Hard-pressed households are facing a “difficult” future as inflation rises

By Suzanne Evans, Director, Political Insight

Hard-pressed households are facing a “difficult” future as inflation rises but the Government cannot spend its way out of the problem, senior minister Jacob Rees-Mogg has warned. The Brexit Opportunities Minister told Channel 4’s Andrew Neil Show: “There are limits to what the Government can do because in an inflation, increasing public expenditure, increasing the deficit would – in and of itself – be inflationary. The Bank of England is forecasting inflation could reach its highest rate in 40 years by October, soaring above 10%. Rees-Mogg also rejected calls for a windfall tax on energy companies, saying: “Short-term raids on companies are not the answer to an inflationary problem” and that “the Government needs to operate within the resources that it has got, that the nation as a whole has.” He noted the tax burden was “about as high as it’s been in 50 years” as a share of the overall size of the economy and added: “There’s very little room for extra taxation, we have to live within our means”. He also defended the firms using their windfalls to pay dividends, saying they benefitted pension funds and it was a “fanciful idea that there is tax that can be taken that does not ultimately fall on individuals one way or another”.
 
A review by Common Wealth reveals that the main UK pension funds hold only a tiny fraction of Shell and BP shares, having sold their holdings to buy safer bonds, undermining claims that a windfall tax on big oil companies would harm savers’ retirement incomes. Common Wealth said that while many defined contribution occupational schemes invested in global shares, using large US fund managers, “their vulnerability to a windfall tax on BP and Shell will be absorbed by the huge breadth and diversification of these asset management giants”. Independent pensions consultant John Ralfe said: “The idea that BP or Shell are widows’ and orphans’ stocks, or that pensioners rely on income from the oil giants to make ends meet, is just risible…As an argument against a windfall tax, it has no validity whatsoever.” Research earlier this year by the TUC, Common Wealth and the High Pay Centre showed that UK pension funds accounted for only 2.4% of the total market value of UK-listed shares, down from 13% before the financial crisis in 2008. Indirect ownership via investment funds accounted for another 6%. Chancellor Rishi Sunak has hinted he is considering a tax on oil companies, while Business Secretary Kwasi Kwarteng has spoken against the idea.
 
A report from the Digital, Culture, Media and Sport (DCMS) Committee on influencer culture says there are regulatory gaps which leave children at risk of exploitation and unacceptable compliance with advertising rules. The committee of MPs has called on the Government to strengthen employment and advertising laws to protect children saying they and their parents and schools must be given more support in developing media literacy. It also recommends rules around advertising for children should be bolstered, and child labour regulations should be brought up to date to reflect the growth of child influencers. It also calls for a code of conduct for influencer marketingto be commissioned.
 
The new Hinckley Point C nuclear reactor plant in Essex is at risk of collapse because of political opposition to Chinese involvement, French energy giant EDF has warned. The Telegraph says the big six energy supplier has told investors it has no obligation to keep funding the project and that there is now “great uncertainty” over whether it can be delivered.  EDF’s annual report also warns it may have to put billions into extra funding for the plant, the first new nuclear energy site in three decades, if China refuses to participate in an investment round planned for 2023. State-owned power company China General Nuclear (CGN) is currently developing Bradwell B and Sizewell C in Somerset, but the political landscape has since changed and ministers are seeking to remove CGN from Britain’s nuclear infrastructure amid growing concern about the emerging superpower’s involvement. Consequently, “the risks of not being in a position to carry out the Bradwell project are high and have increased in 2021,” EDF said.
 
Energy bills are on course to climb to around £2,900 when the energy price cap is reset in October, Keith Anderson, the CEO of Scottish Power has said. He warns this will lead to a “huge increase” in customers being unable to pay for their energy unless ministers step in with more support. He said: “It will hit incredibly hard and immediately…we will see a huge increase in pre-payment customers in effect self-disconnecting – not re-loading their pre-payment meter because they can’t afford to do it. We will also see a massive increase in debt levels for direct debit customers, and a massive increase in people being pushed from direct debits to prepayment meters so that companies can recover the debt”. “We are heading to a really horrible place where none of us want to be,” he added.
 
Research by the Food Foundation charity suggests around one in seven adults may now live in homes where people have skipped meals, reduced meal sizes or gone hungry. An online survey by YouGov saw 10,674 adults surveyed online between April 22 and 29 and found the number of people struggling to buy food has risen by 57% in three months.
 
Insecure low-paid jobs are costing the Treasury as much as £10bn a year, according to the Trades Union Congress (TUC), which has released a study showing that low-paid self-employed workers and those on zero-hours contracts earn significantly less than regular employees, and are therefore paying less tax and national insurance. More than 1 million Brits are on zero-hours contracts and 3.6 million people in total are in insecure work, including those in low-paid self-employment, the TUC said, adding that half of those in self-employment earn less than the minimum wage.
 
A Guardian analysis of tax returns submitted by Barclays shows the bankhas avoided nearly £2bn in tax via a lucrative arrangement that has allowed it to pay less than 1% on profits since 2009, when Barclays made the decision to book profits from the $15.2bn sale of a fund management business in Luxembourg, rather than in the UK where it is headquartered, the newspaper says. By booking the profits overseas, Barclays was able to take advantage of a complex scheme whereby it could offset future profits against a drop in the value of company shares it acquired as part of the deal. Senior Labour MP Margaret Hodge said: “These revelations that Barclays is using a scheme in an infamous tax haven leaves the British-headquartered bank with important questions to answer: “Why is Barclays setting up shop in Luxembourg at all, other than to avoid tax? Does this artificial financial arrangement mean that profits are shifted away from the UK, thus harming our tax coffers? Or have business investments been channelled through this tax haven instead of in Britain, harming our economy in the process?” Barclays employs only 54 staff in Luxembourg, but it is currently the bank’s third most profitable jurisdiction behind the US and UK, with turnover of £1.1bn last year, the Guardian says. Low staff costs mean Barclays can turn nearly all of that income from corporate and investment banking into profit. The bank has 46,000 staff in the UK and nearly 10,000 in the US.
 
Bank of England (BoE) and Financial Conduct Authority (FCA) officials are still spending the vast majority of the week working from home despite ministers piling pressure on workers to get back to their desks, the Telegraph reports. The Bank is only requiring staff to return to the office one day a week, while the FCA is trialling a “hybrid working” model until August that requires staff to be in the office just two days a week. Prime Minister Boris Johnson said: “Mother Nature does not like working from home,” at the end of last year, and Catherine Mann, a member of the Bank’s monetary policy committee, said in November that women risk hurting their careers if they continue to work remotely while others return to the workplace. “There is the potential for two tracks…the virtual track and…a physical track. And I do worry that we will see those two tracks develop, and we will pretty much know who’s going to be on which track, unfortunately,” she explained.  
 
Tesco CEO Ken Murphy wants ministers to change “outdated” laws to allow insects grown on food waste to be fed to fish, pigs and chicken. Writing in The Telegraph, he says “regulatory barriers” to insect protein should be removed so it could be used as an alternative feed to animals to strengthen the UK’s food security as the war in Ukraine hammers supply chains. Murpy argues that insects are a more natural source of protein than soy, which is currently used in animal feed.
 
British Airways (BA) is having to promise to hire 500 call centre workers in the next two months to deal with passenger fury following long delays in answering calls. BA CEO Sean Doyle said the airline is headed for its busiest time of year and that around 150 new members of staff have been hired already. BA is also having to cancel 16,000 flights over the spring and summer because of staff shortages, which the airline has blamed on delays to security vetting of applicants by government agencies. The FTSE 100Spanish-owned company has just announced a €916m (£784m) pre-tax loss for the first three months of the year.
 
EasyJet is planning to tackle staff shortages by removing seats on its flights so it can fly with less crew. The Civil Aviation Authority bases its requirements on the number of crew members needed per flight on the number of passengers flying, the Independent reports, and by removing the back row of seats on its A319 planes, limiting passenger numbers to 150, the budget airline will be able to fly with three crew members instead of four.
 
Troubled UK retail chain McColl's went into administration on Friday, as expected. PwC is understood to have last night taken final offers from Morrisons, which is owned by the US private equity firm Clayton, Dubilier & Rice, and EG Group, the petrol forecourt empire owned by the billionaire Issa brothers who also own Asda. Various media outlets now say both bidders have included a pledge to repay McColl’s lenders in full immediately, one of the key sticking points of Morrison’s previous bid, and that both new offers now include taking on McColl's pension scheme commitments.
 
New figures from real estate firm Colliers reveal that take-up and prices for logistics space have continued to increase despite the easing of pandemic restrictions. Demand for warehouses soared during the pandemic as shoppers increasingly moved online, and Andrea Ferranti, head of industrial and logistics research at Colliers, says prices are surging because of continuing demand. He told the PA news agency that take-up for large units – more than 100,000 square feet – grew to a total of 11.3 million square feet in the first quarter of 2022, an 11% rise on the five-year average for the quarter, and a 1.9% monthly increase. Meanwhile, logistics site availability has dropped by 22.4% year on year as facilities continue to be snapped up.
 
Australian insurance broker AUB Group said this morning it would buy London-based Lloyd's wholesale insurer broker Tysers for A$880 million (£504.5m).
 
Chelsea FC has confirmed the race to buy the Blues has been won by a consortium led by LA Dodgers co-owner Todd Boehly, which has agreed terms to buy the football club in a £4.25 billion deal. The club was put up for sale in March by Roman Abramovich shortly before he was sanctioned over alleged links to President Vladimir Putin amid Russia’s invasion of Ukraine. The approval of the Premier League and the UK Government is required before completing the sale which, all being well, Chelsea expects by the end of the month.
 
It has just been announced that Rightmove CEO Peter Brooks-Johnson will step down from the board and leave the company after the announcement of the firm's full-year results in February 2023. He has spent more than 16 years in the job.
 
Bitcoin fell to its lowest level since January this morning, in line with the slumping tech-heavy Nasdaq, which fell 1.5% last week. Bitcoin was as low as $33,266 in morning trade, before steadying to trade around $33,500, down 1.4%. The cryptocurrency is now 50% down on its November 2021 peak. The Nasdaq has lost 22% year to date, hurt by the prospect of persistent inflation leading the US Federal Reserve to hike interest rates despite slowing growth.

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