Published: 18 April 2024
By Suzanne Evans, Director, Political Insight
Tax: The UK’s tax take has increased faster than any other major economy since 2019, and the Government is spending it faster too, despite low growth, according to new research from the Institute of Fiscal Studies (IFS), which is based on the International Monetary Fund’s latest forecasts and compares projections for the UK economy. In 2001, government spending in Britain was around 8% lower than the average across the G7 advanced economies, but is now expected to settle at only 2.4% below other G7 nations by 2029, the IFS concludes. If this happens, we will be spending around £155bn per annum more than had the size of the UK state remained as it was at the turn of the 21st century. Much of the increase in Government spending and tax take has been over the course of this parliament; the increase in government revenues since 2019 is forecast to be the largest among the 37 comparator countries. Since 2019, Corporation Tax has increased from 19% to 25%; there have been windfall tax slapped on oil and gas companies; and personal tax thresholds have also been frozen since April 2021, leading to fiscal drag. “Our appetite to become a more average spender has not been fully matched by a willingness to become a more average taxer,” Martin Mikloš, research economist at the IFS said. “The UK started this century with a smaller state, lower taxes and lower debt than most of its peers [but] almost twenty-five years and three large crises later, [1] this has changed: the UK now looks much more like a typical advanced economy in fiscal terms,” he added. Debt increased by 62% of GDP between 2001 and 2023, the second-biggest increase among the 37 comparator countries (after Japan). The UK has not had a budget surplus since 2001.
UK pension pots: Almost £2bn has been ‘lost’ from UK pension pots in the last five years because the authorised financial providers and advisers managing them have gone out of business, data from the Financial Services Compensation Scheme (FSCS) has revealed. Over 43,000 claims have been made against bankrupt pension providers 2019. Because the FSCS is only able to refund pensions protected under FSCS compensation rules, which normally limit the compensation available to £85,000, £800m of that has not been refunded. Martyn Beauchamp, interim CEO at the FSCS, said: “The financial loss to people’s pensions that we see in our claims is substantial and has serious consequences for thousands of people every year”. “FSCS has long highlighted the importance of checking that your pension savings are protected, as these types of claims often come to us long after the financial harm may have occurred – and by that point it can often be too late to rebuild before retirement,” he added.
Electric Vehicles: Sales of EVs in the European Union (EU) have fallen, in what appears to be a global trend. New vehicle registrations fell by 5.3% to 1m across the EU last month, according to the European Automobile Manufacturers’ Association, with electric cars particularly hard hit. Sales of battery-powered cars dropped by 11.3%, with demand in Germany, Europe’s largest economy, plunged by 28.9%. Overall, the market share for EVs shrank from 13.9% in March last year to 13% in the same month of this year. Volkswagen, Mercedes-Benz and Tesla have all reported falling EV sales in the first three months of this year.
Motor Insurance: Charlotte Clark, director of regulation at the Association of British Insurers (ABI), told MPs on the Treasury Committee yesterday that the higher cost for motorists who choose to pay in monthly instalments for cover is “very hard” to justify. Consumer group Which? has found that motorists could be charged up to nearly 40% more when paying for insurance in monthly instalments, above the average rate of credit card interest. However, clark said: “We have considered whether or not things like a voluntary cap for the industry is the right way forward. There are very good competition reasons why you can’t do those sorts of things”, She added: “There are additional costs to paying monthly, so in terms of extra administration, you have the cost of capital, so we haven’t got all the money in up-front as insurer, so you can’t invest that money, so there are, what I would say, legitimate costs.” According to the ABI, the average premium for motor insurance rose 25 % last year to its highest level since it began collecting the data in 2012.
The Post Office: CEO Nick Read has been “exonerated of all misconduct allegations” a report compiled by barrister Marianne Tutin of Devereux Chambers has concluded. The report, which has not been released into the public domain, followed complaints by former Post Office Chair Henry Staunton about Read’s “conduct and lack of his management of the many governance and compliance issues”. Staunton had told the parliamentary Business and Trade Committee that “Read and his henchmen” had a bad attitude towards the Post Office’s HR boss, whom Read was alleged to have said was a “pain in the arse for focusing on tackling the toxic culture” instead of prioritising his salary. Staunton also said Read “badgered” him over his salary with “repeated threats to resign”. The Post Office argued Staunton’s claims contained “inaccuracies and falsehoods,” and Read said he “absolutely refutes” bullying claims. In a statement, the Post Office said: “Over the last few months an independent barrister has been investigating a Speak Up complaint into various allegations, which included a number of misconduct allegations against our CEO, Nick Read. Following several interviews and examination of documents by the barrister, Nick has been exonerated of all the misconduct allegations and has the full and united backing of the Board to continue to lead the business”. “It is unacceptable that this specific process was referred to in the public domain but notwithstanding that, Post Office wants to make clear that Speak Up allegations will always be thoroughly and consistently investigated, whoever they are aimed at,” it continued. A Department for Business and Trade spokesperson said: “Ministers are pleased to confirm that the independent barrister has cleared the Post Office CEO, Nick Read, of the allegations against him and he remains in post and has the confidence of the government”. The Post Office is wholly owned by the Government.
Royal Mail: Czech billionaire Daniel Kretinsky has made a takeover approach for Royal Mail owner International Distribution Services (IDS), but has been rebuffed. Kretinsky already owns 27% of IDS through his investment vehicle Vesa Equity Investment, and EP Corporate Group - Vesa's parent company - confirmed that a non-binding indicative proposal had been made and rejected earlier this month after reports by Reuters and the Financial Times. EP said it "looks forward to continuing to engage constructively with the board as EP Group considers all its options". The news led to IDS shares rising 28.85% 270p at close yesterday. IDS also owns Dutch parcels business GLS. Vesa also holds stakes in J Sainsbury and Foot Locker. Kretinsky owns more than a quarter of West Ham United FC.
BT Group is dusting off plans for a sale of its Irish corporate business four years after the plan was rejected, Sky News reports. The FTSE-100 telecoms giant is now working with bankers at Citi on a potential disposal of the unit, which sources said is an early stage and may not result in a transaction.
The Co-operative Bank is going to announce this week that it has struck a £780m deal to be bought by the Coventry Building Society, Sky News claims. Insiders said the cash price to be paid by the Coventry would be close to £800m.
Tesco: Having lost its trademark battle with Lidl over its Clubcard Prices logo, Tesco has embarked on a £7m rebranding exercise. Discount supermarket Lidl sued Tesco successfully when its larger rival began using a blue square with a yellow circle to advertise lower prices for Tesco Clubcard members, arguing it infringed its long-standing logo.
Home REIT, the scandal hit social housing investment trust has this morning informed the London stock markets that it has begun the process of suing its former fund manager Alvarium. Hone REIT is itself facing legal challenges from shareholders who claim to have been misled, a suit it says it intends “vigorously to defend itself” against. The Financial Conduct Authority is investigating the trust, as is the Serious Fraud Office.
Hipgnosis Songs Fund: The board of the trust, which investment in musical intellectual property rights, has approved a $1.4bn (£1.1bn) takeover bid by Concord, an American independent music company. Hipgnosis owns the rights to songs by many of the world’s top artists, including Britney Spears, Justin Bieber and Shakira. The deal will require shareholder and regulatory approval to proceed.
New London landmark: UK property developer Sellar and Japanese developer Obayashi have announced plans to build a “landmark” tower near Liverpool Street. Sellar previously developed The Shard. A consultation on the proposal begins today, ahead of a planning application. The developers hope to start construction in 2026.
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