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The government's manifesto-breaking tax rises are the biggest tax increases in more than 25 years

   News / 12 Oct 2021

Published: 12 October 2021
Location: London, UK

By Suzanne Evans, Director, Political Insight

The latest quarterly job statistics have been released by the Office for National Statistics (ONS) this morning, revealing that job vacancies have reached a 20-year high. The largest increases in vacancies were in the retail sector and in motor vehicle repair, the ONS said. There were 1.102 million job vacancies in July to September 2021 on average, up from 863,000 in the previous three months. However, the number of employees on payrolls also showed another monthly increase, rising 207,000 to a record 29.2 million in September. Other headline indicators for the UK labour market for June to August 2021 show that:

  • Employment was 75.3%
  • Unemployment was 4.5%
  • Economic inactivity was 21.1%

Weekly hours worked increased 40,000 from the previous quarter to 1.021 billion hours in June to August 2021, coinciding with the relaxing of coronavirus lockdown measures. This is still below pre-coronavirus levels of February 2020. After inflation, average pay including bonuses saw 4.7% annual growth in June to August 2021, or 3.4% growth excluding bonuses. The ONS says these rises are partly the result of temporary factors and that the underlying picture suggests more modest pay rises.
The government's manifesto-breaking tax rises are the biggest tax increases in more than 25 years, but they will still leave Chancellor Rishi Sunak with "little room for manoeuvre" in this month’s Budget and Spending Review, according to the Institute for Fiscal Studies' (IFS) Green Budget 2021, reported by Yahoo Finance UK. The tax rises will increase the UK’s tax take to its highest sustained level in peacetime, with spending amounting to 42% of national income, more than 2% above the pre-pandemic spending level and its highest level in "normal times" since 1985, the IFS predicts. The think-tank claims this is mostly the “inevitable consequences of population ageing and pressures on health and care spending” than anything else, arguing that “tax rises that were always inevitable have been smuggled in under cover of the pandemic." Decisions over NHS funding increasingly shape the funding outlook for other departments, as well as overall fiscal policy, the IFS claims. Health spending has risen to make up an ever-growing share of day-to-day public service spending — an estimated 44% by 2024/25, up from 42% in 2019/20, 32% in 2009/10 and 27% in 1999/2000. If the new tax rises meant to fund health and social care are to meet future health and social care pressures then the tax rate could need to more than double from 1.25% to 3.15% by the end of this decade, the IFS estimated.
Business Secretary Kwasi Kwarteng has formally asked the Treasury to support industries hit by soaring energy costs, the BBC reports. The request follows weekend claims he made on Sky News to be in talks with the chancellor about potential support which were disputed by a Treasury source who also claimed Kwarteng "made things up in interviews".
The Director General of UK Steel, Gareth Stace has called on Prime Minister Boris Johnson to step in to "bang ministerial heads together" and "address the exorbitant gas and electricity prices facing us". Speaking on Sky Newsyesterday, Stace said UK Steel pays "80% more than our competitors in Germany" for electricity and said the government should temporarily provide "a certain amount of capacity at a competitive price".
CF Fertilisers, which produces around 60% of the UK’s commercial CO2requirements, is to hike its prices in a government-brokered deal. The firm said in September that it was temporarily shutting two plants because of soaring wholesale gas prices; although the plants make fertilisers, they also produce CO2 as a side-product, which is sold on to a wide range of industries, from food and drink processing to nuclear power. Faced with a CO2 shortage, the government stepped in and brokered a three-week deal to enable CF Industries to restart the plants. It is thought to have involved tens of millions of pounds in subsidies. Yesterday however, the Department for Business, Energy and Industry Strategy (BEIS) said CO2 suppliers had now agreed to pay a price for the gas that will enable CF Fertilisers to continue operating while global gas prices remain high, without the need for subsidies. The deal will remain in place until January 2022. CF Fertilisers is owned by New York-listed CF Industries.
The price of oil has climbed to new multi-year highs. Brent crude jumped as much as 1.7% to $83.78 (£61.40) per barrel yesterday, its highest level since October 2018. US crude also hit a new seven-year high, reaching $80.70 per barrel for the first time since 2014.
The Government has bought 100,000 doses of a new experimental Covid antibody treatment from British pharma GlaxoSmithKline.  Sotrovimab has yet to be approved by UK regulators but has been given the green light in the US, the EU and Japan. The Telegraph said it is not known how much the Government paid for the drug.
Meanwhile, GlaxoSmithKline has unveiled plans for a new £120m base in Weybridge, Surrey, for the separate consumer healthcare operation it will create when it splits into two listed firms in mid-2022. Around 800 staff in the new firm will relocate to the yet-to-be-constructed building from the end of 2024. It will eventually house 1,400 workers. The business is a joint venture with Pfizer, which counts brands such as Sensodyne and Aquafreshtoothpastes and Panadol painkillers among its product range. Glaxo added that it would be selling its current corporate headquarters in Brentford and that pharmaceuticals and vaccines staff would relocate within the same area, but not until at least the end of 2023.
Surgical robotics pioneer CMR Surgical is to build a new multi-million-pound global manufacturing hub in the UK. 200 people will be based at the British firm's 75,832 sq ft factory in Cambridgeshire when it opens.
Irish airline Ryanair is barring passengers who pursued chargebacks against the airline during lockdown restrictions from taking new flights unless they return their refunds. Ryanair refused to refund passengers unable to travel during lockdowns so many sought chargebacks from their credit card company instead and were successful. Now, MoneySavingExpert (MSE) has found those who got refunds from their credit card provider have faced last-minute demands of up to £600 if they want to board a Ryanair plane. Ryanair is defending its actions. It claims it has always been a “no-refunds airline” and that the company’s T&Cs state it may refuse to carry passengers who owe monies in respect of a previous flight owing to “payment having been dishonoured, denied or recharged against us.” Last week the Competition and Markets Authority dropped its investigation into whether British Airways and Ryanair broke the law by failing to offer refunds to customers who could not legally take their flights because of restrictions.
British airline EasyJet said this morning that “travel was back” and it would fly 70% of its pre-pandemic capacity between October and December this year, higher than it planned last month. Lockdowns and other Covid-related travel restrictions drove EasyJet’s losses above £1 billion in 2020/21. "We are encouraged to see positive booking momentum into full-year 2022 which has led us to increase our capacity plans," said chief executive Johan Lundgren.
UK rents are up 9.7% on pre-pandemic levels, with most of the increases happening this year, according to the HomeLet Rental Index. In September, the average household spent 29.6% of their gross income on rent, compared with 30.9% in September 2019, before the pandemic. Renters in London – still the most expensive place to rent a home - spend the greatest percentage of their income on rent, an average of 33.7%. In the capital, rents average £1,752 per calendar month, an annual increase of 6.4%. In the most affordable area to rent, the North West, renters spend 22.1% of their income on rent, paying an average of £578 pcm, up 3.6% from 2020.
Two in five (41%) working mothers say being a parent is holding them back from promotion at work. New research from work-life balance charity Working Families also found half of those with additional caring responsibilities for a sick, elderly or disabled family member said the same. A YouGov survey of 755 British parents with children 18 or under, who were either working or on flexi-furlough in August 2021, suggests the long-established "motherhood penalty" has become a "parenthood penalty" with 30% of male respondents saying that being a parent and having caring responsibilities holds them back from getting a promotion. One in five (22%) working parents said they have felt they had to hide the fact that they have taken time off from work for childcare reasons from their manager. "Outdated cultures and practices still hold sway in many workplaces around the UK," said the charity.
Philip Hammond, the former Chancellor, has joined cryptocurrency startup Copper, taking on the job as an adviser to the firm. The company, which launched in 2018, provides digital currency custody and trading services to institutional investors. It handles $50bn (£36bn) in transactions each month on behalf of around 400 clients, including traders, wealth companies, private banks and offices.
China has banned British beef imports of cattle under 30 months of age – again – in response to a case of bovine spongiform encephalopathy (BSE), or mad cow disease, in the UK last month. The BBC reports the ban took effect from 29 September, citing a statement from the General Administration of Customs. Although China technically lifted a ban imposed in the 1990s on beef from the UK in 2018, no beef has actually been imported since then. At the time, the UK government said the lifting of the ban would be worth £250m to British producers over the next five years.
The price of coal used in China's power plants has surged to a record high, the BBC reports.  On Friday last week, Beijing reportedly ordered China's coal mines to boost output to increase coal supplies after prices soared and electricity shortages forced energy firms to ration power. A series of power cuts also forced factories to cut back production or stop operations completely in the last month. However, key mining regions have been hit by flooding, complicating China's efforts to increase fuel supplies. Shanxi Province, which produced around a third of China's coal supplies this year, was forced to temporarily shut dozens of mines, although some sites are now slowly resuming operations. At least 15 people have died during the severe flooding that has affected more than 1.76 million people in the province. Torrential rain last week led to houses collapsing and triggered landslides across more than 70 districts and cities in the northern province.

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