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Chancellor Jeremy Hunt set out his plan to boost economic growth 

   News / 27 Jan 2023

Published: 27 January 2023

By Suzanne Evans, Director, Political Insight

Chancellor Jeremy Hunt set out his plan to boost economic growth earlier this morning, outlining the opportunities in what he called "the growth sectors which will define this century,"such as digital technology, green industries, life sciences, advanced manufacturing and creative industries. Hunt also set out a long-term plan to tackle poor productivity, saying: "Confidence in the future starts with honesty about the present, and we should not shy away from the biggest challenge we face which is our poor productivity". Hunt also criticised those promoting "declinism about Britain," saying that some downbeat forecasts "do not reflect the whole picture," nor the fact that Britain's economy had “grown by more than France and Germany since 2010.” He also praised "British genius and British hard work", which he promised to turn into prosperity in the long term. He also pledged to build on "the freedoms which Brexit provides" in his speech at Bloomberg's London HQ, not least, he said, because his was “a plan necessitated, energised and made possible by Brexit which will succeed if it becomes a catalyst for the bold choices we need to take". On taxation, he said: “The Conservative Party understands better than others the importance of low taxes in creating incentives and fostering the animal spirits that spur economic growth,” but added that “the best tax cut right now is a cut in inflation,” and he made no commitment to tax cuts. Later in his speech however, he did say that “our ambition must be nothing less than to have the most competitive tax regime of any major country,” which means “restraint on tax spending”. He added: “In case anyone is in any doubt about who will actually deliver that restraint to make a low tax economy possible, I gently point out that in the three weeks since Labourpromised no big government chequebook, they have made £45bn of unfunded spending commitments”.

The Government has written down almost £15bn in costs related to purchases of personal protective equipment (PPE) and other medical items over the last two years, prompting censure from its spending watchdog the National Audit Office (NAO). The Department of Health and Social Care (DHSC) estimates there has been a £6bn reduction in the value of items procured in response to Covid-19 in 2021-2022, out of which a write down of £2.5bn relates to items already purchased by the DHSC that it no longer expects to use, while the rest relates to items the DHSC has committed to purchase, but no longer expects to use. The DHSC reported an impairment of £8.9bn in 2020-2021, taking the total write-down to £14.9bn over two financial years. Despite the huge loss, a government spokesperson said in a statement to Reuters: "It is misleading to say that £14.9bn of taxpayers' money has been wasted". The statement added it had to compete in an overheated global market to procure items, the majority of which it has used.

The Department for Transport has not denied a report in The Sun newspaper which claims Ministers are no longer committed to delivering the HS2 rail line to central London Rising inflation and construction costs meant HS2 trains may terminate in the suburbs of west London instead, permanently, the report said, although it said another option on the table was pushing back its Euston terminus by five years, to 2038. Scrapping the central London scheme would see trains running from a new hub at Old Oak Common, about 8km (five miles) away, with commuters having to use the Elizabeth Line or London Underground to travel to central London.

The Times newspaper claims the Government is looking at plans to allow foreign students to work longer hours to boost the economy by plugging vacancies in areas such as hospitality and retail. Discussions are said to have begun about either raising the cap on paid work hours on foreign students to 30 hours per week from 20 hours currently, or removing it entirely, the report added.

HMRC CEO Jim Harra gave evidence to the Public Accounts Committee about managing tax compliance following the pandemic yesterday, and ended up facing questions related to the tax arrangements of Conservative Party Chairman Nadhim Zahawi, who has come under growing pressure in recent weeks. Zahawi is facing calls to resign after it emerged he paid a penalty to HMRC, over previously unpaid tax, an error he says was "careless and not deliberate". While refusing to comment on specific individuals, Harra said: "There are no penalties for innocent errors in your tax affairs. So if you take reasonable care, but nevertheless make a mistake, whilst you will be liable for the tax and for interest if it's paid late, you would not be liable for a penalty. But if your error was as a result of carelessness, then legislation says that a penalty could apply in those circumstances." Harra also said that if HMRC was asked to help Sir Laurie Magnus, who is heading up the inquiry into the affair, "we will do so in any way we possibly can". However, he said HMRC would not normally publicly comment on someone's tax affairs, even if the individual had given their consent.

Meanwhile, nearly 400,000 self-employed people earning less than £13,000 a year are being penalised for filing their tax returns late, even though most of them don't owe any tax, according to the not-for-profit firm Tax Policy Associates (TPA). The data was gleaned from Freedom of Information requests to HMRC. The lower people's income, the more likely they are to be penalised, the TPA also found, and called for penaltiesto be cancelled if HMRC finds people have no taxable income.

The CityUK has issued a report claiming that the Financial Conduct Authority (FCA) and Bank of England's Prudential Regulation Authority (PRA) are taking too long to vet finance firms, tarnishing the UK’s competitiveness on the global stage. The industry body warns that complex, opaque and slow authorisations, such as for a new CEO or financial product, can discourage growth and investment. It was acknowledged that the FCA and the PRA are taking steps to speed up authorisations, but further action is needed, the group said.

Property website Rightmove says tenant competition has cooled, dropping 6% between October and December compared with the same period in 2021. It is down by a third from September, when the gap between supply of home and demand from tenants reached the highest since records started in 2012. The number of available homes to rent was up by 13% compared with a year earlier, the biggest annual jump since May 2013. However, rents are now much higher, especially outside London. Average monthly rent sought by landlords outside the capital in 2022 was £1,172, 9.7% higher than in 2021. In the capital, they rose by 15.7%, taking average asking rents to £2,480 pounds a month, and to above £3,000 pounds per month in inner London for the first time ever.

Retail sales fell sharply in January, the closely-watched CBI Distributive Trades Survey showed yesterday, reversing festive gains. The net sales volumes balance was -23 in January, compared to 11 a month previously, the CBI said. It was the fastest decline since April 2022. Volumes were also expected to continuing falling into February, although at a slower pace, with a net balance of -15 – the weighted difference between the percentage of respondents reporting an increase and those reporting a decrease. The survey of 156 companies, which included 59 retailers, also found the decline in online sales volumes had slowed, with a net balance of -4 compared to December's -22. Sales are expected to grow in February for the first time since December 2021. The survey was carried out between 22nd December and 13th January.

One in every six shops in Scotland is lying empty, a new report from the Scottish Retail Consortium (SRC) has concluded. The vacancy rate is one of the highest in Britain, and the SRC warned that high streets may struggle to "ever fully recover".

Asda announced a major shake-up yesterday that will put hundreds of jobs at risk and cut pay for thousands, Sharecast News reports. The supermarket chain is proposing to replace overnight shifts in 184 smaller superstores to day time only, potentially leading to the removal of up to 211 night shift manager roles and changing the working patterns of around 4,137 hourly-paid staff. Although staff would still be able to work the same number of hours, Asda says, the change would see the removal of the night shift premium. Asda has also proposed a 25% reduction in opening hours for all 23 in-store Post Office branches following a drop in the number of customers using the service. This would affect 23 salaried Post Office managers and 200 hourly-paid colleagues. In addition, it wants to close seven of its 254 in-store pharmacies, which would affect 48 hourly-paid staff members and 14 pharmacists. Ken Towle, Asda's retail director, said: "The retail sector is evolving at pace and it is vital we review changing customer preferences, along with our own ways of working, to ensure we are operating as efficiently as possible, so that we can continue to invest and grow our business. We are now entering a period of consultation with our colleagues on these proposals. We recognise this will be a difficult time for them and will do all we can to support them through this process."

British convenience store retailer Bestway Group has purchased or agreed to buy a 3.45% stake in supermarket giant Sainsbury's, but says it is not considering an offer for the chain. "Bestway Group intends to hold its shares in Sainsbury's for investment purposes and looks forward to supporting the executive management team. Bestway Group may look to make further market purchases of Sainsbury's shares from time to time, subject to availability and price," the company said earlier today. Sainsburys said it would " engage with Bestway Group in line with our normal interactions with shareholders". Bestway Group is the 7th largest family-owned business in the UK with turnover of approximately £4.5bn. Starting as off as a chain of convenience stores in 1963, it now has interests across the wholesale, pharmacy, real estate, cement and banking sectors and employs more than 28,000 individuals across the UK, Pakistan and the Middle East.

Morrisons' profits have tumbled in its first year under private equity ownership. The supermarket group was taken over by US buyout giant Clayton, Dubilier & Rice (CD&R) for £7bn at the end of 2021, and has just reported a 15% slide in profits to £828million for 2022.  Morrisons lost its position last year as one of the ‘Big Four’ grocers in the UK, having been overtaken by Aldi.

Shell is considering exiting its home energy retail businesses in Britain, the Netherlands and Germany in the wake of "tough market conditions", it said yesterday, although no decision has yet been taken. Reuters reports that the British headquartered FTSE 100 oil giant injected nearly $1.5 billion in cash and credit last year into its British retail business, Shell Energy Retail - which has 1.4m customers - to help weather huge volatility in power prices that caused the collapse of several rival UK utilities. Shell’s German home energy business has 110,000 customers and the Dutch arm, 15,000. Shell’s wholesale and business-to-business (B2B) energy supply businesses are not part of the strategic review, nor is its home energy supply businesses in the United States and Australia. Although the retail businesses have struggled, Shell is set to post a record annual profit of over $30 billion in 2022 when it reports results on 7th February, thanks to soaring oil and gas prices.

Matthew Golton, MD of the Transpennine Express rail company which operates across the North of England and into Scotland, has given an interview to the BBC in which he apologised to passengers and admitted services have not been good enough. The company is facing calls that it be stripped of its contract to run the service, having been cancelling trains on a daily basis for months. 40% of services were cancelled just last week, and the government has said previously that action will be taken if the company "can't be turned round". In his interview, Golton said the operator had a "recovery plan" to do better. “It isn’t good enough” and “I apologise,” he said. “We know that this business is really important to the North of England [and] Scotland. We know that we've got to do a good job and we really care about when we let people down." Although all rail companieshave faced issues because of nationwide rail strikes, Transpennine services have been axed outside of industrial action. The firm has blamed its cancellations on high sickness rates and a backlog of driver trainingcaused by the Covid pandemic, as well as drivers refusing to work overtime. Transpennine and train drivers’ union Aslef had an agreement for train drivers to work on rest days but that ended in 2021 and a new one has not yet been agreed. Aslef says a new offer was lower than the previous deal.

Royal Mail has resumed overseas tracked and signed-for services to all destinations for online customers after a cyber-attack now known to have been carried out by ransomware gang Lockbit, which has links to Russia.

London-listed Provident Financial Group (PFG) is to change its name after more than 140 years to Vanquis Banking Group. The subprime lender also said yesterday that CEO Malcolm Le May is departing and will be replaced by the current head of Bank of Ireland UK, Ian McLaughlin. Founded in 1880 as a doorstep lender, PFG has faced a surge in customer complaints in recent years, hitting both profits and the share price, Sharecast News says. Previously chair, Le May took over as CEO in 2018 and helped turn the business around. The loss-making consumer credit business, which included doorstep lending, was shut in 2021, and it now specialises in mid-cost and near-prime lending, including credit cards, vehicle finance and mortgages. The group said the name change to Vanquis, its credit card arm, would better reflect its mix of lending products.

Penny James has stepped down as CEO of Direct Line with immediate effect, just weeks after the insurer axed its dividend following a surge in claims. The FTSE 250 company has appointed chief commercial officer Jon Greenwood as acting CEO while the board seeks a replacement.

Toyota CEO Akio Toyoda will step down as head of the company his grandfather founded, to become Chairman on 1st April, the automaker said yesterday. The 53-year-old chief branding officer and president of Toyota Motor Corp's Lexus brand, Koji Sato, will take over.  Reuters says the issue of who would take over the top spot at Toyota has been an increasing focus for investors. Under 66-year-old Toyoda, who led the company for more than a decade, the automaker has appeared reluctant to embrace electric vehicles, arguing the hybrid technology it pioneered with its once market-leading Prius was a better fit for many drivers. "No doubt Mr. Toyoda has been a competent CEO, but the whole auto sector needs to make disruptive change and Toyota has been lagging in this in our view, so this could be chance for a fresh start," Anders Schelde, chief investment officer of Danish pension fund AkademikerPension, told the news agency. His fund has repeatedly pressed Toyota to accelerate its shift to electric vehicles.

IBM Corp announced 3,900 layoffs on Wednesday. CFO James Kavanaugh told Reuters that the company was still "committed to hiring for client-facing research and development". The firm also announced that its 2022 cash flow was $9.3 billion, below its target of $10 billion, due to higher-than-expected working capital needs. The layoffs - related to the spinoff of its Kyndryl business and a part of its AI unit Watson Health - will cause a $300 million charge in the January-March period.

A company owned by Asia's richest man has hit back at a report which accused the firm of "brazen" stock manipulation and accounting fraud, the BBC reports. The Adani Group, founded by Gautam Adani, called the report by a US investment firm "malicious" and "selective misinformation". The group lost almost $11bn (£8.7bn) of its market value after the research was made public on Wednesday. It is now considering legal action against New York's Hindenburg Research.

And finally… A Mr Blobby costume has sold for £62,101 on eBay. Originally made in the 1990s for the BBC TV show Noel's House Party, where the clumsy pink character found fame, the costume was meant to be used for an overseas version of the show, but it was later cancelled, so never entered a TV studio. Nevertheless, the online auction, which started last week with a starting price of just £39, attracted 178 bids. “Nobody from the production team wanted it,” the seller said in the listing, so the costume sat in their office and then their home for years.

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