Setback for Chancellor Philip Hammond, as UK public finances worsen

(qlmbusinessnews.com via uk.reuters.com – – Fri, 21st Oct, 2016) London, UK – –

UK public finances
London Skyline/Megan Trace/flickr.com

Britain's public finances showed a much bigger than expected deficit in September, a setback for Chancellor Philip Hammond as he prepares to deliver the country's first budget plans since the Brexit vote.

Investors are already nervous about the prospect of an acrimonious British departure from the European Union, and Friday's figures may limit Hammond's ability to cushion the blow of the referendum result via higher spending or tax cuts.

Britain ran a budget shortfall of 10.6 billion pounds last month, 14.5 percent higher than the deficit in the same month last year, the Office for National Statistics said.

The deficit, excluding state-owned banks, was above all forecasts in a Reuters poll of economists, which had produced a median projection of an 8.5 billion-pound shortfall.

Despite falling from more than 10 percent of economic output in 2010 to 4 percent in the last financial year, Britain's deficit remains among the highest for any developed nation.

Hammond, responding to Friday's figures, reiterated his message that he will bring down the budget deficit more slowly than his predecessor George Osborne had planned.

“We remain committed to fiscal discipline and will return the budget to balance over a sensible period of time, in a way that allows us the space to support the economy as needed,” he said in a statement.

But the slow improvement of the public finances in the year to date, combined with an expected slowdown in the economy next year that will hurt tax revenues, represents a constraint for Hammond as he prepares his Nov. 23 Autumn Statement.

He has said any extra spending on infrastructure projects was likely to be modest, disappointing some economists who said he could be bolder with government borrowing costs so low.

NO SPLURGE

The weak September figures took the deficit in the first half of the financial year to 45.5 billion pounds, down nearly 5 percent from the same period in the previous year but already close to the 55.5 billion pounds forecast for the 2016/17 tax year as a whole by Britain's budget watchdog in March.

The Office for Budget Responsibility said it was clear that its March forecast was “very unlikely to be met” but said the size of the miss was likely to be reduced by one-off factors that weighed on borrowing in the first half of the year and an expected jump in income tax receipts later in the year.

The OBR said it was still too early to assess the impact of the Brexit vote on Britain's public finances.

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Samuel Tombs, an economist with Pantheon Macroeconomics, said Hammond would probably want to keep some room for a loosening of the purse strings once Britain actually leaves the EU which will probably be shortly before the next election.

“As a result, we think that the chancellor will scrap the 0.8 percent of GDP fiscal tightening planned for 2017, but will not set fiscal policy to boost growth and will ensure that the fiscal consolidation resumes thereafter,” Tombs said.

September's weak performance was partly caused by a fall in receipts from corporation tax and property transactions. Growth in value-added tax receipts was slower than earlier in the year.

It was the first fall in corporation tax revenues for the month of September since 2009, the ONS said, adding that it was unable to provide a reason for the fall.

The growth in VAT receipts was the slowest for the month of September since 2012.

By William Schomberg

Uk hit by £10 billion annual cybercrime

(qlmbusinessnews.com via uk.businessinsider.com – – Wed, 19 Oct, 2016) London, UK – –

The UK economy lost up to £10.9 billion as a result of online fraud and cybersecurity last year, according to new research — that's around £210 for every person over the age of 16 in the country.

The figures, from the National Fraud Intelligence Bureau and crime awareness group Get Safe Online (GSO), would likely be even higher if more cybercrime was reported. 39% of those who had been victims of cybercrime in a GSO survey said that they hadn't reported the incident.
The report also highlights a worrying gap in people's understanding of what constitutes an online crime.

86% said that they had not been targeted by cyber criminals in the past 12 months. 68% of respondents, however, said they had been targeted in a variety of ways — deceptive emails, fraudulent websites, and email account hacking, all of which are common methods for online theft.
Another worrying trend is the rise of ransomware, a type of malicious software designed to block access to a computer system until a sum of money is paid. 3% of victims in the survey had been victims of ransomware.

The research also highlighted a widespread belief that cybercrime is inevitable — 37% of those surveyed who have been a victim of cybercrime said that they felt there was “nothing that could be done” to prevent it.
Tony Neate, chief executive of GSO, said in an emailed statement: “The fact that over a third of people felt there was nothing that could have been done to stop them becoming a victim is alarming indeed – particularly when it’s so easy to protect yourself online.”

City of London Police’s commander Chris Greany said: “The huge financial loss to cybercrime hides the often harrowing human stories that destroy lives and blights every community in the UK.

“All of us need to ask ourselves are we doing everything we can to protect ourselves from online criminals. Unfortunately, people still click on links in unsolicited emails and fail to update their security software. Just as you wouldn’t leave your door unlocked, so you shouldn’t leave yourself unprotected online,” he added.

By Thomas Colson

Tenants to face rent increase as 440,000 landlords are hit by changes in tax

(qlmbusinessnews.com via uk.finance.yahoo.com – – Tue, 18 Oct, 2016) London, Uk – –

Thousands of tenants could face substantial rent rises next spring or even be forced to move out as sweeping tax changes hitting their landlords come into effect.

About 440,000 landlords are facing substantially higher tax bills which could see them passing on the costs to their tenants or selling up, a pressure group has warned.

The changes will mean landlords will no longer be able to deduct mortgage interest payments or any other finance-related costs from their turnover before declaring their taxable income.

The National Landlord Association says more than 400,000 landlords who currently pay basic-rate tax will immediately be hit by the changes although, potentially, the majority of Britain’s estimated 2m landlords could find their tax liability rise.

It says about a third of landlords in London and the east of England will be affected next April, with just over a quarter in the West Midlands.
Richard Lambert, chief executive officer of the NLA, said its research showed government claims the changes would only affect a small number of higher-rate taxpayers were “complete tosh”.

“The government must look to amend these tax changes and minimise the impact on landlords and their tenants – something that could easily be achieved by applying the rules to only new loans written after April 2017.
“Unless this happens, landlords will face an impossible decision of whether to increase rents and cause misery for their tenants, or to sell-up, and force their tenants to find a new home,” he added.

Warning shot: landlords face being squeezed by the taxman come next spring

The amount by which landlords will be affected will depend on their personal circumstances, including whether or not they generate income from any other sources.
Landlords’ tax liability will increase depending on their existing annual mortgage interest payments, which are broken down by portfolio size:
Single property – £3,600
2-3 properties – £8,600
4-5 properties- £16,300
5-10 properties – £18,200
11-19 properties – £24,900
20+ properties – £38,000
It has been estimated that some 7.2 million UK households will be in rented accommodation within a decade as house price inflation continues to see increasing numbers struggle to get on the property ladder.

By Mark Dorman

 

Parliament should vote on Article 50, Constitutional lawyers tell the UK High Court

(qlmbusinessnews.com via uk.businessinsider.com – – Mon, 17 Oct, 2016) London, UK – –

Theresa May is facing the first serious test of her authority as Prime Minister, with lawyers on Monday arguing in the High Court that she must defer to parliament on the matter of the UK leaving the European Union.

Three of the UK's most senior judges on Monday heard arguments about why members of parliament should vote on the triggering of Article 50.

Article 50 begins the official two-year process of Britain leaving the European Union and Theresa May has signalled she will trigger the article in March of next year. However, there is increasing pressure for the triggering to be put to a vote, a process that some commentators say could result in the Brexit process being watered down or even reversed.

Lawyers representing a number of claimants say it would be unlawful for May to initiate Britain's exit from the EU using “royal prerogative” — the power granted to a government to make decisions without a vote from parliament.

Speaking at the Royal Courts of Justice, Patrick Green QC, representing British expats, said it was “beyond any doubt” that existing law prevents the executive from removing treaties and domestic law without first consulting parliament. Green was referencing the European Communities Act (1972) and European Union Act (2011).

He argued that the former piece of legislation, which saw the UK concede some of its legislative power to the EU, was an example of Parliament conferring powers which “only parliament” could exercise and confer. Triggering Article 50 without first passing an Act of Parliament would require May's government to overturn a parliamentary decision without consulting parliament itself, he added.

“There can be no scope for government with a stroke of a pen claiming the power to take away treaties … remove domestic rights and reverse parliament's conferral power without parliamentary approval,” he said.

Helen Mountfield QC, representing the crowdfunded claimants group People's Challenge, told the court that triggering Article 50 without parliamentary approval would be contrary to the Scotland Act, which protects Scottish domestic law from alteration without a proper parliamentary process.

“The crown does not have the right to impose or remove rights as a matter of domestic law,” she said.

The court room was packed to watch the second day of the historic case unfold. If the judges rule in the claimants' favour, not only would it have a clear impact on how and when Britain leaves the 28-nation bloc, but would reshape the country's constitutional landscape.

The government's position was defended by Attorney General Jeremy Wright QC. Wright argued that MPs were told the government intended to use royal prerogative to trigger Article 50 after the result of a Brexit vote, and said the referendum legislation did not state that further legislation would be necessary to put the result into effect.

“As a matter of general principle, withdrawal from a treaty is a matter for the Crown … This is totally within the expectation of Parliament … Royal prerogative has not been eroded,” he said.

The attorney general accused the claimants of politicising the legal debate by wanting MPs to be “asked the same question” that was put to the public on June 23.

The case got underway on Thursday and will conclude on Tuesday, with a verdict expected in mid-November. The claimants are expected to launch an appeal to the Supreme Court if the judges rule against them.

The case is being heard against a backdrop of heated debate between Remainers who want Brexit to be subjected to tough parliamentary scrutiny, and Brexiteers who accuse Remainers of attempting to subvert the will of the British people.

Some who have attended the case have been verbally abused upon entering the court. Lord Chief Justice opened proceedings by saying this abuse was “wholly wrong” and warned those responsible would receive the “full vigour” of the law.

The case continues.

By Adam Payne

 

Nissan CEO Ghosn meets May, after Brexit ultimatum

(qlmbusinessnews.com via uk.reuters.com – – Fri, 14 Oct, 2016) London, UK – –

Two weeks after warning that Nissan (7201.T) could halt new investment in Britain's biggest car plant due to uncertainty over Brexit, Chief Executive Officer Carlos Ghosn met Prime Minister Theresa May on Friday.

Ghosn told reporters at the Paris motor show late last month that future spending on the north of England facility in Sunderland would depend on a guarantee of compensation if Britain's eventual deal with Europe led to tariffs on car exports.

Businesses have been concerned that Britain is headed towards a “hard Brexit”, which would leave it outside the European single market and facing tariffs of up to 10 percent on car exports.

Nissan, which built nearly one third of Britain's 1.6 million cars last year, faces a decision in early 2017 on where to build its next Qashqai sport utility vehicle, prompting Friday's visit.

“The purpose of this meeting… is to ensure both Nissan and the UK government have an aligned way forward that meets the needs of both the company and the country,” a Nissan spokesman said.

“We do not expect any specific agreement to be communicated following this initial introductory meeting of the CEO and the Prime Minister,” he added.

A spokesman for the prime minister said he would not comment on the private meeting.

Ghosn's concerns led other carmakers to warn about the consequences of a hard Brexit, favoured by some Conservatives who wish to impose limits on immigration, a key concern of many voters who backed Brexit.

The chief executive of Britain's biggest automaker Jaguar Land Rover (TAMO.NS) told Reuters that any Brexit deal would have to guarantee a “level playing field”, opening up the possibility that others too would seek financial guarantees.

In September, when asked for a response to Ghosn's comments, a spokeswoman said the government would not give a running commentary of different opinions about Brexit.

But in a speech to the Conservative Party this month, May said the government would do everything it could to encourage, develop and support strategic sectors of the economy such as car manufacturing, financial services and aerospace.

Britain's car industry was a strong supporter of continued membership of the European Union ahead of the June 23 vote, benefiting from unfettered access to the world's biggest trading bloc and its standardised regulations.

The British government has said it will listen to business concerns and protect the economy as its begins formal divorce talks from the European Union by the end of March.

(Additional reporting by Kylie Maclellan; editing by Stephen Addison)

 

Confidence returns to British housing market as prices are set to soar

 

(qlmbusinessnews.com via uk.businessinsider.com – – Thur, 13 Oct, 2016) London, UK – –

Britain's house prices are set to soar as there are more people rushing into the housing market, but not enough people are selling their homes.

According to new data from the Royal Institution of Chartered Surveyors (RICS), there has been a “significant turnaround in new buyer enquiries compared to June”when the EU referendum took place, but there is a slump in people actually putting houses on the market.

This only means one thing — there are too many people looking to buy a home and not enough to go around. Considering this is a key problem for Britain's housing market anyway, because there is a dearth in supply and homes are not being built fast enough, this will elevate prices for some time to come.

“The market does now appear to be settling down following the significant headwinds encountered through the spring and summer. Buyers do appear to be returning, albeit relatively slowly, but the big issue that continues to be highlighted by respondents is the lack of fresh stock on the market,” said Simon Rubinsohn, chief economist at RICS.

“Although this is not a new story, it is a significant one having ramifications for both prices and the level of turnover. Central London remains something of an outlier with contributors telling us this is the one part of the market where there may be further give on prices in the near term. Elsewhere the price trend still seems on the up.”

RICS points out that the number of new instructions being received by estate agents has hit historic lows.

“This drop in new properties coming to the market continues a pattern that extends back to the middle of 2014 with a brief exception around the turn of the year when some vendors saw opportunity linked to the April hike in stamp duty for investors,” said RICS.

And the impact on prices is over the next three months is that, nationally, they will rise. According to RICS' UK Residential Market Survey, 14% more respondents expect to see an increase. RICS says “this is the strongest reading since March and compares with +9% in August.”

By Lianna Brinded

 

UK economy set for £66 billion annual loss without Single Market access

(qlmbusinessnews.com via uk.finance.yahoo.com via uk.businessinsider.com – – Wed, 12 Oct, 2016) London, Uk – –

Britain's government predicts that a “Hard Brexit” — Britain leaving the European Union without access to the Single Market — will cost the UK £66 billion ($81.2 billion) a year in lost tax revenues.

According to “leaked government papers” seen by The Times newspaper, the UK Treasury is warning cabinet ministers that the country's GDP could fall as much as 9.5% because it would have to rely on the World Trade Organisation rules for trading and therefore it would miss out on more favourable trading tariffs that come with being a member of the 28-nation bloc.

The Treasury expects both trade and foreign investment in Britain to be around a fifth lower than it otherwise would have been if the UK relies on WTO rules for trade. This would also have a knock-on negative effect for productivity, hence the huge drop in tax receipts.

The leaked document is apparently a “draft cabinet committee paper, ” which is intended to inform those in charge of negotiating Britain's exit from the EU.

The Times says the drop in tax revenue is the equivalent of 65% of the annual budget for Britain's National Health Service, showing just how huge a loss it would be to the UK.

Britain voted to leave the EU on June 23. Since then, prime minister Theresa May has repeatedly said that “Brexit means Brexit” and pledged to pull the UK out of the 28-nation bloc with the best deal possible. However it is looking like Britain is going to have a “Hard Brexit” no matter what, judging by May and her cabinet's stance on immigration.

Simon Wells and his team of economists at HSBC said in their client note earlier this month that “immigration control appears a higher priority than full Single Market access,” following the PM's speech at the Conservative party conference.

Britain has pretty much been given a choice by EU officials between controlling immigration and access to the Single Market. While no official negotiations can actually start until May triggers Article 50, which officially gives the UK two years to negotiate its exit with EU officials, the UK government's repetition on focusing on immigration instead of access to the Single Market all points to a “Hard Brexit.”

Britain cannot have best of both worlds. Taking greater control of immigration by opting out the Freedom of Movement Act, which allows any EU citizen to enter the country, means that the country will have to relinquish its single market membership — like Turkey.

If the UK wants single market access, it will have to adhere to EU immigration rules — like Norway.

By Lianna Brinded