Published: 16 May 2023
By Suzanne Evans, Director, Political Insight
The Government suffered defeats in the House of Lords yesterday over plans to scrap certain EU laws by the end of the year. Peers backed an amendment to the Retained EU Law Bill to give parliament greater scrutiny over which rules should be ditched, and to give devolved governments - rather than Westminster ministers - the final say on whether EU dictats should be kept. The Government had already made major changes to the Bill: although the UK formally left the EU in 2020, EU laws that had previously applied in the UK were kept in place for reasons of continuity, will all originally set to be rejected by 31st December this year unless ministers had decided to replace or retain them. However, in a dramatic change of policy last week, Business Secretary Kemi Badenoch announced this would be ditched to provide “legal clarity”, instead producing a schedule to replace a minimum of just 600 EU laws, a U-turn leading Brexiteer Jacob Rees-Mogg called “pathetically under-ambitious”. On Monday evening, this amendment to drop the sunset clause was passed by peers in the House of Lords, many of whom had previously criticised the deadline. Peers are continuing to debate and amend the bill, after which it will go back to the House of Commons for MPs to either accept or reject the changes.
More than 6 million more Brits are set to be swept into the 40p income tax band according to new research by economic think tank the Institute for Fiscal Studies (IFS). The IFS says this will happen because of Prime Minister Rishi Sunak’s March 2021 decision (while he was Chancellor to Boris Johnson) to freeze tax bands for six years, and last November’s decision by current Chancellor Jeremy Hunt to extend that by a further year. That policy now represents the largest tax increase since Margaret Thatcher’s Chancellor Geoffrey Howe doubled VAT in 1979, the IFS calculated. It means the number of people paying the steeper levy will reach 7.8m by 2027/28, or 14% of the population, up from 1.6, or 3.5% in 1991/92 – a near quadruple increase. “In the space of 40 years, higher rates of income tax will have gone from being a feature of the system reserved for those with the very highest incomes, to one that impacts a far more substantial proportion of the population,” the IFS said.
The latest Office for National Statistics’ (ONS) jobs data is out this morning, and shows a record number of Brits are returning to the workforce, signalling that labour shortages are starting to unwind. 241,000 people flowed out of economic inactivity in the three months to March compared to the previous quarter, taking the employment rate to 75.9% in the same period. This is the highest total the ONS has recorded since it started monitoring the data, and the first fall in more than two years. A notable increase in the numbers of part-time and self-employed workers helped push up the employment rate, the ONS said. However, the numbers of people not in work or looking for work because of persistent sickness has climbed to a record high of more than 2.5m, having increased by 400,000 since the last count. Darren Morgan, director of economic statistics at the ONS, told the BBC Radio 4 Today Programme that the increase had been seen in "conditions related to mental health, particularly in the young". There was also a rising number of people "having musculoskeletal issues, so problems connected to the back and neck, with some theories of the increase in home working contributing to that," he said, adding: “We've also seen an increase in the category that includes post viral fatigue so perhaps long-Covid impact." There has also been a further jump in older workers taking early retirement and a rise in the student population, each of which have raised economic inactivity levels. The number of job vacancies fell for the 10th consecutive period, with the ONS saying uncertainty about the economic outlook meant firms were holding back on recruitment. Meanwhile, inflation is continuing to outstrip pay: the latest data showed that regular pay, excluding bonuses, fell when prices rises are taken into account. “Growth in total and regular pay fell in real terms (adjusted for inflation) on the year in January to March 2023, by 3% for total pay and 2% for regular pay,” Morgan said on Twitter. The unemployment rate nudged 0.1% higher to 3.9%, but remains historically low.
Farmers are to be given greater protections in future trade deals, Downing Street has said, ahead of the UK Farm to Fork summit today. Other government’s initiatives announced in advance include reviewing supply chains to ensure producers are getting a fair deal, and making it easier for farmers to turn properties on their land into farm shops. Environment secretary Therese Coffey said the measures, which include a £30m investment in new technologies, were about putting “more British produce on supermarket shelves and plates”. The pledge on trade talks comes after former environment secretary George Eustice, who comes from a Cornish farming family, criticised the fresh trading terms with Australia, which he said “gave away far too much for far too little in return”. Farmers have also been told that 45,000 visas will be available next year to help the horticulture sector with the picking season, matching this year’s allocation.
Indian carmakers have agreed to eliminate import tax on a limited number of vehicles in a trade deal with Britain "if the need arises", according to a document seen by Reuters. India currently levies 70% and 100% tax on car imports which will be reduced in a phased manner to 10% by year five but only for a maximum of 46,200 vehicles, according to a proposal made by the country's leading auto lobby group, the Society of Indian Automobile Manufacturers, to the government. Indian import taxes on cars are among the highest in the world of any major car making nation, and led directly to Tesla’s decision to shelve entry plans last year. The country is the world’s third largest automobile market. The proposal applies only to combustion engine cars - electric, hybrid, hydrogen and fuel cell vehicles are excluded. India and Britain started trade negotiations in January last year, seeking a deal that could double current trade to $100bn (£78.95bn) by 2030.
Michael Saunders, senior economic adviser at consultancy Oxford Economics and a former rBank of England rate-setter, has rejected assertions supermarkets are participating in “greedflation,” i.e. artificially hiking prices by taking advantage of soaring inflation. Instead, businesses are pushing up prices in response to soaring costs, he said in a note to clients, which was reported by City A.M. He added that isolated incidents of rising profits “do not reflect the overall picture” of the UK economy. “The bulk of UK food price inflation reflects cost increases from the international surge in prices for agricultural commodities and energy,” he wrote, explaining that the cost of materials used by food manufacturers have jumped 29% over the last two years, and consumer prices have also risen 29% over the same period. “Take out oil and gas, where profits have risen sharply, and the share of company profits in GDP has fallen markedly” to their lowest level since 2009, Saunders said, proving firms aren’t pumping up inflation to hoist profits.
The Competition and Markets Authority (CMA) announced an investigation into food retailers and supermarket petrol forecourts yesterday to establish whether a “failure in competition is contributing to grocery prices being higher than they would be in a well-functioning market”. CMA CEO Sarah Cardell said: “We recognise that global factors are behind many of the grocery price increases, and we have seen no evidence at this stage of specific competition problems. But, given ongoing concerns about high prices, we are stepping up our work in the grocery sector to help ensure competition is working well and people can exercise choice with confidence.” The watchdog also announced preliminary findings of its ongoing Road Fuel market study, launched in July to investigate whether fuel prices have been kept artificially high, saying it found supermarkets were overcharging drivers by 5p per litre on petrol and diesel, even when taking into account the conflict in Ukraine. High pump prices could not be attributed “solely to factors outside the control of retailers,” the CMA said, and that “the higher prices drivers are paying at the pumps appear in part to reflect some weakening of competition in the road fuel retail market”. It’s full report on petrol prices is due before 7th July. AA president Edmund King said the finding were “hugely welcome in confirming what millions of UK drivers have long believed, that they too often get a raw deal at the pump”. “A handful of maverick small forecourts slashing prices, saying they can still stay commercially viable, has exposed the shame of the other retailers,” he added.
Ofcom said it has launched an investigation into Royal Mail’s failure to meet its delivery targets in the past year. Only 73.7% of first class mail was delivered within one working day across the year, falling well short of its universal service obligation 93% target. Ofcom said it takes quality of service very seriously and could fine Royal Mail if it cannot reasonably explain why it missed the targets.
Vodafone is cutting 11,000 jobs on the expectation of flat earnings next year after reporting a decline in annual profits. Performance was described as "not good enough" by CEO Margherita Della who said: “To consistently deliver, Vodafone must change". The company is “too complex” and will need radical simplification to deliver, she added. Adjusted core earnings fell 1.3% to €14.7bn due to higher energy costs, and commercial underperformance in Germany
Center Parcs has been put up for sale by its Canadian owners, the Financial Times reported yesterday, citing unnamed sources who said private equity group Brookfield has appointed investment banks to sound out potential buyers for the British holiday resort group. Brookfield is said to be seeking between £4bn and £5bn for the business, which has five holiday villages in the UK and one in Ireland. Brookfield acquired Center Parcs from US private equity firm Blackstone in 2015 for £2.4bn. Since then, it has installed 250 new lodges and spent £100m upgrading IT and booking systems. According to Brookfield's website, Centre Parcs currently has around 2m guests per year; a 98% occupancy rate; and "stable cash flows". Brookfield declined to comment on the report.
EY has launched a UK leadership shake up. According to reports from Sky News, a memo was circulated to partners last week, informing them that its executive committee would be cut from 13 members to 7 and that the UK operations would no longer have a chief operating officer. Sky also reports that the Big four accountancy firm’s UK managing partner, Alison Kay, is moving to a European role. The ann Land Securities (LAND.L) said on Tuesday it was likely to sell more assets than purchase after the British landlord swung to an annual loss, as surging interest rates and broader economic woes weighed on the valuation of its properties.
Land Securities has swung to an annual loss and says it is likely to sell more assets than it will purchase. The British FTSE 100 landlord blames surging interest rates and broader economic woes for weighing on the valuation of its properties, adding that its office space portfolio has struggled “in the wake of evolving work habits”. Loss before tax came in at £622m for the year ended March 31, versus a profit of £875m last year. Landsec has a £10.2bn portfolio comprising office, retail, leisure, workspace and residential assets.
Barclays is closing 15 more branches from August this year - 12 in England, one in Wales, and two in Scotland. Last year, the high street lender announced it would close 132 branches, and has already closed most of those.
European regulators have approved Microsoft's £55billion mega-merger with Call Of Duty maker Activision Blizzard, just weeks after it was blocked by the UK's Competition and Markets Authority (CMA). The European Commission gave the merger thee ego-ahead on the condition that Microsoft ensures Activision's game catalogue will be freely available on other cloud game-streaming providers over the next ten years. Activision and Microsoft are planning to appeal the British decision.
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