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What's happening in the world of accountancy today

News in brief

Author: ICAEW Insights

Published: 27 Sep 2022

29 September 2022: IMF slams UK government tax plans; only 59% of UK pubs plan to be open in 12 months; 933 London civil service jobs moved to Scotland.

The International Monetary Fund (IMF) has openly criticised the UK government over its plan for tax cuts. It said the proposal was likely to increase inequality and speed up the pace of price rises, fuelling the cost-of-living crisis. The IMF works to stabilise the global economy and one of its key roles is to act as an early economic warning system. While it acknowledged the package aims to boost growth, it urged the government to re-evaluate tax measures in its 23 November fiscal plan, the BBC reported. 

Around 41% of UK pub managers and owners do not believe they will still be operating in 12 months. A Peckwater Brands study of 200 UK pubs found only 43% feel optimistic about the future and 59% expect to continue operating. Fewer than two-fifths (39%) have confidence in the government’s support for the hospitality sector, according to The Bulletin Reporter. The majority (63%) described inflation as a “major issue”.

Almost 1,000 London-based Civil Service jobs have moved to Scotland since March 2020. The Cabinet Office said 933 jobs have already shifted as part of its Places for Growth plan to move 22,000 out of the city by 2030. A further 600 are to be permanently based in Scotland by 2025 as the Cabinet Office looks to double its Glasgow employees. The goal of the plan is to have at least 50% of UK-based Senior Civil Servants located outside of London. 

28 September 2022: 5 October tax return deadline approaches; mortgage lenders pull deals over interest rates; Australia’s financial sector to pay customers $7.2bn for wrongdoing.

HMRC is reminding customers who need to complete a tax return for the 2021/22 tax year to inform it by 5 October 2022. They can do this by registering for Self Assessment. HMRC is encouraging customers to plan ahead to give themselves the best chance of completing this on time. Those submitting their first return also need to register to receive their Unique Taxpayer Reference. 

Some mortgage deals have been withdrawn by banks and building societies. The move follows a fall in the pound fuelled forecasts of a sharp rise in interest rates. An increase in the cost of long-term borrowing means the current cost to mortgage lenders of offering new deals is now more expensive. Virgin Money and Skipton Building Society have halted mortgage offers for new customers, Bank of Ireland has withdrawn all mortgages and Halifax will stop mortgages with product fees. Other banks including NatWest and Nationwide are continuing to review the market before making a decision, the BBC reported. 

Australia’s financial sector must now pay customers up to $7.2bn for any wrongdoing. Australian Securities and Investments Commission (Asic) has issued a new regulatory guide for paying compensation and told companies to pay up quickly. This will replace the regulator having to directly manage remediation schemes, the Guardian reported. Asic estimates total remediation already paid has reached $5.6bn to about 7 million customers, with a further $1.6bn due to 2.7 million customers. 

27 September 2022: Pound hits record low after tax cut plans; TikTok may face £27m fine; state-owned foreign entities hold 50% of UK offshore wind capacity. 

The pound has fallen 2% to a record low against the dollar as markets react to the UK's biggest tax cuts in 50 years. In early Asia trading, sterling fell close to $1.03 before regaining some ground to about $1.07 on Monday. This is the first time it has fallen below $1.09 since 1985. It followed Chancellor Kwasi Kwarteng’s promise of more tax cuts on top of a £45bn package. The cost of UK government borrowing also rose and is expected to continue climbing, the BBC reported

TikTok is facing a potential £27m fine for failing to protect the privacy of children, the UK’s data watchdog says. The Information Commissioner’s Office (ICO) found the app may have breached data protection law between May 2018 and July 2020 and has issued it a notice of intent. The maximum fine it can impose would be based on a calculation of 4% of TikTok’s global annual turnover. The ICO’s provisional view is that TikTok may have processed the data of children under the age of 13 without parental consent, the Guardian reported. 

Nearly half of the UK's offshore wind capacity is in possession of state-owned or majority state-owned foreign entities, a report by the Commonwealth think tank shows. The Danish government and Norway's Equinor have the largest stakes, at 20% and 9% respectively. They are followed by organisations in Sweden, Italy, China and France. The UK government only owns a small renewable energy company called Offshore Renewable Energy Catapult, which is focused on research and holds a tiny percentage of capacity, Sky News reported.

26 September 2022: Microsoft staff disagree on remote working; Māori tribe receives £92.6m over colonial atrocities; new reforms to counter fraud and money laundering. 

Microsoft has revealed its staff fundamentally disagree about productivity when working from home. It surveyed of 20,000 workers across 11 countries, and found 87% of employees felt they worked as, or more, efficiently from home. However, 80% of managers disagreed. Around 70,000 people joined Microsoft during the pandemic and can work from home up to 50% of the time as standard, the BBC reported. 

Māori people in New Zealand have secured an apology and millions of dollars in redress for atrocities committed by the crown. Nearly 46,000 members of the Ngāti Maniapoto iwi (tribe) received NZ$177m (£92.6m) in compensation – New Zealand’s fifth-largest sum of its kind – and the return of 36 sites of cultural significance. The Maniapoto Claims Settlement Bill was signed into law in New Zealand’s Parliament, condemning colonial acts including indiscriminate killings and alienation of tribal land, the Guardian reported

The Economic Crime and Corporate Transparency Bill has been introduced into Parliament. It includes reforms designed to bear down on kleptocrats, organised criminals and terrorists abusing the UK’s open economy. Under these, anyone who registers a company in the UK will need to verify their identity. It will also give Companies House new powers to check, challenge and decline incorrect or fraudulent information. 

23 September 2022: London tops Europe’s financial hub rankings; UK music industry calls for tax relief amid slow recovery; Sri Lanka inflation rate jumps to 70.2%.

London has retained its title of being Europe’s top financial hub and ranked second globally. The capital’s highly-skilled talent pool helped drive it to the top of the European rankings in Z/Yen’s latest Global Financial Centres Index. Its closest rival on the Continent was Paris, finishing 10th, City A.M reported. Internationally, it only lost out to New York, which held onto its lead position for the fourth consecutive year. “London’s second position looks secure but needs a significant global change to once again challenge for the top place,” Z/Yen chairman Michael Mainelli said. 

The UK music industry is calling for a package of support including tax relief. The multibillion-pound industry remains almost a third smaller than before the pandemic. Now its representative body, UK Music, is requesting a VAT cut for struggling venues and the streamlining of restrictions affecting touring between Europe and the UK. While the industry’s contribution to the UK economy rose 26% year-on-year to £4bn in 2021, this remains 31% down on the record £5.8bn in 2019, the Guardian reported. 

Sri Lanka's annual inflation rate surged to more than 70% in August. Official data also showed food prices rose 84.6% compared to a year ago, as it struggles with its worst economic crisis in over seven decades. The country has been unable to afford key imports such as fuel, fertiliser and medicine. While Sri Lanka has reached a preliminary deal with the International Monetary Fund for a $2.9bn (£2.6bn) loan, this hinges on it also receiving funds from private creditors, the BBC reported

22 September 2022: M&S reveals £15m staff pay package; economists call for BoE interest rate committee shake-up; Australia’s bank loses $30bn on COVID-19 bonds. 

Marks and Spencer has announced a bumper £15m pay package to support its 40,000 frontline staff during the cost of living crisis. The British high-street giant is also introducing an autumn pay review for the first time, while extending its benefits scheme for workers. Many will get a boost to their hourly pay to a minimum of £10.20, up from £9.50 in April of this year. A full-time customer assistant will now earn more than £100 extra per month than in October last year, City A.M reported

Economists are calling for a radical shakeup of the Bank of England’s interest rate setting body. It should be appointed by the devolved administrations and by English MPs in order to ensure greater diversity of thought, economist Richard Murphy and former Monetary Policy Committee member David Blanchflower said. They propose a plan where the governor would be the only MPC member directly chosen by the government and members appointed for a single fixed term, the Guardian reported

Australia's central bank has lost A$44.9bn (£26.3bn) on bonds it bought amid efforts to support its economy during the pandemic. The Reserve Bank of Australia's deputy governor says that wiped out the bank's profit for the 2021-22 year, leaving a net loss of A$36.7bn. The bonds were accumulated under a A$300bn emergency stimulus programme. However, the bank says the loss will not affect its normal operation, the BBC reported

21 September 2022: 40 US companies pledge to hire refugees; national insurance rise reversal to only help richest; Mike Ashley to leave Fraser’s board.

Mike Ashley will step down from the board of Frasers Group, owner of the Sports Direct chain that the billionaire founded 40 years ago. He will not be standing for re-election as a director, will leave the board next month, and will provide the company with £100m worth of funding. The move follows much controversy over Ashley’s conduct and decision-making while leading the company. His son-in-law Michael Murray took over running the group earlier this year and is in line for a £100m pay-out if he can double Frasers' share price to £15 within the next three years, City A.M reported.

Reversing the national insurance rise will see the lowest-paid workers stand to gain just 63p a month while the richest could get back £150 a month. Chancellor Kwasi Kwarteng is expected to propose the method this week. However, research by the Institute for Fiscal Studies has now found those in households with the average UK household income of £31,400 will only save about £20 a month, while those on an income of £55,000 will save about £58. Kwarteng is also expected to also announce further tax cuts such as a future reduction in income tax by 1p or even 2p, the Guardian reported

Forty companies have pledged this week to hire nearly 23,000 refugees over the next three years. This is one of the biggest public commitments on the issue to date. However, the promises by firms including Hilton, Amazon, Pfizer and Pepsico do not match the surge in new arrivals. Under Donald Trump’s presidency, the US cut its refugee allowance to admit fewer than 12,000 in 2020 and 2021. That number is now on track to double, but will fall far short of President Joe Biden's 125,000 pledge. Emergency programmes, which do not carry the same kind of financial support, have allowed another nearly 82,000 Afghans and over 100,000 Ukrainians to enter the US in recent months, the BBC reported

20 September 2022: EU seeks windfall taxes on energy firms; lowest paid UK workers face toughest financial squeeze; Pound at 37-year low against US Dollar.

The EU is seeking windfall taxes on energy firms to tackle high prices as well as a cut to electricity use across the bloc. EU chief Ursula von der Leyen warned the European Parliament that gas and electricity prices had hit all-time highs after Russia's invasion of Ukraine. She called for electricity consumption to be cut at peak hours by at least 5%. The proposals also include skimming the profits of low-carbon electricity producers, implementing a de facto windfall tax on the oil, gas and coal sectors. The estimated €140bn (£121bn) raised would go to families and businesses across the EU's 27 states, the BBC reported. 

A poll of the UK’s lowest-paid workers reveals 78% are now facing the toughest financial squeeze of their lifetimes. The Living Wage Foundation found more than half of the 2,000 surveyed earning less than the real living wage had used a food bank in the past year. Additionally, 42% regularly skip meals for financial reasons and 21% have no money left over after paying for essentials, such as rent and food. As many as 4.8 million people in the workforce have earnings of less than the real living wage, the Guardian reported

Pound Sterling has dropped to a 37-year low against the dollar, pushed further down by disappointing retail sales figures. It plummeted by more than 1% to 1.1351. Meanwhile, the Euro rose to 87.66 pence, its highest since early 2021, and was last up 0.39% at 97.52 pence, the Office for National Statistics found. This comes after weaker than expected retail sales figures, with volumes dropping 1.6% in August, City A.M reported. 

16 September 2022: FTSE 100 boosted ahead of interest rate rises; Kwarteng may scrap caps on bankers’ bonuses; Patagonia boss gives firm to charity.

London’s FTSE 100 has bounced higher, driven by inventors pouring into banks on expectations of more interest rate rises from the Bank of England. The capital’s premier index added 0.56% to 7,318.10 points, while the FTSE 250 climbed 0.47% to just below 19,000 points. Traders have ramped up bets on the Bank continuing to lift borrowing costs, despite UK inflation dropping last month to 9.9% from a 40-year high of 10.1%, City A.M reported.

Chancellor Kwasi Kwarteng is reportedly planning to scrap caps on bankers’ bonuses. The move would aim to boost UK tax revenues by attracting more talent to the City of London. Kwarteng has looked at abolishing rules imposed after the 2008 financial crash that capped bonuses at twice an employee’s salary, the Guardian reported. Ministers are known to be concerned that the City could lose out to other financial centres and such a change would make it more competitive. 

The billionaire founder of Patagonia has given away the company to a charitable trust. Yvon Chouinard said that under a new ownership structure, any profit not reinvested in running the business would go to fighting climate change. Currently, this will amount to around $100m (£87m) a year. The outdoor fashion retailer operates in over 10 countries. Founded in 1973, its estimated revenue was $1.5bn this year, while Chouinard's net worth is thought to be $1.2bn, the BBC reported. 

15 September 2022: food prices rise at fastest August rate in 27 years; firms’ energy bill support delayed; Japan may lift tourist cap to help economy. 

Food and soft drink prices soared at a record rate in August, up 1.5% compared with July. This is the largest July to August rise since 1995. However, falling petrol prices helped the overall inflation rate to ease in the year to August, the Office for National Statistics figures found. Prices are rising faster than wages, putting pressure on household budgets. The Bank of England has said inflation could top 13% this year. It is expected to keep raising interest rates to try and control it, the BBC reported

British businesses will have to wait longer than households for financial support with their energy bills, the government warns. The news comes amid delays in launching the £150bn scheme, which may not be ready until November. This is concerning company bosses as fixed energy contracts come to an end in October for hundreds of thousands of firms. Businesses across many sectors of the economy have warned they may not survive the winter as a result of soaring bills, the Guardian reported

Japan may further relax border controls for foreign travellers to boost its economy. The yen slid to its lowest point against the US dollar in 24 years last week, dropping as much as 1.7%. Deputy Chief Cabinet Secretary Seiji Kihara now says the cap on daily entries could be lifted in the "not so distant future". Japan has barred most foreign visitors for the last two years amid measures to slow the spread of COVID-19. Earlier this month the number of foreign tourists allowed to enter the country was raised to 50,000 per day from 20,000, the BBC reported. 

14 September 2022: UK unemployment at lowest rate for 48 years; Truss tax plan gives rich more support than poor; Aldi overtakes Morrisons as UK’s fourth-largest supermarket.

The UK's unemployment rate fell to its lowest level since 1974 in the three months to July. The jobless rate fell to 3.6% over the period, according to the Office for National Statistics. However, the squeeze on pay remains, with rises in regular pay failing to keep up with the rising cost of living. When taking the rise in prices into account, the value of regular pay fell by 2.8%. One reason for the fall in the unemployment rate is a rise in the number of people who are no longer looking for work. The inactivity rate rose to 21.7%, its highest since 2017, the BBC reported

Liz Truss’s plans for an energy price freeze and sweeping tax cuts mean rich households will receive twice as much support aimed at reducing the cost of living than poorer households next year. The wealthiest tenth of UK households would receive £4,700 on average, and poorest tenth £2,200, the Resolution Foundation said. It estimated that the plan to limit an increase in the cost of a typical household energy bill to £2,500 for two years from October would cost about £120bn, the Guardian reported.

Aldi has overtaken Morrisons as the UK's fourth-largest supermarket chain. The data from Kantar Worldpanel suggests discounters are continuing to attract market share as prices rise. Morrisons had a 9.1% share of the grocery market in the 12 weeks to 4 September compared with Aldi's 9.3%. Grocery inflation was at a new record rate of 12.4% last month – increasing the average annual bill nearly £40 to £571. Prices of essentials such as milk and butter have risen 30% over the past year, as families get to grips with rising bills across the board, Sky News reported

13 September 2022: European Central Bank raises interest rates; Germany announces €65bn package to curb energy costs; Southern Water to use bailiffs against customers.

The European Central Bank has hiked its key interest rates by an unprecedented 75 basis points, signalling that further rises are likely. Last week it lifted the deposit rate from 0 to 0.75% and the main refinancing rate to 1.25%, the highest level since 2011. The move comes as inflation is at a half-century high and the bloc heads for a likely winter recession. It has also revised its economic forecast, projecting inflation averaging 8.1% this year, 5.5% in 2023, and 2.3% in 2024, Sky News reported

Germany has announced a 65bn (£56.2bn) package of measures to ease the threat of rising energy costs. The package, much bigger than two previous ones, will include one-off payments to the most vulnerable and tax breaks to energy-intensive businesses. Energy prices have soared since the February invasion, and Europe is trying to wean itself off Russian energy. Last week Russia said it was suspending gas exports to Germany through the already operating Nord Stream 1 pipeline indefinitely, the BBC reported

Southern Water is threatening to use debt collection agencies against customers. Some customers are observing a payment boycott in protest against its continued dumping of raw sewage. The company has now warned them will be using bailiffs if they continue to hold back bill payments, as well as saying “additional fees could be applied to your account and your credit rating may be affected.” It has been given the lowest rating for performance by the Environment Agency, and last year was fined £90m for dumping billions of litres of raw sewage into the sea around Whitstable and the Hampshire coast, the Guardian reported. 

12 September 2022: EY to vote on audit and advisory split; minority ethnic workers more commonly paid below RLW; free UK Trade and Export Finance Guide available; 12.5% on waiting list as NHS backlog grows.

Big Four firm EY is looking to separate its audit and advisory businesses. The leaders of its 15 biggest member organisations – including those in the UK and US, which account for 80% of its $45bn (£39bn) annual revenues – unanimously decided to put the split to a vote by its 13,000 partners. As EY operates across 150 counties, this is expected to begin on a country-by-country basis towards the end of this year and conclude early next year, the Guardian reported.

More minority ethnic workers in the UK are paid below the real living wage than white British workers, a survey has found.  The Living Wage Foundation research also found 56% have experienced discrimination at work, 34% have been passed up for promotion owing to their ethnicity, and 29% have been refused a job because of their ethnicity. In most ethnic groups, women are more likely than men to earn below the real living wage. This is £9.90 an hour in most of the UK and £11.05 in London, the Guardian reported

A Trade and Export Finance Guide has been created to better support UK businesses. Trade Finance Global partnered with UK Export Finance, the UK government’s export credit agency, and Department for International Trade to produce the guide. It explains how businesses should navigate issues such as the COVID-19 pandemic, Brexit and the Russia-Ukraine conflict when facing UK trade and export requirements. The free guide is available on the government website

Nearly one in eight people are now waiting for operations or other types of care in England. New NHS data shows there were a record 6.84 million people on the waiting list at the end of July, as the backlog in hospital treatment continues to grow. Before the pandemic this figure was 4.2 million. New Prime Minister Liz Truss has promised to put the NHS on a "firm footing" and the government is expected to unveil a plan for the health service next week, the BBC reported

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