The Treasury took £10bn more in taxation last month than in April 2021

By Suzanne Evans, Director, Political Insight

The Treasury took £10bn more in taxation last month than in April 2021 because of the rise in National Insurance and the economic recovery. However, economist Michal Stelmach at KPMG warned that rising inflation meant “we now expect monthly interest spending to reach an eye-watering £16bn in June, exceeding the annual day-to-day budget of the Home Office.” This is almost four-times April's interest payments of £4.4bn.
 
According to the Financial Times, the Treasury is drawing up plans that would widen any possible windfall tax beyond oil and gas producers to cover electricity generators as well, including wind farm operators. The newspaper quoted an unnamed government insider, who said: "North Sea oil and gas producers are only half the picture. The other half is that high gas prices have led to some pretty substantial windfall profits for all electricity generation." Shares in electricity generators subsequently fell yesterday. SSEended the day down 7.85%, Drax had tumbled 13.79%, and British Gas-owner Centrica was off 7.19%.
 
Jonathan Brearley, CEO of Ofgem, told the Business, Energy and Industrial Strategy committee yesterday that he was expecting the energy price cap to rise to £2800 in October. Energy bills already rose £693 to £1,971 in April, following a 54% energy price cap increase amid soaring oil and gas prices. "I'm afraid to say conditions have worsened in the global gas market, with Russia's invasion of Ukraine,” Brearley said. "Gas prices are higher and highly volatile. At times they have now reached over 10 times their normal level." If the energy regulator does indeed hike the price cap to £2,800. prices will have more than doubled in just over six months for some 22 million households on standard variable tariffs. Adam Scorer, CEO of National Energy Action, said: “Ofgem’s warning that the price cap will rise again by over £800 in October will strike terror into the hearts of millions of people already unable to heat and power their homes.” “It will plunge households into deep, deep crisis. The financial, social and health impacts are unthinkable,” he added. Analysis from thinktank The Resolution Foundation suggested the number of families living in fuel stress — defined as spending at least a tenth of their total budgets on energy bills alone — would rise from 5 million to 9.6 million should the price cap rise as Brearley predicts.
 
The Public Accounts Committee (PAC) has highlighted “widespread non-compliance” with IR35 tax reforms, including in central government departments. It says the situation is “not acceptable”.  Last year’s reforms to the way in which freelance contractors are hired by private sector businesses by HM Revenue & Customs (HMRC) were “rushed,” “provided poor guidance,” and even “public bodies struggled with its tool to assess status,” the committee said. Its analysis suggests even government departments and agencies subsequently owe HMRC £263m in back taxesbecause public bodies were given too little time to prepare for the changes. The new rules put responsibility on assessing self-employed status from the freelancer to the hiring company, in a move aimed at tackling ‘tax avoidance’ from so-called ‘disguised employees,’ but PAC also criticised the absence of a clear definition of self-employment which it said makes it “challenging” for hiring organisations to correctly determine a workers’ employment status.
 
Amazon has reaped a total of £425m in UK government contracts in the past two years, The Guardian says, prompting fresh criticism that the tech giant is failing to pay a fair share of tax in Britain. The newspaper quotes a report by the Centre for International Corporate Tax Accountability and Research(CICTAR) with assistance from investigative thinktank Taxwatch, which found Amazon’s highly profitable cloud computing business is increasingly being indirectly supported by taxpayers through hundreds of billions of dollars in government contracts around the world. In the UK, Amazon benefited to the tune of more than 10 times the level of corporation tax paid by the group’s main British subsidiaries that year.
 
The number of low-paid workers in the UK has hit a record low and is on track to be "eliminated" by 2024 according to new analysis by the Resolution Foundation. However, the same report suggests the number of low-earning self-employed workers has gone up. The report, written in collaboration with the LSE and funded by Nuffield Foundation, concluded that the introduction of and rise in the minimum wage has helped reduce low pay - defined as earning less than two-thirds of the typical hourly pay - to a joint record low of 13% with 2021. Low pay among women has more than halved between 1997 and 2021 - from 31% in 1997 down to 14% last year. Yet while the number of low-paid employees has fallen, the number of low-earning self-employed workers has grown at an “alarming rate” the report says, with self-employed people nearly three times more likely to be low paid than employees. "This is an issue that goes well beyond the rise of the gig economy", the foundation said, noting that currently there are as few as 350,000 "gig workers" across the UK, compared to the 1.6 million low-paid self-employed workforce. "With these workers completely outside the legal framework of the minimum wage and the tax system encouraging employers to use self-employed labour, a new approach will be needed to reduce low pay among the self-employed," it added.
 
Members of the Rail, Maritime and Transport (RMT) union at Network Railand 15 train operators have voted overwhelmingly to go on strike over jobs, pay and conditions. The union said it was the biggest endorsement for industrial action by railway workers since privatisation in the 1990s. RMT general secretary Mick Lynch said: “Today’s overwhelming endorsement by railway workers is a vindication of the union’s approach and sends a clear message that members want a decent pay rise, job security and no compulsory redundancies. Our NEC will now meet to discuss a timetable for strike action from mid-June, but we sincerely hope ministers will encourage the employers to return to the negotiating table and hammer out a reasonable settlement with the RMT.” The union says Network Rail intends to cut at least 2,500 maintenance jobs as part of a £2 billion reduction in spending on the network, while staff at train companies have been subject to pay freezes, threats to jobs and attacks on their terms and conditions. The Government and rail industry criticised the move towards strike action, calling it “hugely disappointing and premature”. Andrew Haines, Network Rail’s CEO, said: “The RMT has jumped the gun here as everyone loses if there’s a strike. We know our people are concerned about job security and pay. As a public body we have been working on offering a pay increase that taxpayers can afford, and we continue to discuss this with our trade unions”. He added: “We are at a key point in the railway’s recovery from the pandemic. The taxpayer has provided the industry with £16 billion worth of additional life support over the last two years and that cannot continue”.
 
More than 700 households in NW England who are unable to access the UK mains gas grid are to be freed from “unlawful” LPG contracts. The Competition and Markets Authority (CMA) investigated complaints that the households, who buy domestic gas from BDS Fuels, and found they had been automatically locked into repeat “exclusivity contracts” for LPG (liquified petroleum gas) without their explicit consent. Customers were also required to pay a £350 fee if they wanted to break the contract and change providers. The CMA said BDS had now agreed to remove unlawful automatic renewal clauses from its LPG contracts; inform all affected existing customers that they could switch supplier with immediate effect and without paying a fee; and to refund customers who paid a fee to be released from their LPG contract early.
 
Grocery prices in Britain rose 7% in the four weeks to 15 May, the fastest pace in 13 years, and market research firm Kantar has found that over one fifth of households are now "struggling" to make ends meet. Rising food prices are of concern to over nine in 10 of the 22% of shoppers struggling financially, making it the second most important issue behind rising energy bills, Kantar said.
 
UK private sector growth is the weakest it has been since last year's winter lockdown, the closely watched S&P Global / CIPS Flash UK Purchasing Managers Index (PMI) reveals. It dropped to 51.8 in May - a 15-month low and down from 58.2 in April. A score above 50 signifies growth.
 
FTSE 100 insurer Aviva said the proportion of insurance claims it rejected due to fraud concerns rose last year, and that it expects fraudulent claims to increase further as the cost-of-living crisis deepens. The Independentreports that the insurer uncovered more than 11,000 instances of claims fraud in 2021, worth more than £122 million, meaning some 30 bogus claims are typicalle being detected every day. Waseem Malik, chief claims officer at Aviva UK General Insurance, said: “Fraud is typically committed for reasons of need or greed, and we believe the increase in claims fraud last year is linked to reduced incomes during Covid lockdowns...As more households and businesses come under increased financial stress due to the cost-of-living crisis, we expect to see more claims fraud, especially on home, small business, and liability insurance policies”.
 
UK banks and insurers will end up shouldering nearly £340bn worth of climate-related losses by 2050, unless action is taken to curb rising temperatures and sea levels, the Bank of England (BoE) has warned. The ghoulish prediction is based on the Bank’s first climate stress tests on seven of the UK’s largest lenders, involving three climate scenarios over a 30-year period. One involved average temperature rises of 3.3°C, and a 3.9-metre rise in sea levels. The BoE warned that banks must stop funding fossil fuel projects to prevent economic disaster and a jump in millions of consumers’ insurance and mortgage costs. Some economists and MPs, however, scorned the report and called for the central bank to “focus on the basics of monetary economics” rather than climate change. Steve Baker, Tory MP for Wycombe, said: “With inflation heading toward double digits, the electors of Wycombe need the bank to focus on the basics of monetary economics, and not start leaning into much longer-term problems in areas of great controversy.” Ruth Lea, economic adviser to Arbuthnot Banking Group, said: “Given the economic problems that this country faces, the bank’s dealing with climate change is a horrendous distraction from its core activities.”
 
The number of house sales fell slightly in April, according to figures from HM Revenue and Customs (HMRC). There were 106,780 transactions last month, down 3.9% from March, and 12.1% lower than in April 2021 when the stamp duty holiday was still in full swing. However, despite the drop in sales, transactions were ahead of pre-COVID levels in 2018 and 2019, suggesting the market remains hot despite inflationary pressures.
 
The Confederation of British Industry (CBI) has found that sentiment in the retail sector deteriorated at the fastest pace since November 2020, Yahoo Finance UK reports. As rising costs hit consumer demand, sales volumes were reported as flat in the year to May but retailers believe they will fall at a modest pace next month. Recent figures from the Office for National Statisticsrevealed retail sales rose 1.4% in April despite the surge in inflation squeezing household finances and threatening to push the UK into a recession. Internet sales volumes fell at their quickest rate on record during the period.
 
Farmers are threatening to reduce bread production by planting less crops for milling wheat and more for animal feed, which is spiralling in cost, The Telegraph claims. The government is being urged to offer more incentives to farmers to push them to plant milling wheat in the coming months, helping to guarantee decent future returns, amid fears that a failure to do so could impact options on supermarket shelves. Minette Batters, president of the National Farmers’ Union, warned that there was a "real danger in this world that farmers actually just decide to produce wheat to feed pigs and poultry, because they know they're going to be guaranteed a good price".
 
One of the City’s elite “magic circle” law firms has boosted the starting salary for junior solicitors in their mid-20s to £125k, escalating a war for talent with aggressive American rivals, The Telegraph says. Clifford Chance updated its graduate recruitment website on Monday to reflect a 16% salary bump to £125,000 from £107,500 – the second pay raise in just over six months. It will take effect immediately.
 
FTSE 100 miner Glencore has indicated it will plead guilty to seven counts of bribery in the UK related to its oil operations in Africa, the UK’s Serious Fraud Office (SFO) said in a statement. Glencore must also pay a $1bn (£800m) to resolve US bribery and market manipulation investigations dating back to 2007, and has announced it has agreed to pay $39,598,367 (£31 million) in a settlement signed with the Brazilian Federal Prosecutor’s Office in connection with its bribery investigation. The firm’s chairman has admitted that “unacceptable practices” took place. In London, the SFO alleged that it had found “profit-driven bribery and corruption across the company’s oil operations in Cameroon, Equatorial Guinea, Ivory Coast, Nigeria, and South Sudan”. “Glencore agents and employees paid bribes worth over $25m for preferential access to oil, with approval by the company,” the SFO alleged. Dutch and Swiss authorities are also investigating alleged wrongdoing by the firm, some of which is thought to be related to operations in the Democratic Republic of Congo. In February, Glencore said it had set aside $1.5bn to cover potential fines and costs related to the various investigations. The company has just announced it will return $4bn in dividends to shareholders following record profits.
 
Shell was forced to pause its AGM in London yesterday after it was interrupted by some 40 environmental protesters attending the event as shareholders. They repeatedly chanted slogans such as: “Shell must fall” and “shame on you” and “We will stop you.” “We will expose you. We know who you are. We know what you have done. We will remember,” they said. They also accused the board of spending “more money on green advertising than green technology”. Three of the protestors were arrested after the police were called.

A safety consultant at oil and gas giant Shell has stopped working for the firm and accused its top executives of failing to protect the environment. In a post on LinkedIn, Caroline Dennett said the company is "causing extreme harms to our climate, environment, nature and to people". "Contrary to Shell's public expressions around 'net zero', they are not winding down on oil and gas, but planning to explore and extract much more," she added. In response, Shell reaffirmed its aim to become carbon neutral by 2050.
 
British Airways (BA) owner IAG is said to be facing a shareholder pay revolt because of the company’s proposal to increase chief executive Luis Gallego's maximum share award under its restricted stock plan from 100% of salary to 150%, despite heavy losses experienced during the pandemic.  Glass Lewis, one of the major proxy voting agencies, recommended that investors vote against the pay policy as it is "misaligned with the stakeholder experience".
 
The sale of Chelsea FC moved a step on yesterday when the government confirmed talks have started with "international partners" to help complete the deal. A consortium headed by US businessman and investor Todd Boehly has agreed to pay £4.25 billion for the Premier League club. Current owner Roman Abramovich it on the market in early March, just before he was sanctioned by the British government following his country's invasion of Ukraine. Completing the purchase has been a lengthy process due to government concerns over the potential for Abramovich to profit from the sale, AFP says and because of the £1.5 billion debt owed by Chelsea's parent company, Fordstam Ltd, to Camberley International Investments, a Jersey-based company with suspected links to Abramovich. Abramovich, who has said he has not asked for his loan to be repaid, is understood to have provided confirmation to the government that his associate, Demetris Ioannides, has resigned from the trust owning Camberley International, which is believed to be a key development in meeting the government’s requirements for the granting of a new sale licence.
 
Dyson is looking to recruit 250 robotics engineers this year to build ‘home assistant’ robots for use by the end of the decade. The UK-founded firm plans total investment in new technologies of £2.75 billion over the next five years, and those plans include a robotics centre at Hullavington Airfield in Wiltshire led by Dyson’s chief engineer Jake Dyson..
 
London’s £18.9 billion Elizabeth line railway opened yesterday morning. PA Media said hundreds of transport enthusiasts gathered at stations in Paddington, west London and Abbey Wood, south-east London, to be on the first trains which departed shortly after 6.30am. Transport for London (TfL) said an estimated 130,000 journeys were made up to 10am on the entire line, which stretches from Reading in Berkshire and Heathrow Airport in west London to Abbey Wood in south-east London and Shenfield in Essex. Around 65,000 of those involved the new central section between Paddington and Abbey Wood. Mayor of London Sadiq Khan, who travelled on the first departure from Paddington, said it was “a fantastic day”.
 
Steve Rowe steps down as CEO of Marks & Spencer today after six years in the post, ending his 39-year career at the British retailer which started when he was a Saturday boy at the Croydon store. He will be succeeded by M&S's food boss and joint chief operating officer Stuart Machin.
 
The Independent reported yesterday that social media stocks lost more than $160bn in market value after a profit warning from Snapchat’s owner Snapcaused a sharp decline in the sector. The share price of the company, which is dependent on digital advertising, plummeted more than 40 per cent after the warning, taking its price to below its 2017 initial public offering price of $17. Facebook-owner Meta, Google-owner Alphabet, Twitter and Pinterest, were also down between 7% and 24% and saw more than $201.8bn wiped off their values yesterday before rallying and regaining some ground. Snap’s share price is down around 83% since September 2021 and has fallen 70% so far in 2022. Financial observers say that concerns about inflation, interest rates, supply chains and Russia’s continuing war in Ukraine has caused advertisers to rethink their spending, according to CNBC.
 
Consumer credit provider Klarna is planning to axe 10% of its staff, it was reported yesterday, as the company warned that a recession looked likely. According to BBC News, the Swedish buy-now-pay-later specialist was planning to cut about 700 of its 7,000-strong global workforce, amid red-hot inflation, plummeting consumer sentiment and the ongoing war in Ukraine.
 
The US is cutting off another financial route for Russia to pay its international debts, a move that could push the country closer to default, the BBC reports. The US Treasury Department said it would end a waiver that had allowed US bondholders to accept payments, tightening sanctions imposed over the war in Ukraine. Russia, which is rich from its oil and gas supplies, has the funds to pay and has already signalled plans to contest any declaration of default. While the new rules only apply to people in the US, they will make it difficult for Russia to make payments elsewhere given the role of US banks in the global financial system. The US had already barred Russia from using US banks to transfer payments. Russia's debt was already downgraded to "junk status" by major ratings agencies in March, a move that disqualifies it from purchases by major investors, making it difficult for Russia to raise money on international markets.

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