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Telegraph
3 hours ago
- Business
- Telegraph
Entrepreneurs should be terrified by Starmer's benefits about-turn
Officials at the Treasury will be fretting over how they are going to fill the latest 'black hole' to open up in the public finances. Economists at the Office for Budget Responsibility (OBR) will be worrying over how long they will have to forecast the impact on debt. And the Bank of England will be worrying about how the UK can possibly sell £100bn or more of gilts backed only by the promises of a government that has clearly lost control of the public finances. There are plenty of people with good reasons to feel worried about Sir Keir Starmer's latest reversal on welfare cuts. But it is Britain's entrepreneurs who should be most afraid. Why? Because one way or another, they will have to pay for it all. It remains to be seen whether the Prime Minister has done enough to get his welfare reforms through Parliament, or whether he will have to offer the rebels on his backbenches even more concessions by next week. One point is already absolutely clear, however. This is an expensive about-turn. According to the Resolution Foundation, an impeccably Left-of-centre think tank, the changes will cost at least £3bn, and of course, the real total could be a lot higher. It comes on top of the concessions on the winter fuel allowance to pensioners, the above-inflation pay rises for the public sector, and the big rises in defence spending planned for the next few years. Add it all up, and the extra spending runs to tens of billions, for a government that was already racking up record debt. We all know what is going to happen next. In the autumn, Rachel Reeves, the Chancellor – or Yvette Cooper, if the Home Secretary has already taken over by then – will be forced to announce another punishing round of tax rises. It may well need to be more than the £40bn that the Chancellor squeezed out of the economy last time around. Where is the money going to come from? The Starmer Government promised at the election not to raise any of the three main taxes: income tax, VAT or National Insurance (NI). It has already twisted that by claiming that the increase in NI for employers was not included in the pledge, and given the catastrophic impact on jobs of the last increase, it will be reluctant to raise that again. It will almost certainly freeze thresholds beyond 2028, but while that will flatter the OBR forecasts, it won't raise extra money immediately. There is only one target left to raise any serious cash. Small businesses and entrepreneurs will have to end up paying the bill. There are four big ways the Chancellor can target anyone who has started or owns a business. First, we can expect another big increase in the capital gains tax (CGT). In her first Budget, a major increase in CGT was widely forecast. In the end, the increases were relatively modest, with the lower rate of CGT pushed up from 10pc to 18pc, and the main rate from 20pc to 24pc. With money so tight, we can't expect the Treasury to pussyfoot around with a few tweaks to the system. The obvious move is to equalise CGT with income tax, so that a 40pc rate will be imposed on any gain of more than £50,000, and 45pc on any gain over £125,000. It can be levied overnight, so that business owners and investors won't have the option of selling out before it comes into effect. Next, we can expect a big rise in dividend taxes. The tax-free allowance for dividends has already been reduced to a meagre £500, and after that they are taxed at 8.75pc for basic rate taxpayers, and 33pc and 38pc for the high rate. The difference with income tax is meant to reflect the fact that corporation tax has already been paid on that money. But why not just equalise it with income tax, and get rid of the allowance completely, as has already been proposed by Angela Rayner, the Deputy Prime Minister, who is increasingly the backseat driver in charge of the Treasury. It can be spun as 'simpler' and 'fairer', and will raise serious money. Thirdly, expect a temporary 'surcharge' on corporation tax. The French have helpfully pioneered this wheeze for the Treasury, with last year's 'solidarity levy' on companies with an extra 20pc or 40pc added to existing tax bills depending on the size of the business. It raised some serious cash, with the luxury goods giant LVMH expected to pay an additional €800m (£684m) as a result, and the infrastructure giant Vinci €400m. It is hard for companies and entrepreneurs to get around that, and of course, ministers can deny, just about plausibly, that it is a tax on 'working people'. Finally, the Chancellor will be painfully aware that many of the country's wealthiest people are leaving the country. So why not impose an exit tax? Germany, Norway and Belgium have already imposed levies of up to 45pc on anyone leaving the country for somewhere a little less punishing, so there is nothing to stop the UK doing the same. Either they stay and pay the corporation tax surcharge? Or do they pay the exit tax? Either way, the Treasury gets to collect a lot of money. The important point is this. Reeves already had very little fiscal room left. Her tax rises are collecting less money than forecast, and spending has started to spin wildly out of control. Taxes will have to go up, and the only way that can be done is by hitting the UK's dwindling band of business owners and entrepreneurs. There is nowhere else to go. True, it will be terrible for confidence, and will damage investment even more. But that doesn't mean it won't happen – and everyone in the firing line should be terrified of the latest about-turn.
The Independent
18 hours ago
- Business
- The Independent
When it's Rachel Reeves vs Andrew Bailey, I know who my money's on
A difference of opinion has surely emerged between the chancellor and the governor of the Bank of England. Last month, Rachel Reeves confidently asserted that ' the economy has turned a corner ' in a BBC interview. A couple of weeks later, she repeated that view. 'The most recent GDP (gross domestic product) numbers, 0.7 per cent growth in the first quarter, the strongest in the G7, and recent business surveys ... are very positive," she told a Confederation of British Industry dinner. "That is good news and does show we are beginning to turn the corner.' Andrew Bailey, however, expressed a very different view at the annual conference of another business group, the British Chambers of Commerce (BCC). 'We think the UK economy will grow at a more moderate pace over the coming quarter,' he said – a view reflected by the Bank of England's GDP forecast, which it cut in half in February to a sluggish 0.75 per cent for 2025 as a whole. He indulged in one of his word salads when he explained his view, saying: 'The unexpected strength in the first quarter was driven by strong outcomes for volatile components of GDP in the monthly figures for March.' In laymen's terms, he was trying to say that the surge in the early part of the year was driven by one-offs – the most obvious being the unexpectedly strong performance manufacturing recorded, as firms hurried to deliver their products to the US ahead of Donald Trump's tariffs. Needless to say, this is a long way from Reeves' corner. It looks more like UK plc briefly pushing down the throttle, before slamming on the brakes to avoid a nasty looking pothole on a dodgy country road filled with them. That hole was in no small part created by Reeves' tax rises – not just the fiscal tightening itself, but the way she chose to achieve it by taxing employment. The effect of this was there for all to see in the most recent labour market data, which showed the jobless rate jumping to its highest level in nearly four years, while the number of openings fell by 63,000. The governor described this as a 'softening' and said he was 'beginning to hear a bit more evidence of adjustments through pay and employment' as a result of Reeves' decision to increase employer national insurance contributions (NICs). That's more Bailey-speak, which, put simply, means: the numbers were horrible. The government has repeatedly said it wants to get more people into work. This is the stated aim of its attempts at welfare reform, including the controversial plans to reduce access to disability benefits, which resulted in a humiliating climbdown. However, its actions speak otherwise, and the labour market duly responded. But wait, should we be so quick to believe Bailey? The Bank of England's forecasting record is less than stellar. Its poor performance during recent spells of uncertainty led to it drafting in Ben Bernanke, the former chairman of the US Federal Reserve, to conduct a review. The results didn't make for happy reading. Among his findings were 'deficiencies of the Bank's forecasting infrastructure,' the use of 'out of date software' and 'insufficient resources… devoted to ensuring that the software and models underlying the forecast are adequately maintained'. That, coming from a fellow central banker, was pretty damning. However, when it comes to the opposing views of the chancellor and the governor, the data still strongly favours Bailey's argument. The economy contracted by 0.3 per cent in April, and the unexpectedly strong performance in the early part of the year looks like a mirage. Reeves is badly in need of help from somewhere. Public finances are still a mess, and she may have to raise taxes – again. The global environment is dangerous and unpredictable, and trade barriers are being thrown about with wild abandon. One thing that might give UK plc a much-needed shot in the arm, as Reeves tries to navigate through this sludge, would be looser monetary policy. An interest rate cut, or two – perhaps even three. The last meeting of the Bank's Monetary Policy Committee showed a significant minority of its rate-setters were sufficiently worried about the economy to vote for an immediate cut (the vote went 6-3). If those three retain that stance and Bailey changes his vote, it would only take one more MPC member for lower rates to arrive. That would be just the ticket for small businesses, medium-sized businesses, and big businesses – all of which have been grappling with sharply rising costs, those internecine trade wars and, I'm sorry to say, a political class that seems to have embraced stupidity as an operating principle. A quarter point cut at the next meeting is a very real possibility. Very necessary, too. Because when it comes to this debate, Bailey is on the money.
Yahoo
21 hours ago
- Sport
- Yahoo
From San Diego to Wimbledon: meet Britain's college hotshot Oliver Tarvet
Two weeks ago, 21-year-old Oliver Tarvet concluded his third and penultimate year at the University of San Diego, basking in the sunshine on America's west coast. 'Excited for one more,' he posted on Instagram, at that stage unaware of the green-floored opportunity ahead. Fast-forward a fortnight, to Friday, and Tarvet will be one of 128 players to take his place in the men's singles draw for Wimbledon. Not half bad. 'This seemed so far away when I was a little kid,' said Tarvet, from St Albans, whose world ranking of 719 makes him the British No 33. 'Now it's a reality, it's obviously a great feeling. Winning on Monday [round one] was something I didn't expect, but I just kept on surprising myself this week.' Advertisement Given an unexpected wild card for qualifying, Tarvet made a mockery of the numbers and – as the second-lowest ranked player in the draw – became the first British man in eight years to qualify for Wimbledon. Needless to say, he'll be the lowest-ranked player next week, by an astonishing 236 places. Tarvet's impressive four-set victory, 6-3, 3-6, 6-2, 6-1, over Belgian player Alexander Blockx, ranked 579 places higher, in the final round on Thursday was met with jubilation in the unique setting of the 770-capacity Court 1, at the Bank of England Sports Centre in Roehampton; an old-school, makeshift venue which acts as the traditional gateway to the big dance at the All England Club, three miles down the road. Tarvet had supremely passed his first two tests this week in straight sets, stunning world No 126 Terence Atmane in round one. Yet Thursday's final round presented something different from London's recent heatwave. With grey clouds overhead, the scene was decidedly gloomy but fortuitously, the Briton is well accustomed to swirly conditions. Advertisement 'Luckily, I play in wind because we're right by the coast, we get that coastal breeze,' he says of his time at San Diego, where he is majoring in Communications, with a minor in Marketing. 'This is a bit more swirly, a bit more unpredictable. In San Diego, it's a bit more consistent. 'A lot of it is about being scrappy. There's going to be bad bounces, but I did a good job just accepting it and making the most of it.' The first two sets were split, immediately placing Tarvet into new territory in his first best-of-five set match. Yet after a mid-match downpour, forcing the players off court for 45 minutes, Tarvet played lights out on his return, storming to the third set and a double-break lead in the decider. The wind picked up as he served out the match, but with an ace crisply sweeping the chalk on match point, the college star chucked his racket up in the air in unparalleled euphoria. He would later tell of 'mad' reactions on his college WhatsApp group – and a £66,000 first-round prize, on paper, awaits him next week, yet he will only be able to pick up $10,000 (£7,279) worth of that prize, given his status as a college athlete. Oliver Tarvet, the British No 33, has qualified for the main draw at Wimbledon (Getty Images) Tarvet celebrates his four-set win in Roehampton by throwing his racket into the air (Kieran Jackson/The Independent) 'After the rain delay, I did a really good job coming out with really good energy,' he added. 'It's really special. It was my first best-of-five match and it's something I knew I was ready for. I just need that same confidence going into next week.' Advertisement Tarvey is the latest in a line of British players who are utilising the ultra-competitive US college system as a means of launching a professional career. Cameron Norrie and, just last year, Jacob Fearnley have all impressed stateside before steamrolling into the world's top-100, largely as a result of eye-catching results on the grass. Could Tarvet be next in line? 'It's incredible, college definitely teaches you to be loud and competitive,' Tarvey says, of an environment he has clearly thrived in. He won the singles and doubles at the ITA All-American Championships in September, the first man since 2015 to hold both trophies. Hamish Stewart missed out on a Wimbledon spot at the final hurdle (Getty Images) 'Even if you're top-10 in the world, college is such a great option. I was a little bit immature when I was 18, I was not ready to be independent of for the loneliness of the tour. It's a really good option to help you mature and develop your game. Advertisement 'In college tennis, usually the more competitive team wins. You have 10 guys screaming your name, it's tough not to play well and enjoy the moment. Generally, I play my best when I'm more energetic.' Yet while Tarvey will be keeping a firm eye on Friday morning's draw, compatriot Hamish Stewart agonisingly missed out on a Wimbledon spot after a four-set defeat. The 25-year-old, from Strathblane in Scotland, who came through pre-qualifying last week as well, was very much in the contest at 4-4 in the fourth set, albeit a set down, but did not win a point after the rain delay, with the world No 550 losing seven points on the bounce to Switzerland's Leandro Riedi. Emily Appleton, the only British woman in the last round of qualifying, fought back to take the second set in her match against Veronika Erjavec, but won just seven points thereafter as the Slovenian progressed in three sets, 6-2, 2-6, 6-0.
CNBC
21 hours ago
- Business
- CNBC
Sterling keeps climbing on struggling dollar
The pound was set for its biggest weekly gain against the dollar in nearly four months on Friday and held close to its near four-year high hit the previous day, though that was more due to dollar weakness than sterling strength. The pound was last up 0.14% on the dollar at $1.13745, just off Thursday's top of $1.37701, the highest since late 2021. It was broadly steady on the euro, at 85.24 pence, underlining the fact that the move in the pound against the dollar - referred to as cable by financial markets - has much more to do with the dollar. "The gains in cable reflect mostly this year's weakness in the dollar and the strength of the euro, which has dragged the pound higher due to the limited parameters of the EUR/GBP trading range," Rabobank analysts said in a note. The pound has gained 2.2% against the dollar this week, its most since early March, as the greenback's short-lived gains during the Israel-Iran conflict fade. The main domestic support for the pound this year has come from the Bank of England being slower to cut interest rates than peers, particularly the European Central Bank, as inflation remains sticky. "Core inflation in the UK has basically stopped moving for the past year - hard to say why. BoE officials are quite concerned. That makes it difficult to cut rates and also the economic outlook is not improving," Michael Pfister, FX analyst at Commerzbank, said. Analysts also said they were watching this week's political drama given what Rabobank described as "the overhang of a very large debt/GDP ratio and a UK current account deficit." Prime Minister Keir Starmer this week sharply scaled back planned welfare cuts after more than 100 of his Labour Party lawmakers publicly opposed the reforms, which sought to shave 5 billion pounds ($6.9 billion) per year off a rapidly rising welfare bill.
Zawya
a day ago
- Business
- Zawya
Sterling keeps climbing on struggling dollar
LONDON - The pound was set for its biggest weekly gain against the dollar in nearly four months on Friday and held close to its near four-year high hit the previous day, though that was more due to dollar weakness than sterling strength. The pound was last up 0.14% on the dollar at $1.13745, just off Thursday's top of $1.37701, the highest since late 2021. It was broadly steady on the euro, at 85.24 pence, underlining the fact that the move in the pound against the dollar - referred to as cable by financial markets - has much more to do with the dollar. "The gains in cable reflect mostly this year's weakness in the dollar and the strength of the euro, which has dragged the pound higher due to the limited parameters of the EUR/GBP trading range," Rabobank analysts said in a note. The pound has gained 2.2% against the dollar this week, its most since early March, as the greenback's short-lived gains during the Israel-Iran conflict fade. The main domestic support for the pound this year has come from the Bank of England being slower to cut interest rates than peers, particularly the European Central Bank, as inflation remains sticky. "Core inflation in the UK has basically stopped moving for the past year - hard to say why. BoE officials are quite concerned. That makes it difficult to cut rates and also the economic outlook is not improving," Michael Pfister, FX analyst at Commerzbank, said. Analysts also said they were watching this week's political drama given what Rabobank described as "the overhang of a very large debt/GDP ratio and a UK current account deficit." Prime Minister Keir Starmer this week sharply scaled back planned welfare cuts after more than 100 of his Labour Party lawmakers publicly opposed the reforms, which sought to shave 5 billion pounds ($6.9 billion) per year off a rapidly rising welfare bill. (Reporting by Alun John and Lucy Raitano; Editing by Andrew Heavens)
