Recently in Tax Category
This is an extended, updated blog version of my Post Column from two weeks ago.
There's been a clutch of forecasts out of late on the economy. One by BDO says we're heading for double dip, another, by the CBI, says we'll avoid it. And while the forward looking PMI figures on manufacturing and services started the year in better-than-expected shape, and may indeed hold out the hope that the UK could narrowly avoid an 'official' double-dip recession, at best all we can say is that the economy is still flatlining. Sadly, employers seem to be increasingly taking this on board in their hiring and firing decisions.
So much so that the UK's labour market faces its most difficult quarter since the recession, according to the Chartered Institute of Personnel and Development (CIPD) in its recent 'Labour Market Outlook'. Despite the government's hopes of a rebalancing from the public to private sector, the CPID in fact suggests that the private sector is shifting from a "wait and see" mode to one in which more employers lay off workers given anemic growth in the economy.
In defending his rush into a front-loaded austerity fix for the UK economy, Chancellor Osborne has repeatedly sought cover from international organisations for his actions.
His 2010 Tory Party conference speech set the tone:
"On one side there is the IMF, the OECD, the credit rating agencies, the bond markets, the European Commission, the Confederation of British Industry, the Institute of Directors, the British Chambers of Commerce, the Governor of the Bank of England, most of British business, two of our great historic political parties, one of the Miliband brothers, Tony Blair, and the British people.... On the other side is Ed Miliband and the trade union leaders who put him where he is".
Cue much conference laughter and clapping.
Of course, it was never really thus, and the Chancellor conveniently omitted to note many leading figures on that 'other side', including the US President Barack Obama, Nobel Prize-winning economists Paul Krugman and Joseph Stiglitz, the leading columnists Martin Wolf and Samuel Brittan of the Financial Times, and Keynes' biographer Lord Skidelsky amongst many others.
Last year the Mega-Banks - freshly bailed out by you and me - signed a tax code which demanded that they comply with the "spirit and the letter" of the law.
A year on and people are asking whether the banks are indeed doing just that after it became clear that Barclays paid a paltry Â£113 million in corporation tax in 2009, on a whopping pre-profit of Â£11.6 billion.
That works out at an effective corporation tax rate of around 1%. The rate of corporation tax in the UK is 28%.
Back in the summer of 2007 BBC Radio rang me to talk about the gathering financial storm. I remember the moment well as I was on the way to a christening south of Dublin and my wife pulled over so I could do a quick interview before finding the party.
Three years on, what has changed? Everything and nothing, it seems.
'Everything' in the sense that we as citizens have had to pay the price in terms of lost jobs, higher taxes, and now cuts in public services. The economy is roughly 10% smaller than what it would have been without the huge downturn.
And hundreds of billions' worth of 'toxic assets' that were once on the banks' books have been shifted over to the state and added onto fiscal deficits which anyway had shot up during that downturn both through lower tax takes and higher government spending.
What is clear beyond doubt is that the UK tax system is among the most complex in the world.
It is a deterrent to businesses looking to move into Europe and a nightmare for those that have to understand and interpret it.
Legislation by cross reference and arcane English are just two of the issues that have added to the problem.
The fact that there are no deliberate gaps in our legislation where new law on the same subject can be added has made matters worse. Law covering the same area could be scattered across different Finance Acts.
There has been much said in the press recently about Francis Maude's plans to cut the redundancy protection of civil servants including all of Whitehall, large regional departments such as Works and Pensions, Revenue and Customs, the Ministry of Defence and the Ministry of Justice.
Some long serving members of these departments would be entitled to six years redundancy pay if they were made redundant.
Credit due to them, the previous Government tried to halt this particular gravy train and were defeated in court, hence the need for legislation.
There is much talk about the current economic crisis forcing Government to look closely at spending, including pay, pensions, and now redundancy protection for the public sector, as well as social security benefits and capital projects.
The question we must ask is why it has taken a financial crisis of such magnitude to make Government look in depth at the situation?
Now that the initial dust has settled on the budget there is time for some reflection on the measures introduced.
Much has already been said about the increase in VAT and the lower than expected CGT rate but tucked away in the press releases is a little gem that has been largely overlooked.
Government is going to end the effective requirement to use a pension fund to buy an annuity by age 75.
"Short-term speculators should not determine the outcome of takeovers", Business Secretary Vince Cable said today, thereby kicking off a potential scrap with Conservative Cabinet colleagues, in the opening moves of a new review of the rules which govern takeover bids.
The new government is still pondering whether it should change the regulatory stance over takeovers in the wake of Cadbury, to give firms more protection form takeovers, especially hostile ones.
The Department for Business, Innovation and Skills (BIS) stated that it intends to respond to a recent critical select committee report (chaired brilliantly by Peter Luff MP) on the Kraft deal before the parliamentary recess starts next month.
During the election, the Liberal Dems said there was a strong case for reinstating a public interest veto - which was scrapped by New Labour - while the Tories attacked this as 'populist nonsense'.
Today Vince Cable signalled his desire for a tighter regime, saying that the government wanted "all shareholders to be empowered, the takeover process to be more transparent, directors to think about their wider long-term legal duties, and takeovers to be decided on the basis of long-term shareholder value rather than short-term speculation".
Yesterday I walked past the Marks & Spencer store on Harborne High Street.
So what? I hear you ask.
Well I'd just ambled out of the Plough pub in Harborne (which by the way is a brilliant example of a small business at its best - serving customers well) and needed to pick up some odds and ends before walking home, having left the car at home. I usually just stumble into the M&S opposite.
But, just as I was about to walk into M&S on autopilot, this time I instead took a sharp right turn and headed up the road to the other end of the High Street where I bought my bits and pieces for dinner from Waitrose and the Coop (both in fact cooperatives by the way).
The reason for this was my annoyance at the intervention by Sir Stuart Rose (the boss at M&S) into the general election campaign.
It's been a recurring theme of Birmingham Post blogs by John Clancy and myself over the last two years that the UK needs a fundamentally new industrial policy that helps to rebalance the economy and support high-tech advanced manufacturing, including that in the auto industry.
Our arguments on the need to rebalance the economy are brought together in a new book 'Blogs from the Blackstuff. The Case for Re-wiring the Economy' which is just out and can be found here.
Whilst Labour under Mandelson have been late converts to the idea of 'active interventionalism' - and recent efforts by Mandy to anchor green auto production and technologies in the UK have been hugely welcome - there is a feeling of 'too little too late' about Labour's attitude to manufacturing.