.4bn of extra spending for Scotland, £1.3bn for Wales and £900m for Northern Ireland to help those areas battle the effects of the virus. 

However, in some post-speech analysis, the Institute for Fiscal Studies did point out that if you strip out spending on Coronavirus then the Chancellor has actually reduced departmental budgets by £10bn. 

The Health Budget and other spending 

Rishi Sunak announced that the ‘core health budget’ was to rise by £6.6bn next year – enough to build 40 new hospitals and upgrade 70 existing ones. Simple maths suggests that cannot possibly be right, so it is presumably a continuing commitment, following on from the election pledge, to build more hospitals and recruit more nurses. 

There would be more money for local government and social care, and more for schools, with a commitment that year on year funding would see a 2% increase for each pupil. 

There would also be more money for the social justice system. “More police and more prisons,” declared the Chancellor, before moving on to commit to an extra £24bn investment in defence and diplomacy. 

The Overseas Aid Budget 

It had been widely predicted that the overseas aid budget would be cut. The Chancellor duly cut it from 0.7% of GDP to 0.5% – in fairness, still leaving the UK as the 2nd highest donor in the G7. In the short term this should save around £10bn a year, with the Chancellor giving a commitment that the budget would go back to its previous level “when the economy allows.” 

A Record Investment in Infrastructure 

The Chancellor outlined a spend of £100bn next year on a “once in a generation” investment in the national infrastructure. This will include a £7.1bn national housing fund (in addition to the £12.2bn affordable homes programme), investments in roads, railways and cycle lanes. There would be investment in broadband and money to turn the UK into a ‘scientific superpower’ with £15bn of funding for research and development. 

Alongside the new National Infrastructure Strategy there would be a new National Infrastructure Bank, which would work with the private sector to oversee new investment projects. 

Rather than a general commitment to the environment, Rishi Sunak made it more specific and local. There would be a new £4bn ‘levelling up’ fund for “the places people call home.” Money would go to local projects that “improve the infrastructure of everyday life.”

Inflation and the Impact on Pensions

Rishi Sunak had insisted that now is not the time to impose tax hikes “in the fog of enormous economic uncertainty.” Nevertheless, there is a growing acceptance that all the Coronavirus support measures will need to be paid for, and with the fine print in the Chancellor’s accompanying documents revealed, we get our first look at where the money might come from. 

A change in the methodology behind measuring inflation looks likely to emerge, with an impact on certain pensions. Where increases to defined benefit pension schemes are currently tied to the Retail Prices Index (RPI), from 2030 they are set to be aligned with the Consumer Price Index plus housing cost (CPIH) which generally runs between 0.5% and 1% lower than the RPI. This would result in savings on the side of the Government in exchange for cuts on the side of pensioners and investors. State pensions will be unaffected, and will rise by 2.5% in April in line with the Government’s triple-lock promise. 


The Chancellor finished his speech by saying that although he had announced huge levels of investment, “numbers ring hollow.” While the Government had set the direction, it was up to individuals and communities to “build a better country.” 

It is fair to say the analysts did not greet his speech with much enthusiasm. Those on the left were understandably critical of the public sector pay freeze and the cut to the overseas aid budget. 

For now the Chancellor seems prepared to spend his way to recovery, but the Centre for Policy Studies summed up much of the criticism: 

But ultimately it will be the private sector, not the public, which digs us out of this economic hole – so as the pandemic recedes we urge the Chancellor to embrace pro-growth, pro-enterprise stimulus measures, such as tax incentives to encourage business to hire and invest. 

The Institute for Economic Affairs was even harsher, criticising the Chancellor’s decision to spend much of his £3.5bn jobs package on apprentices and extra work coaches as a ‘retro policy drawn from dusty files last seen in the 1980s.’ They added: 

Recovery from the recessions of the 1980s and 90s was not the result of extra government spending, but was rather associated with deregulation and freeing up markets. There was no sign of this in today’s announcement. Government intervention, however justified by health concerns, has created the current situation. The answer is not yet more intervention, but rather to allow businesses the maximum freedom to reorient and rebuild. 

Before commending his statement to the House, the Chancellor said that in order to “Build a better country” he was putting his faith in the “courage, wisdom, creativity and kindness” of the British people. 

How those courageous, wise, creative and kind people will pay for it all was largely deferred until March.

Guido Fawkes:

Reaction from commentators:

Spending review key points:

Government document:

Guardian key points and analysis:

Politico article:

The Chancellor’s Winter Economic Plan

In December 2019, the Conservatives won an 80 seat majority in the General Election and three months later, new Chancellor Rishi Sunak presented his first Budget. But by then there was a large cloud on the horizon – the outbreak of Covid-19. 

The Chancellor used his Budget speech in March to present a raft of measures to support businesses and jobs, promising to do “whatever it takes.” A week later he was back with more emergency measures and on Monday 23rd March, the UK went into full lockdown. 

Six months on from lockdown, the Treasury announced that the Chancellor’s traditional Budget speech had been cancelled for this year and instead a Winter Economic Plan was presented on Thursday 24th September.  

What has happened in the last six months? 

The last six months for the UK economy can perhaps be summarised in two words: ‘recession’ and ‘redundancies’. Figures released for the second quarter of the year – April to June – showed that the UK economy had shrunk by 20.4%. Early hopes of a ‘V-shaped recovery’ from the downturn quickly vanished.

The pandemic has unquestionably accelerated trends that may otherwise have taken 20 or 30 years to arrive. We may well all have been working from home by 2050 however, the Prime Minister has told office workers to do it for perhaps the next six months. That will surely have serious consequences for many town centres and the ‘commuter economy’. 

These changes have, inevitably, meant widespread redundancies. Figures recently released suggest that UK payrolls shrank by 695,000 in August as the Chancellor’s furlough scheme started to wind down. 

The Chancellor’s Speech 

The Chancellor, Rishi Sunak, was at pains to stress that he’d consulted both sides of industry on the measures he was going to introduce. He was photographed before the speech with Carolyn Fairbairn of the CBI, and Frances O’Grady of the TUC. 

He rose to his feet in a suitably socially-distanced House of Commons and stated that his aim was to protect jobs and the economy as winter approached, and to try and “strike a balance between the virus and the economy.” We were, he said, “in a fundamentally different position to March.” 

Rishi Sunak said that the UK had enjoyed “three months of growth” and that “millions of people” had come off the furlough scheme and returned to work. While ‘three months of growth’ is undoubtedly true, we must remember that the economy shrank by 20.4% in the second quarter. According to the Office for National Statistics, the economy grew by 6.6% in July – but it has only recovered just over half the activity lost because of the pandemic. 

The primary goal, the Chancellor stated, was “nurturing jobs through the winter” as we all faced up to the “new normal.” He conceded, though, that not all jobs could be protected and that people could not be kept in jobs that “only exist in furlough.” 

So what measures did the Chancellor propose? 

Emphasising that he could not protect “every business and every job” the Chancellor conceded that businesses faced uncertainty and reduced demand. In a bid to protect jobs through this period, the first measure he introduced was: 

The Job Support Scheme

  • This is a six month scheme, starting on 1st November 2020
  • To be eligible, employees must work a minimum of 33% of their normal hours 
  • For remaining hours not worked, the Government and the employer will each pay one third of the employee’s wages 
  • This means employees working at least 33% of their hours will receive at least 77% of their pay 
  • The Chancellor also announced that he was extending the support scheme for the self-employed on “similar terms” to the Job Support Scheme 

Pay as you Grow 

After ‘eat out to help out’, we now have the Chancellor’s next catchy slogan: pay as you grow. 

  • Businesses which took loans guaranteed by the Government during the crisis will now be able to extend those loans from six years to ten years, “nearly halving the average monthly repayment,” said the Chancellor. 
  • There is also the option to move to interest only payments, or to suspend payments for six months if the business “is in real trouble,” with no impact on the business’s credit rating. 
  • Coronavirus Business Interruption Loans (CBILS), taken out by a reported 60,000 SMEs, can now also be extended to 10 years.
  • The Chancellor also promised a new government-backed loan scheme, to be introduced in January.

VAT Deferral 

  • Businesses who deferred their VAT during the crisis will no longer have to pay a lump sum at the end of March next year. 
  • They will have the option of splitting it into smaller, interest free payments during the 2021-2022 financial year. “This will benefit up to half a million businesses,” claimed the Chancellor. 

Income tax is deferred – but it still needs to be paid 

As we all know, death and taxes are inevitable. The Chancellor did at least delay one of them for many people…

  • He announced extra support to allow people to delay their income tax bill, which should benefit millions of the self-employed. 
  • Those with a debt of up to £30,000 will be able to go online and set up a repayment plan to January 2022.
  • Those with a debt over £30,000 should contact HMRC and set up a plan over the phone. 

The planned VAT increase is postponed 

  • The Chancellor’s final move was to give direct, targeted help to the tourism and hospitality sectors. 
  • These two sectors had benefitted from a lower VAT rate of 5%. This lower rate was due to end in January, but will now remain in force until 31st March 2021. 

What was the reaction to the speech? 

As with all Budget speeches, the reaction was mixed. Carolyn Fairbairn of the CBI praised the Chancellor for “bold steps which will save hundreds of thousands of viable jobs this winter.” 

Manufacturing group Make UK said the Chancellor ‘deserved credit’ for looking at action taken in other countries such as Germany and France and copying their successful ideas. 

The Adam Smith Institute was more cautious: the Chancellor’s plans were “sensible – but not costless.” Matthew Lesh, head of research at the free-market think tank said, “The Government must resist becoming addicted to spending. Temporary spending is sensible to keep struggling businesses afloat, but in the longer run we are going to have to get the national accounts in order.” 

There was, though, plenty of criticism, especially from the retail sector. Lord Wolfson, boss of Next, warned that ‘hundreds of thousands’ of retail jobs may now become ‘unviable’ in the wake of the crisis. “I wouldn’t want to underestimate the difficulty,” he said, “I think it is going to be very uncomfortable.” 

Where do we go from here? 

As we have commented above, six months, roughly to the end of March, now seems to be the accepted next phase of the fight against the pandemic. As people worry about whether they’ll be able to see their families over Christmas, many will also be worrying about their jobs.

In his speech, the Chancellor more than once stressed that he could not save ‘every job and every business’ and a sharp rise in unemployment through the winter seems inevitable, which will lead to more Government spending on benefits and lower tax receipts. 

The Treasury is already facing a significant shortfall and the Winter Economic Plan, although the level of Government support has been sharply scaled back, will only add to that. At some point, all the support will need to be paid for, either by increased taxes or more optimistically, a resurgent economy. 

What does this mean for my savings and investments? 

Many world stock markets have proved remarkably resilient to the pandemic and are showing gains this year. Unfortunately, the UK’s FTSE-100 index is not one of them: it ended 2019 at 7,542 and closed March as the country went into lockdown at 5,672. As we write this commentary (Friday morning), it is standing at 5,823, up 2.66% on the end of March. 

As we have stressed many times, saving and investing is a long-term commitment and, while there will undoubtedly be plenty of bumps in the road ahead, Governments and central banks around the world remain committed to an eventual economic recovery. Yes, the pandemic has accelerated trends and certain sectors of both the UK and world economies have suffered serious damage; but as we never tire of saying, new companies will find new ways to bring new products to new markets. 

We can, in the long term, still face the future with confidence but we appreciate that some clients may have understandable short term concerns. 

If you have any questions on this report, or on any aspect of the current situation, please do not hesitate to get in touch with us. 

The Chancellor has, we think, taken sensible and prudent action. As he said, “life can no longer be put on hold” and let us hope that economic activity in the UK – and the wider world – quickly reflects that. 


is the Bitcoin bubble close to bursting?

You may have seen Curtis “50 Cent” Jackson make the news at the end of January after becoming a Bitcoin millionaire. The rapper, actor and businessman made his 2014 album, Animal Ambition, available for purchase for a fraction of a Bitcoin upon release, making around 700 Bitcoin from sales. 50 Cent has admitted that he had forgotten about the earnings, which have sat untouched since 2014 and are now reportedly worth somewhere between £5 million and £6 million thanks to the meteoric rise of the cryptocurrency’s value in recent months.

Despite 50 Cent’s good fortune, those in the financial sector continue to warn against Bitcoin and other cryptocurrencies as a sound investment. Alex Weber, chairman of global financial services company, UBS, is one of the latest figures to lend his voice to these warnings, describing cryptocurrencies as ‘not an investment we would advise.’

There have also been warnings from consultancy firms that initial coin offerings (ICOs), which raise funds by providing cryptocurrency tokens, are prime targets for cybercriminals. Ernst & Young analysed 372 ICOs which had raised $3.7 billion in total and found that hackers were taking as much as $1.5 million in proceeds from these each month with approximately $400 million stolen in total.

The announcements from governments worldwide that cryptocurrencies will soon be regulated has resulted in huge price fluctuations, with Bitcoin dropping from its high point of almost $20,000 in December 2017 to around half that towards the end of January 2018. The steep drop is due in part to the announcement by the government of South Korea, the third largest cryptocurrency market in the world, that its planned ban on the use of anonymous bank accounts in cryptocurrency trading would be implemented from 30th January.

Another concern surrounding cryptocurrency technology is the continued hype surrounding it, with companies taking advantage of investor buzz. The US Securities and Exchange Commission has warned that companies will be scrutinised over name and business model changes which have been made to capitalise on the hype.

Due to these developments in recent months, many economists are now predicting the cryptocurrency bubble could be about to burst. When, or if, this will happen remains to be seen, but the risks surrounding these relatively new forms of investment continue to be a worrying reality.

Theresa May calls surprise early election

During a surprise announcement outside Downing Street on the morning of 18th April, Theresa May set the date of the next UK general election as the 8th June 2017, almost three full years before the previously expected date of May 2020.

Delivering the statement revealing the move, Mrs May said that the early general election would further deliver the ‘certainty, stability and strong leadership’, which she said the Conservative party had offered since the referendum on Britain’s EU membership. The Prime Minister elaborated to say that, ‘the country was coming together, but Westminster was not’, a reference to the fact that, despite the referendum result, the Conservatives still face opposition within Parliament on what so-called ‘Brexit’ should look like, or even whether it should still take place at all.

The Prime Minister addressed this point directly, saying that she was ‘not prepared’ to let those who oppose Brexit ‘endanger the security of millions of working people across the country. What they are doing jeopardises the work we must do to prepare for Brexit at home.’ Mrs May went on to say that, ‘we need a general election and we need one now, because we have at this moment a one-off chance to get this [a general election] done whilst the European Union agrees its negotiating position.’

Addressing the fact that she had previously said the next general election would not be before the May 2020 date, Mrs May said that she had ‘only recently and reluctantly come to this conclusion.’ The Prime Minister said that she now felt that a general election was ‘the only way to guarantee certainty and stability for the years ahead… and to seek your support for the decisions I must take.’

Speaking directly to her political rivals, the Prime Minister said that she had a simple challenge to them: ‘this is your moment to show you mean it… let the people decide.’

Analysts were quick to point out that the election gives Mrs May the chance to increase her party’s majority in the House of Commons. The Conservative’s majority has been slim for some time now, which is causing Mrs May a level of discomfort when it comes to shaping Brexit. Though the general election does give her party the chance to make gains – against opposition which currently trails in the opinion polls – it also gives Labour and the Liberal Democrats the chance to shape their own arguments around Brexit. Many of the seats held by Labour, in particular, are still considered ‘safe’ seats which may limit the gains available to the Conservatives, though whether anything is truly ‘safe’ in political terms any more is a matter for some debate!

In the run up to the announcement, the pound fell against the dollar which helped the FTSE 100 to rise from losses made earlier in the day. After the announcement, however, the FTSE fell again, whilst the pound recovered, showing that not only is a week a long time in politics, but a fifteen minute announcement is a long time for the markets!

We will be sure to keep you fully informed of all of the details in the run up to the election and how the outcomes could impact you and your financial planning, both now and into the future.


Autumn Statement Preview 2014

Last year, George Osborne took to the micro-blogging site Twitter to announce his Autumn Statement. Sadly, there was no mention of this year’s speech on the Chancellor’s social media account, but we do know it will be on Wednesday December 3rd and if he follows last year, Mr Osborne will be on his feet around noon.

Before we look at what we can expect in the Autumn Statement, let’s first look at some of the background to it: the picture is rather murkier – and perhaps less optimistic – than it was last year.

First of all there is a General Election just around the corner: the next Election will be held on May 7th 2015. Traditionally, that would mean a Chancellor of the Exchequer gearing up for a raft of tax giveaways in the Autumn Statement and in the March Budget. We doubt that will be the case this time.

The central theme running through George Osborne’s period as Chancellor has been deficit reduction – and it’s unlikely that he’ll give up on that now. Generally speaking, Osborne’s time as Chancellor has been viewed favourably in the financial markets: the recent IMF report which was critical of many countries and spoke of an ‘uneven’ recovery in global markets, was full of praise for the UK. Osborne is unlikely to throw that reputation away.

Besides, his hands are tied. As he said when speaking to the BBC after the IMF published its report, “The UK is not immune to what is happening on the continent”. What is happening is a serious slowdown, with even the German economy recently reporting a fall in output.

UK growth is generally expected to be 3.1% this year. However, a recent report from the Ernst & Young Item Club has forecast a fall to 2.4% next year. The Chancellor has also found himself faced with falling tax revenues: most of the new jobs that are being created are low paid jobs, and more people are becoming self-employed.

Throw in the political uncertainty from the Scottish referendum result and the rise of UKIP and George Osborne’s room for manoeuvre is limited. He appears to have already told his Cabinet colleagues that there is no money for extravagant giveaways, and the rest of us can expect to receive the same message on December 3rd.

So what can we expect? After all, this is the Chancellor who gave us “the most radical reforms to pensions for a hundred years” and totally re-wrote the rules on Individual Savings Accounts. Despite the limits he has to work with, we can still expect George Osborne to pull at least one rabbit out of the hat.

It might well be another re-writing of the ISA rules – or a new type of ISA – designed to encourage peer-to-peer lending. Start-ups and small businesses are still struggling to find capital from conventional sources. Not surprisingly, there are now an increasing number of sites appearing on the web allowing businesses to ‘crowdfund’ – to raise money from the general public. There are suggestions that the Chancellor may officially recognise this trend and the help it is giving to emerging businesses and take steps to encourage this lending by the general public.

For more established businesses, there are strong suggestions – not least from Business Secretary Vince Cable – that there will be steps taken to hand small businesses rate relief. They should expect something “positive in the pipeline in the Autumn Statement” according to Mr. Cable. This may well be linked with moves to encourage investment in UK high streets, which continue to struggle.

After the pensions changes were announced in the March Budget, Pensions Minister, Steve Webb, glibly announced that the Government, “wouldn’t be bothered” if people used their pension pots to buy a Lamborghini. George Osborne seems inclined to trust the good sense of the British people, but don’t be surprised if there is further tinkering with the pensions rules. Now the dust has settled, there are suggestions that the new rules have created some loopholes which the Chancellor may be keen to close.

He’ll also continue with his wider crackdown on tax evasion, although as the Daily Telegraph recently commented, digital companies operating in several countries are increasingly needing “international, not local” taxation systems.
Finally, expect the Chancellor to take further steps to address the skills shortage in British industry. In a recent study by the accountants Grant Thornton, 40% of UK businesses identified skills shortages as their biggest problem, with a significant number saying that a reduction in national insurance contributions would make them more likely to take on apprentices. A move in this direction would come as no surprise.

Whatever other surprises the Chancellor comes up with on December 3rd will be covered in our Autumn Statement Bulletin. As last year, we’ll be preparing this as the Chancellor is speaking and we’ll be working into the evening – so we’d expect the Bulletin to be available to our clients the following day


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Inflation Rates: What’s Pushing our Prices Up or Down?

The ONS (Office of National Statistics) revealed recently that the UK inflation rate had dropped to 2% in December 2013, but what actually contributes to influencing our inflation rate, moving the prices of the goods we use up or down?

Over the last five years, the three main contributors to the 12-month inflation rate were food & non-alcoholic beverages, housing, water, electricity, gas & other fuels, and transport (including motor fuels). Combined, these three sectors have, on average, accounted for over half of the 12 month inflation rate each month.

The largest downward contributions to the change in the CPI 12-month rate between November and December 2013 came from food & non-alcoholic beverages. Prices overall rose between November and December 2013 as they do between these months in most years. The rate of the rise was smaller than between the same two months in 2012 and was the smallest it has been since 2006. The downward contribution came from price movements for most foodstuffs and non-alcoholic beverages, with the largest contributions coming from price movements for fruit and meat.

These downward contributions were partially offset by an upward contribution from prices for bread and cereals where the rate of price increases has accelerated. Looking over the longer term, inflation for food and non-alcoholic beverages has grown at a faster rate than overall inflation in each of the last eight years.

Overall, the cost of recreation and culture fell at a quicker rate between November and December 2013 than between the same two months in 2012. The downward contribution came from across the sector, with the largest contribution coming from prices for games, toys and hobbies – notably computer games, where there were reports of sales and lower priced games on older platforms.

The largest (though relatively small compared to many months) upward contribution to the change in the CPI 12 month rate between November and December 2013, came from transport, where prices overall rose at a quicker rate between November and December 2013 than between the same two months in 2012.

The majority of the upward contribution came from prices for petrol and diesel. Petrol prices rose by 0.5 pence per litre between November and December 2013 compared with a fall of 2.8 pence per litre between the same two months in 2012, to stand at 130.4 pence. Diesel prices rose by 0.8 pence per litre between November and December 2013 compared with a fall of 1.4 pence per litre between the same two months in 2013, to stand at 138.3 pence. The upward contribution was partially offset by air fares where prices increased between November and December 2013 as usual, but at a slower rate than in 2012.


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Number crunching by Her Majesty’s Revenue and Customs (HMRC) provides for us overall figures for 2010/2011 key out-turns for taxpayers and income tax liabilities. In terms of an analysis of the body of taxpayers, we are told that:

  • there were 31.3 million individual income taxpayers in 2010/2011, an increase of 0.7 million compared with the previous year.
  • there were 28 million non-higher rate taxpayers (89.6% of all taxpayers), 3.02 million higher rate taxpayers (9.6%), and 236,000 additional rate taxpayers (0.8%).

The average rates of taxation applied to taxpayers in 2010/2011 were 12.5% for basic rate taxpayers, 23.1% for higher rate taxpayers, and 39.9% for additional rate taxpayers.

The share by band of total income and tax liabilities were:

  • the richest 50% of taxpayers by total income accounted for a 76.5% share of total income and 88.7% of tax liabilities.
  • the richest 1% of taxpayers by total income accounted for a 11.5% share of total income and 25.0% of tax liabilities.

In terms of tax liabilities due on taxable incomes, 61.3% fell within the basic rate tax band, 23.9% in the higher rate band, and 14.7% in the additional rate band.

The HMRC projections for 2013/2014 estimate that there are:

  • 29.3 million taxpayers in 2013/2014, which is 2 million lower than in 2010/2011.
  • 4.3 million higher rate taxpayers in 2013/2014, which is 1.3 million higher than in 2010/2011, with 290,000 additional rate taxpayers in 2013/2014.

Also in 2013/2014 average rates of tax fall to 10.6% for basic rate taxpayers, 22% for higher rate taxpayers, and 38.8% for additional rate taxpayers. HMRC notes that recent out-turns and projections for the highest income taxpayers are strongly affected by expected responses to changes in the top rate of income tax.



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Handy Guide for the Tax Rates 2013/2014

A useful guide to keep all the tax rates handy.  Click the link below – print off double sided fold and keep….


Concept Financial Planning Tax Table Guide


Should you wish us to send you a copy, just contact us with your details and we will send out free of charge.


Small Print – The guide is for information only. The rates and allowances are subject to our understanding of legislation as at April 2013 and are subject to change.


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Guide to the GDP

The GDP, ‘Gross Domestic Product’, is arguably the most important of all national economic statistics. The GDP seeks, every three months, to capture the state of the economy in one percentage number.

If the GDP figure is up on the previous three months, the economy is growing. If it is down, the economy is contracting and if the contraction is over two consecutive months, the economy is in recession! In the UK, the Office of National Statistics (ONS) gathers and publishes the GDP data.

GDP is the principal means of determining the health of the UK economy and is used by the Bank of England as one of the key indicators in setting interest rates. If GDP growth is slow, higher interest rates could damage any recovery. However if prices are rising too fast, we could expect the Bank to increase interest rates to try to control them.

The Treasury also uses GDP when planning economic policy. When an economy is contracting, tax receipts tend to fall and the government adjusts its tax and spending plans accordingly. UK GDP is used internationally by the various financial bodies such as OECD, IMF, and the World Bank to compare the performance of different economies. The EU also uses GDP estimates as a basis for determining different countries’ contributions to the EU budget.

The Office for National Statistics publishes one single GDP quarterly figure, using three ways of measuring growth. Each measure should produce the same GDP percentage number.

  • Output measure: This is the value of the goods and services produced by all sectors of the economy; agriculture, manufacturing, energy, construction, the service sector and government. Considered the most accurate in the short term, this involves surveying tens of thousands of UK firms.
  • Expenditure measure: This is the value of the goods and services purchased by households and by government, investment in machinery and buildings, and including the value of exports minus imports. For this measure, the ONS surveys manufacturing and service industries.
  • Income measure: The value of the income generated mostly in terms of profits and wages. Information on sales is collected from 6,000 companies in manufacturing, 25,000 service sector firms, 5,000 retailers and 10,000 companies in the construction sector.

Data is also collected from government departments covering activities such as energy, agriculture, health and education. The ONS produces the earliest estimate of GDP of the major economies around 25 days after the end of a three month period, providing an early estimate of the real growth in economic activity. It is quick, but only based on the output measure, when around only 40% of the data is available, so this figure is revised as more information comes in over the next two months.

We may be forgiven for wondering about the statistical reliability of this flagship growth marker when we consider that the percentage growth, after all the number crunching, is often only 1% or less.

In addition, the quarterly published GDP growth figure can still be subject to later revision to take account of subsequent analyses, for example of price and inflation figures. However the final quarterly GDP figure is what everyone seems to anticipate and wait for.

Are we coming out of a double-dip recession or heading for a triple-dip, is it a ‘blip’ or are ‘green shoots emerging’ – whatever the three monthly GDP growth figure is, we can be sure that there will be a lot of talk about it!



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