TAX
Major supermarkets call for rethink of IHT raid on farmers
Tesco has warned that Labour’s tax on farmers is putting the UK’s food security at risk and should be halted. The supermarket’s chief commercial officer, Ashwin Prasad, wrote in a blog: “This is not just a debate about individual policies – the UK’s future food security is at stake.” Asda and Morrisons have already made their backing of farmers public while Sainsbury’s has urged ministers to “listen to the concerns of farmers.” Mr Prasad said: “After years of policy change, it has been harder than ever for them to plan ahead or to invest in their farms. It’s why we’ll be supporting the National Farmers Union’s calls for a pause in the implementation of the policy, while a full consultation is carried out.” Meanwhile, the Office for Budget Responsibility has cast doubt on how much revenue would be raised from the measure since farmers are likely to reduce investment because of the tax raid.
Financial Times The Daily Telegraph The Times
Inheritance tax hits record high
Inheritance tax (IHT) payments reached £6.3bn over the nine months leading to December, marking a £600m increase from the previous year, according to HM Revenue and Customs. Nicholas Hyett, an investment manager at Wealth Club, remarked: “Inheritance tax continues to be something of a golden goose for HMRC.”
The Times
REGULATION
FCA calls for politicians to define acceptable level of consumer harm
UK lawmakers have been asked by the head of the Financial Conduct Authority, Nikhil Rathi, to define an acceptable level of harm to consumers in return for looser regulations. The FCA last week responded to government calls for regulators to support growth in the mortgage market, outlining a series of regulatory changes it plans to introduce in 2025. But speaking at the House of Lords financial regulation committee on Wednesday, Mr Rathi warned: “One or two things are going to go wrong here and not everybody is going to play completely by the rule book, and is there acceptance of that?” He said the Mortgage Charter, which was introduced to reduce the risk of defaults and repossessions, would not be compatible with relaxing lending standards. However, an upside would be improving the chances of young people getting on the housing ladder. “So there are positive benefits for the economy”, he said, “but ultimately, that risk calculus is something we do need a bit of political guidance on, a political discussion on, and it needs to stick over time.” Meanwhile, Rachel Reeves told an audience at Davos that having more than 100 regulators adds to the overlapping burdens businesses face, opening the door to scrapping some bodies.
Financial Reporter Financial Times The Daily Telegraph The Times
FINANCE
Trust at risk from Treasury intervention in commission case
Following the Treasury’s move to intervene in the motor finance commission case set for April in the Supreme Court, lawyers warn of a risk to public trust in the financial sector if consumers are denied justice. The case rests on whether it is illegal for car dealers to earn commission from lenders without obtaining the customer’s fully informed consent to the payment. But the Chancellor is concerned a £30bn bill for banks could harm the industry and make securing car finance loans more difficult. But Elizabeth Comley, COO of Slater and Gordon, argued: “While we recognise the importance of maintaining confidence in British lenders, this cannot come at the expense of justice for the individuals affected. Consumers deserve accountability and redress when they have been wronged, and Rachel Reeves’ attempts to shield lenders from the consequences of their actions risk undermining public trust in the financial sector as a whole.”
The Daily Telegraph Daily Mirror
PENSIONS
Applying UK inheritance tax to pensions ‘risks delays and higher costs’
Experts are calling on the Treasury to reconsider its inheritance tax (IHT) proposals for pension funds, warning that the current plans could lead to delays and increased costs for bereaved families. The bosses of AJ Bell, Hargreaves Lansdown, Interactive Investor and Quilter have written to the Chancellor, Rachel Reeves, warning that subjecting pensions to IHT could lead to bereaved families paying interest on tax they did not know they owed. Richard Wilson, chief executive of Interactive Investor, said: “The current proposals are an affront to people who have done the right thing by diligently investing through a pension throughout their working lives to ensure financial resilience in retirement, while also taking proactive steps to create an effective estate plan that complies with existing tax rules.”
Financial Times The Times
Labour’s auto enrolment freeze hits businesses
Businesses are set to incur an additional £2.3bn in costs following Labour’s decision to freeze the threshold for automatic pension enrolment at £10,000 for 2025-26. Torsten Bell, the pensions minister, said the move will lead to more low-earners being included in the pension system due to rising earnings. The private sector’s pension contributions are expected to rise from £49.6bn to £51.9bn. Ian Futcher, a financial planner at Quilter, remarked: “While freezing the thresholds provides stability for both employers and employees, it is still a missed opportunity to drive higher contributions that could secure better retirement outcomes for millions of workers.”
Daily Mail
MANUFACTURING
ESG rules are ‘destroying the European defence industry’
The general secretary of NATO has warned that ethical investing rules are hampering efforts by European defence firms to raise capital. Mark Rutte told an event at the World Economic Forum in Davos, Switzerland: “We still are not able to explain to the pension funds, to the banks, the difference between illicit drugs and pornography on the one hand and spending on our collective defence on the other. And somehow it’s all the same basket. This is crazy.” Mr Rutte was supporting remarks made by François Michel, chief executive of Belgian defence manufacturer John Cockerill, who claimed that ESG risked “destroying the European defence industry.”
The Daily Telegraph
RETAIL
Consumer sentiment declines sharply
Consumer confidence in the UK’s economy has plummeted, with the British Retail Consortium’s (BRC) consumer sentiment index revealing a drop to -34 in January, down from -27 in December. The survey indicates that only those aged 18-27 expect improvement, while two-thirds of individuals aged 60-78 anticipate a worsening economy. Helen Dickinson, chief executive of the BRC, said: “On top of this challenging market backdrop, retailers are facing £7bn in additional costs from the budget and new packaging levy.” She added: “To mitigate this, and shore up investment in shops and entry level jobs, the government must ensure that no shop ends up paying a higher business rates bill because of its proposed reforms.” Retailers are now warning of potential price increases and job cuts as they navigate these financial pressures.
The Times
BANKING
New bill shields taxpayers from bank failures
The Government’s Bank Resolution (Recapitalisation) Bill aims to protect taxpayers from the financial fallout of small bank failures. Treasury minister Emma Reynolds said: “The Bill creates a recapitalisation mechanism which will ensure that certain costs of managing the failure of banking institutions do not fall to the taxpayer.” The legislation allows the Bank of England to direct the Financial Services Compensation Scheme (FSCS) to recapitalise struggling banks, funded by industry levies. While the Bill has garnered support, concerns remain regarding its application to larger banks, with calls for amendments to prevent FSCS funds from being used for them.
The Independent UK
INSURANCE
Pandemic sparks surge in BI cases
The COVID-19 pandemic has led to a significant rise in business interruption (BI) cases, primarily due to ambiguities in insurance policies. The Financial Conduct Authority (FCA) initiated a “test case” at the Supreme Court in 2021, revealing gaps that have made insurance lawyers increasingly sought after. Aaron Le Marquer, partner at Stewarts, stated: “The cases have demonstrated the importance of insurance law to businesses large and small.” High-profile cases include claims from Stonegate Group and Various Eateries, with the latter settling for £16.4m after a favourable ruling. Premier League clubs also pursued claims against major insurers, but most have settled. Mark Pring from Reed Smith noted: “There are huge sums at stake in the litigation and the insurance industry has had a pretty torrid few years.”
City AM
INFRASTRUCTURE
Labour to eliminate environmental watchdogs’ building block powers
In a significant policy shift, the Government plans to empower developers by removing the requirement to mitigate environmental impacts before construction. Environment Secretary Steve Reed announced: “These reforms will unblock infrastructure projects while protecting the natural environment we all depend on.” Instead of prior mitigation, developers will contribute to a new Nature Restoration Fund, which aims to finance larger environmental interventions. The change is expected to expedite up to 150 major infrastructure projects by 2030, addressing delays that have hindered economic growth. The rule modification will be part of the upcoming Planning and Infrastructure Bill, as Labour seeks to stimulate the sluggish UK economy amid rising borrowing costs and a declining pound.
The Daily Telegraph The Independent UK
Thames Water facing bankruptcy as Ofwat refuses to budge
Thames Water has warned ministers that raising bills by more than a third will not be enough for it to avoid bankruptcy. Talks between Britain’s largest water company and Ofwat have broken down after the regulator refused to change its decision last month capping the amount that bills could rise to pay for new infrastructure investments. Thames is expected to appeal its decision to the Competition and Markets Authority. The stand-off has Treasury officials worried that investors will be put off by the regulator’s stance just as the Chancellor is seeking to woo foreign investment.
The Times
ECONOMY
Interest on debt pushes up borrowing
Government borrowing exceeded expectations in December, reaching £17.8bn, significantly higher than the £14.6bn anticipated by the Office for Budget Responsibility. This figure marks the third highest December borrowing on record and the highest in four years. Jessica Barnaby, ONS Deputy Director for Public Sector Finances, said: “Compared with December 2023, spending on public services, benefits, debt interest and capital transfers were all up.” Public sector net financial liabilities are now estimated at 84.5% of GDP, while public sector net debt stands at 97.2% of GDP. In response to the rising fiscal pressures, Darren Jones, Chief Secretary to the Treasury, stated that the Government would rigorously review spending, promising to cut unnecessary expenditures to ensure taxpayer money is used effectively.
City AM
PERSONAL FINANCE
Wealth “increasingly concentrated” among older people
A new report by the International Longevity Centre UK (ILC) and M&G has found that people in their late sixties increased their wealth by nearly 50% between 2010 and 2020, contrasted with those in their late 30s who saw the value of their savings and assets grow by 9%. However, only 6% of over-20s surveyed in 2019-2020 said they had received a gift worth more than £500 in the last two years, and the likelihood of being given a significant gift also falls with age. David Sinclair, chief executive at the ILC, said: “Wealth has become increasingly concentrated among older generations. If we don’t act now, these inequalities will only worsen, leaving younger generations facing even greater challenges.” Liz Emerson, of the Intergenerational Foundation, suggests inheritance tax exemptions for older people if they shift more of their family wealth towards their grandchildren.
The Daily Telegraph