900,000 furloughed in January – business news 26 February 2021.
James Salmon, Operations Director.
900,000 furloughed in January. A return to growth expected in the second half. Councils fail to hand out 1.6bn in grants. Talk on the budget and potential taxes and the effect of covid on the wealth gap.
Latest lockdown saw businesses furlough 900,000 in January
New figures show that the latest lockdown saw businesses furlough another 900,000 jobs last month. A total of 4.9m wage bills were paid by the Treasury under the furlough scheme at January’s peak, surging from below 4m for most of December when more businesses had been allowed to open. It took the number paid to stay at home to its highest level since the end of July. Data from HMRC show that number fell to 4.7m by the end of last month.
Return to growth expected in second half
PwC is predicting growth of up to 4.6% for Scotland this year as the country’s economy recovers from the pandemic. After an estimated drop of 10.6% in GDP last year, the economy north of the Border is expected to grow by between 3.6% and 4.6% in gross value added (GVA) terms in 2021, depending on the speed of the recovery. For the UK as a whole, PwC believes the economy will see negative growth in the first quarter of up to -2.8%, followed by a gradual return to growth from the second quarter.
Councils fail to hand out £1.6bn of Covid grants
New figures from the Department for Business show that councils across Britain failed to hand out more than £1.6bn of emergency Covid grants to struggling businesses, causing fury in Whitehall. Craig Beaumont, of the Federation of Small Businesses, said: “We should be seeing local authorities in a big race to stop supply chain businesses going bust, yet most are still at the start line and have not got discretionary grants out the door. Full discretion has made councils afraid of making mistakes and wanting more guidance from government, while government insists all instruction has been given.”
Nearly 800,000 homes at risk of being repossessed
The Social Market Foundation estimates that some 770,000 families are at risk of losing their homes if they suffer a loss in income when a ban on repossessions ends in April. A quarter of the homeowners at risk of having their property repossessed work in the retail and manufacturing sectors, the SMF said. Scott Corfe, research director at the SMF, warned the Government needs to prepare for “a possible spike in evictions and repossessions” given many households will not be able to pay their mortgage if they lose their jobs.
Sunak likely to freeze lifetime allowance, higher tax rate
The Times reports that Rishi Sunak is expected to announce that the lifetime allowance will be frozen for the rest of this parliament at just over £1m. If the lifetime allowance rose in line with inflation it would increase by £88,900 by the end of this parliament. However, freezing the allowance means the additional pension savings will face the 25% levy – equivalent to £22,225.
It is also understood that the Chancellor will freeze the £50,000 threshold for the higher rate of income tax, but resist freezing the £12,500 threshold amid concerns it will hit low earners. Freezing the higher rate would create 800,000 more higher-rate taxpayers, according to the Resolution Foundation.
Cameron joins calls to resist tax increases in Budget
Rishi Sunak will call for “honesty” about the need to reduce spending when he delivers his Budget speech on Wednesday, Treasury sources have said. “You will hear the word honesty used a lot. He will be very clear to people that we’ve spent at wartime levels to get people through this, which was the right thing to do, but this can’t go on forever,” they said. Meanwhile, senior Conservatives including former prime minister David Cameron are warning the Chancellor not to use major tax hikes to balance the books.
In an interview with CNN, Mr Cameron said that tax increases “wouldn’t make any sense at all” before the economy was up and running again. His comments come as Tory and Labour MPs plot to thwart an increase in corporation tax, leading Downing Street to threaten to remove the party whip from Tory MPs who rebel against the Budget. Meanwhile, the left-leaning think tank the Institute for Public Policy Research should use increases in CGT, corporation tax, wealth tax and a land value tax to raise £55bn while injecting a further £190bn into the economy to lay the ground for a “balanced recovery.”
Chancellor faces revolt over planned CGT raid
Mel Stride, the chairman of the Treasury Select Committee, has warned of a backbench rebellion if the Rishi Sunak raises capital gains tax (CGT). “If you were going to align income tax rates to capital gains tax, I think it would be extremely problematic,” he said. Landlords would be hit particularly hard by a hike in CGT, the Telegraph notes, with those in London potentially facing an average bill of £27,000, according to Hamptons. Separately, Bridget Phillipson, shadow chief secretary to the Treasury, said now was not the time to be putting up taxes on families and businesses that are struggling. She added: “Not only can they not bear that, but it would hamper the recovery that we want to see.”
Global financial system skewed in favour of wealthy, UN panel says
The UN panel on financial integrity for sustainable development has urged governments to overhaul tax rules and the banking system to help end poverty and tackle the climate emergency. Systemic tax abuses, corruption and money laundering are leaving billions of people trapped in poverty. The panel of world leaders, central bank governors and business and civil society representatives said up to 10% of the world’s wealth could be hidden offshore at a time when governments were under growing financial strain because of the Covid pandemic, and as inequality soars.
Covid crisis makes the rich richer
London has overtaken New York as home to the highest concentration of dollar millionaires in the world.
This is according to a report by the property consultants Knight Frank. Some 874,354 people in London have assets, including property, worth more than $1m. Compared with 820,000 in New York. The Knight Frank wealth report shows that despite the economic destruction wrought by the pandemic on millions of people with modest incomes, those who were already very rich have been able to increase their fortunes.
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