Thursday 3 December 2015

Thursday, December 03, 2015 Posted by Hari No comments Labels:
Posted by Hari on Thursday, December 03, 2015 with No comments | Labels:

Osborne reliant on rising immigration levels to achieve budget surplus
During last week’s autumn statement, Osborne boasted: “The OBR’s (Office for Budget Responsibility)... forecast today is that the economy will grow robustly every year, living standards will rise every year, and more than a million extra jobs will be created over the next five years.” The chancellor made no reference to immigration in his statement. But analysis of figures from the OBR, the government’s independent forecasting body, shows that Britain’s finances would not be forecast to hit a budget surplus by 2019-20 without recent upward revisions to net migration numbers. As a result of the extra jobs and tax incomes, and changes to the composition of the UK’s working-age population, generated by the influx, the OBR has revised up the level of potential economic output for the UK by 0.9%. Under the OBR’s calculations, if projected net migration had remained unchanged at 105,000 a year, the boost to output would have been negligible. Without the additional output generated by those changed migration forecasts, the projected budget surplus would drop to zero and the only feasible way to achieve one by 2020 would have been through additional spending cuts or tax rises. Furthermore, based on OBR data and the evidence available, it is highly likely that the government’s intention of reducing net migration to the “tens of thousands” is directly at odds with its fiscal target. The OBR’s latest fiscal sustainability report, published in June, stated that net inward migration in line with the Office for National Statistics (ONS) high migration scenario of 225,000 a year would reduce the primary budget deficit by 0.5% of GDP and net debt by 17% of GDP by 2064-65, relative to the OBR’s central projection. In the low migration scenario (105,000 a year), the primary budget deficit would increase by 0.5% of GDP and net debt by 20% of GDP by 2064-65. The OBR’s outlook also shows the 1.1m increase in employment cited by Osborne is mostly because of upward revisions to net migration, which is predominantly concentrated among people of working age: this boosts the employment rate, GDP, potential output and tax receipts. Figures released last week by the ONS show that annualised net migration to Britain hit a new high of 336,000 in June, indicating that further revisions to the OBR’s projections may be in store. GUARDIAN

U-turn on Tax Credit cuts a mirage: Osborne’s review 'only delays squeeze on working poor', says IFS
Despite George Osborne’s headline-grabbing retreat on his controversial plans to slash cash payments to more than three million low-income working families from next year, he will still make millions of such families considerably worse off by the end of the decade through his post-election welfare cuts, both the Resolution Foundation and the Institute for Fiscal Studies (IFS) have stressed. Some 3.3 million working households had been on course to lose an average of £1,300 from next April thanks to George Osborne’s July Budget welfare cuts, prompting a historic revolt from the House of Lords. Mr Osborne was accused of hurting the very “strivers” he claimed to be trying to help and even many Conservative MPs were alarmed by the plan. The Chancellor had sought to make a virtue of his complete climbdown on tax credits in his Autumn Statement speech on Wednesday saying: “The simplest thing to do is not to phase these changes in, but to avoid them altogether”. That prompted many opponents of the cuts to proclaim victory. But the Resolution Foundation said that because tax credits are being phased out and replaced by a wholly new benefits system known as universal credit, poor working families will be just as hard hit by 2020 as they were before this week’s policy reversal. The IFS echoed the point: “The long-term generosity of the welfare system will be cut just as much as was ever intended as new claimants will receive significantly lower benefits than they would have done before the July [Budget] changes.” Research presented by the IFS showed that 2.6 million working families would be an average of £1,600 a year worse off than under the current system. The IFS also presented a chart showing that the impact of the post-election tax and benefit changes by Mr Osborne on families in the lower half of the income distribution in 2020 was virtually identical both before and after the Autumn Statement volte-face on tax credits – confirming that the scrapping of these credit cuts merely postpones the negative impact on the less well off of government welfare cuts. INDEPENDENT

Rise of the 'rabbit hutch' homes: Half of new-build three-bed properties are too small for families, architects warn - and Yorkshire has the pokiest
Between July and August the Royal Institute of British Architects (RIBA) measured the size of 100 randomly selected developments currently under construction by some of Britain's biggest house-builders. Out of 10 housebuilders, RIBA singled out two of the worst offenders in terms of space in new-builds. The Persimmon homes surveyed were on average 10.8 square metres smaller than the optional minimum standard, while Barratt homes were on average 6.7 square metres smaller, RIBA claimed. On average, new-build three-bedroom homes outside London are four square metres - or the size of a family bathroom - smaller than they should be, said RIBA. New-builds in Yorkshire and the Humber are the smallest at an average of 84 square metres, while new three-bedroom homes built in London are 17 per cent larger at around 108.5 square metres. The architects trade body warned that half of the new homes being built today are not big enough to meet the needs of people who buy them, depriving thousands of families of the space needed to 'live comfortably and cohesively, to eat and socialise together, to accommodate a growing family or ageing relatives, or even to store possessions including everyday necessities such as a vacuum cleaner.' New rules introduced in October give local authorities the option to set minimum size standards for new-build homes. Under the optional standards, a three-bedroom, five person home would be a minimum of 93 square metres. But, at 84 square metres, the average new three-bedroom home in Yorkshire is smaller than one in London by the equivalent of a double bedroom and a family living room, RIBA said. In the North East, the average size of a three-bedroom new-build is 85.4 square meters, while in the West Midlands it is 85.7 square metres. In London, the South East and the East of England, where properties tend to command higher prices, the average size of a three-bedroom property tends to be bigger than the optional standard of 93 square metres. The conversion of office space into residential homes is not covered under any space standards, meaning the 20,000 conversions last year came with no safe-guards, according to RIBA. RIBA wants to see a national space standard automatically applied to all new-build homes. DAILY MAIL

British workers will have worst pensions of any major economy
According to the Organisation for Economic Cooperation and Development (OECD), the typical British worker can look forward to a pension worth only 38% of their salary, once state and private pensions are combined. The Paris-based thinktank said on Tuesday that this compares with above 90% in the Netherlands and Austria and 80% in Spain and Italy. Only Mexico and Chile offer their workers a worse prospect after retirement, although Turkey is the surprise table topper, giving its retirees an average pension equal to 105% of average wages, according to the OECD report. Workers in the UK will also have to toil for longer than anywhere else before they qualify for a state pension. Over the next two decades, the state pension age will move up to 68 in the UK, matched only by Ireland and the Czech Republic. In the rest of the developed world, even by the 2050s, the average retirement age will have moved up to only 65.5. The French and the Belgians enjoy the earliest retirement. France is raising its state pension age from the current level of 62, but widespread early retirement means that, on average, French men and women stop work at 59.4 and 59.8 respectively, with the Belgians not far behind. In recent years, there have been frequent warnings about the “demographic timebomb” that will wreck the finances of ageing European nations. But the OECD said: “The combination of higher pension ages, fewer options for early retirement, changes in the way benefits are calculated and more people working and contributing longer has greatly improved the financial sustainability of pay-as-you-go pension systems.” It said that the burden of paying pensions would rise from the current level of 9% of GDP to just 10.1% by 2050, with some countries even seeing reductions in spending. Pensions expert Tom McPhail, of Hargreaves Lansdown, said: “This analysis makes embarrassing reading for the politicians who have been responsible for the UK’s pensions over the past 25 years.” GUARDIAN

Fury as Chancellor grabs £400m from struggling High Street: George Osborne under fire after axing business rate relief for small shops
Former high street tsar Mary Portas and retail veteran Bill Grimsey accused Chancellor George Osborne of a betrayal of the businesses that are working hard to keep high streets alive for local communities. Portas said: ‘It seems Government isn’t really serious about getting behind the small businesses on our high streets. I really am very frustrated.’ She pointed out that at the same time Government policy appears to ignore global firms such as Amazon and Google which pay insignificant levels of tax on sales in the billions.” Grimsey, former boss of Wickes, Iceland and Focus DIY, said: ‘It is like banging your head against a brick wall. This is a signal from the Chancellor that says: “We don’t really care about town centres and smaller retail businesses and we’ll sneak this £417 million under the radar”.’ The pair lashed out after Osborne failed to extend a measure to provide business rate relief to 278,000 small shops. The Chancellor had announced it in 2013 after Portas conducted a high-profile review of the plight of town centres at the Government’s invitation. The Local Data Company has revealed that independent high street shops are closing at a faster rate than they are opening for the first time since 2011. The tax relief which has been scrapped excluded big stores and those on flourishing high streets. It meant small stores in struggling areas saved £1,000 in the year to March 2015 and £1,500 in the current financial year. Campaigners argue that the tax relief had allowed some firms to stay in business. DAILY MAIL

HSBC tax dodge whistleblower given five years’ jail by Switzerland
The leak of secret bank account details formed the basis of revelations – by the Guardian, the BBC, Le Monde and other media outlets – which showed that HSBC’s Swiss banking arm turned a blind eye to illegal activities of arms dealers and helped wealthy people evade taxes. While working on the database of HSBC’s Swiss private bank, Hervé Falciani, an IT worker, downloaded the details of about 130,000 holders of secret Swiss accounts. The information was handed to French investigators in December 2008 and then circulated to other European governments. It was used to prosecute tax evaders including Arlette Ricci, the heir to France’s Nina Ricci perfume empire, and to pursue Emilio Botín, the late chairman of Spain’s Santander bank. The subsequent investigation into HSBC showed that it had routinely allowed clients to withdraw bricks of cash, often in foreign currencies of little use in Switzerland; that it aggressively marketed schemes likely to enable wealthy clients to avoid European taxes; that it colluded with some clients to conceal undeclared “black” accounts from their domestic tax authorities; and that it provided accounts to international criminals, corrupt businessmen and other high-risk individuals. HSBC was fined £28m by the Geneva authorities this year, after investigators concluded that “organisational deficiencies” had allowed money laundering to take place at its Swiss subsidiary. French magistrates are conducting a criminal investigation into the bank, alleging “complicity in aggravated money laundering and financial fraud”. HSBC has been ordered to post bail of €100m (£70m). As a holder of both Italian and French nationality, Falciani cannot be extradited to Switzerland by either of those countries and is therefore unlikely to ever serve his sentence. GUARDIAN

Four senior KPMG partners arrested in Belfast tax evasion probe
The four men were detained after officers from HM Revenue and Customs visited KPMG’s Belfast office in connection with what HMRC said was “suspected tax evasion”. The arrests are the latest blow to Northern Ireland’s tightknit business community, which has been hit by a scandal surrounding the £1.2bn sale of a portfolio of property loans to Cerberus, a US private equity company. This year allegations emerged that some Northern Ireland politicians stood to gain from a £7m “fixer’s fee” linked to that deal. The purchase of the loans is the subject of criminal investigations in the UK and the US. The four detained men are Jon D’Arcy, KPMG’s chairman in Northern Ireland; Eamonn Donaghy, the senior tax partner in Belfast; Paul Hollway, head of the firm’s Irish corporate finance business; and Arthur O’Brien, a senior partner. Mr Donaghy has been a leading figure in the successful campaign for Northern Ireland to be given the devolved power to set its own corporation tax. The province is to introduce a 12.5 per cent corporation tax rate from 2018, which will put it on the same level as the rate in the Republic. Northern Ireland-based companies currently pay the same 20 per cent corporate tax rate as the rest of the UK. FINANCIAL TIMES

Cash-strapped households owe a record £2.1bn to water companies, with 2.5m unable or struggling to pay
There has been a 17 per cent increase in unpaid water bills since 2010, jumping from £1.9bn to £2.2bn, the water regulator Ofwat says. The average bill is £385 a year, but in some parts of the country it is as high as £482. The costs associated with unpaid bills added a hypothetical £21 to each customer’s bill in 2014/15 prices, Ofwat said. But the regulator added that it had taken action to make sure not all bad debt was passed on. In 2013, it rejected a request from Thames Water, the biggest supplier, to raise prices to cover £75m of costs associated with rising bad debt. Despite this, Thames Water (the capital’s monopoly supplier) is planning to raise bills from April next year to build a £4.2bn, 16-mile sewer to stop 39m tonnes of raw sewage overflowing into the Thames every year. The project has attracted critics including Sir Ian Byatt, who led the privatisation of the water industry in 1989. He argues that smaller improvements could have the same effect and meet EU water quality standards more quickly. The complicated financial structure of the “super sewer” — under which Thames Water pays for just a third of the cost of the project — has also been criticised. Thames Water posted a 29.5 per cent rise in pre-tax profits to £335.8m in the year to the end of March but pays no corporation tax. The water regulator has already ordered 18 companies in England and Wales to cut bills by 5 per cent in real terms over the next five years. It has also introduced social tariffs to encourage companies to reduce charges for poor customers. FINANCIAL TIMES


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