Category Archives: Business

Chancellor Says Tax Hikes and Spending Cuts Ahead

Chancellor George Osborne has indicated that increased taxes and cuts to spending are likely to lie ahead for the UK. These measures, the Chancellor said, will be a necessary evil in order to deal with the economic “shock” of leaving the EU.

Speaking on radio to the BBC’s Today programme, Osborne reiterated warnings he had given prior to the referendum, and said that he continues to stand by the view that the UK’s future outside of the EU would not be “as economically rosy” as a future inside. The warnings he gave before the vote was taken, he claimed, “have started to be borne out by events.”

The UK’s economy has already felt the initial shock of the decision to leave the Union. After the referendum result was announced, with a narrow majority voting in favour of “Brexit,” financial markets were sent reeling with the stock market falling markedly and the value of the pound rapidly descending to its lowest levels since 1985.

Osborne said that the result of the economic impact of leaving the EU would leave the country poorer. He emphasised the government’s responsibility to “provide fiscal security” and the need for the country to “live within its means.”

After making these comments, Osborne was asked whether this would mean the need for increases in tax and cuts to government spending. His response to this question was “Yes, absolutely.”

A decision regarding the shape that these austerity measures might take, however, would have to be made by the new Prime Minister, Osborne said. With David Cameron announcing in the wake of the referendum that he would step down, the role of his successor as leader of the Conservative Party and therefore the current government is up for grabs. Making such a significant decision on matters of spending and tax, Osborne said, would not be possible while this leadership contest was still ongoing, but rather would fall to whoever emerged from that contest as the new leader of the country.

Osborne also said that it was a decision for those who had supported “Brexit.” Those who campaigned for the country to withdraw from the European Union, he said, are the ones responsible for drawing up a plan for the country following this withdrawal.

Despite reiterating warnings he had given before the referendum and predicting austerity as a result of Brexit, Osborne said that he stood by the Conservative Party’s decision to hold a referendum.

Osborne Calls Emergency “Stability” Budget

Following the Conservative victory in the UK’s general election, George Osborne has announced a new budget to be delivered on the 8th of July this year. The unusual move of delivering an extra budget is, he said, part of the government’s efforts to “deliver on the commitments we have made to working people” as soon as possible.

Previously, Osborne delivered the annual budget on the 18th of March. Through an article in national newspaper The Sun, he acknowledged that inserting an extra budget mid-year was an “unusual” step to take. However, he said that it was down to a desire to make “promises made in the election into a reality” with the minimum of delay.

The “stability budget” to be held in July will, Osborne claimed, concentrate with “a laser like focus” on improving UK living standards through raising economic productivity.

The chancellor has given a rough outline of the plans he expects to deliver in this budget in a conference outside 11 Downing Street. However, he would not yet go into any details of pertinent issues such as plans to make £12 billion worth of cuts to welfare. During the election campaign, the party provided details of how £2 billion worth of cuts would be achieved, but the remaining £10 billion remains unaccounted for in the details so far released.

While Osborne would not go into specifics about how the government’s goals would be achieved, he was happy to outline what the main goals are. The budget will, he said, represent a continuation of a “balanced plan” from the government to reform welfare, reduce government debts, and invest in the National Health Service. The welfare reforms, he said, would focus on efforts “to make work pay.” However, he refused to give any indication of where or how they would make the planned £12 billion of cuts to welfare funding. He only said that the government wanted to create “a welfare system that’s fair to the people who pay for it” but would “always protect the most vulnerable.”

Osborne also said that the government will increase NHS funding each year, continue cracking down on tax avoidance, and help to create new jobs including an extra three million apprenticeships.

Labour’s Caroline Flint, shadow secretary for energy and climate change, said that the Tory election campaign has involved a number of “uncosted promises.”

“It will be interesting,” Flint continued, “to see who is going to pay for those uncosted policies when they bring in the budget in July.”

Hourly Minimum Wage to Increase by 20p

The National Minimum Wage is to increase by 20p per hour, the government announced recently. The rise will take effect from October, and will boost the minimum hourly rate that businesses can pay employees to £6.70 from the current level of £6.50. Prime Minister David Cameron claimed that this increase would provide minimum wage workers with “more financial security.”

Younger workers, who are subject to different rates, will also see an increase in the National Minimum Wage from October. Workers aged 18-29 will see minimum wage rise by 17p, taking the rate up to £5.30 from its current level of £5.13. 16-17 year olds will receive an 8p increase, from £3.79 at present to £3.87 after October. Overall, these increases represent a rise of roughly 3% for minimum wage workers in both the 18-20 and 21+ age categories, and 2% for those aged 16 and 17.

The biggest boost is being received by apprentices. This group is also subject to a separate minimum wage rate. Specifically, the minimum wage for apprentices is significantly lower. This fact is designed to reflect the fact they are receiving training and a qualification as well as monetary compensation for their work, but has nonetheless been criticised by many as too low to be liveable.

Currently, apprentices are subject to a minimum wage rate if £2.73 per hour, assuming they are in the first year of their apprenticeship or are under the age of 19. This will rise by 53p to £3.30 an hour from October. This is an increase of 20%, meaning that apprentices are receiving a proportionally much larger boost than those who are subject to other minimum wage rates.

The increases that have been announced for minimum wage rates are essentially in line with recommendations that have been made by the Low Pay Commission. The one area in which the government deviates from these recommendations is in the increase for apprentices. Where the Low Pay Commission recommended an increase of only 7p per hour, the government decided to introduce the significantly larger 57p increase to the minimum hourly rate.

The increase of 3% to be introduced for adult workers, meanwhile, is being hailed as the biggest minimum wage rise for seven years in real terms. Nonetheless, not all quarters are enthusiastic, with some believing that the increase should have been greater. Unions believe the rise will not be sufficient to tackle “in-work poverty,” while Labour points to the way that inflation has “eroded” the value of the minimum wage in recent years.

HSBC Aided Tax Avoidance Worth “Hundreds of Millions”

HSBC, a familiar name in banking on an international scale, has helped clients to collectively avoid hundreds of millions in tax according to a joint investigation by media outlets around the world. The investigators have seen details of accounts representing a large number of the bank’s clients in order to substantiate the allegation.

The data examined by the consortium of media outlets was leaked in 2007 by a whistleblower. It contains details of accounts belonging to 106,000 HSBC clients. Overall, the data covers clients in 203 different countries, including 7,000 in the UK. After its release, it was passed on to more than 50 media outlets including the Guardian and the BBC’s investigative programme Panorama.

The bank will now be the subject of criminal investigations in France, Belgium, the US and Argentina. It currently faces no investigations in the UK, where the bank is based. According to a statement, HSBC will be “co-operating with relevant authorities” while such investigations are ongoing.

In regard to the nature of the accusations, HSBC admits in a statement that some of its clients have been aided in tax avoidance by HSBC’s policies. Specifically, the bank admits that secrecy policies have been taken advantage of by certain clients in order to hold accounts that were not declared for tax purposes. However, the bank insists that since this took place, it has “fundamentally changed.”

However, HSBC is accused of more than just passively implementing secrecy policies that aided tax avoiders. After the 2005 introduction of the European Savings Directive, designed to allow Swiss banks to take money directly from undeclared accounts on the taxman’s behalf, HSBC wrote to customers offering ways around the new measures. This is just one of a number of ways in which the bank is accused of taking a more active role in assisting with tax avoidance.

Neither the holding of offshore accounts nor the avoidance of tax is necessarily illegal. However, deliberately hiding money in order to avoid paying tax that is rightfully due is an illegal practice, and offshore accounts are frequently used as a means to achieve this.

In 2013, the authorities in France concluded an examination of the data released by the whistleblower. They decided that almost all (around 99.8%) of French citizens featured in the data were probably involved in tax evasion. Meanwhile in India, finance minister Arun Jaitley has said that investigations will be launched into all Indian citizens featured on the list. Jaitley did, however, warn that the list may also contain legitimate accounts.

As well as to the various media outlets and journalistic bodies that have been analysing and investigating the list, the leaked data has also been in the hands of HMRC since 2010. However, though the data seems to identify over 1,100 who have evaded tax that they legally owe. However, only one prosecution has so far been made.

Lloyds Bank Cutting 9,000 Jobs as Branches Close

Lloyds Banking Group has now confirmed that the next three years will see them close 150 branches, and this will result in the loss of 9,000 jobs. This represents the loss of roughly 10% of the bank’s current workforce.

As well as those high street banks branded under the Lloyds name, the group also owns the Bank of Scotland and Halifax firms.

This is the latest in a series of job cuts made by the major banking group. Since 2008, 43,000 jobs have been cut by Lloyds. This figure excludes those losses that have just been announced, which will take place over the next three years as branches close.

The bank has also dropped its previous pledge to keep “the last branch in town” open. It will now proceed with branch closures without regard to this principle, and has said that it will concentrate on closing down urban branches first.

The group has suffered from a number of fines in recent years for various issues, mistakes and missteps. The PPI scandal, in particular, has hit the Lloyds Banking Group hard. When administration costs of £2.5 billion are included, the PPI scandal has cost the group £11.3 billion to date and a further £900 million has now been set aside to cover future payouts. Recent fines that do not relate to the scandal have totalled over £200 million – a significant figure even if it seems small next to the volume of PPI claims.

Despite these problems, chief executive Antonio Horta-Osorio insists that “the group is performing strongly.” Indeed, over the nine months leading up to 30th September this year, the group reported strong pre-tax profits of £1.61 billion. According to Horta-Osorio, “We have met or exceeded the strategic objectives set out in 2011 and are ready to move on to the next stage in our development.”

The 150 bank closures for the next three years are a net figure, with planned new branches subtracted from the total. The bank actually intends to close 200 of its current branches, but also to open 50 new ones in different locations. With 2,250 branches belonging to the group at present, the overall number of branches owned by the group will have shrunk by roughly 7% once the three-year process has been completed.

A call from the Unite union urges the bank to give a “no compulsory redundancy guarantee.” A spokesman for the union, Rob MacGregor, said “The wallets of top executives at Lloyds should not be getting fat by forcing low paid workers onto the dole.”

SME Conference Aims To Help CFOs Balance Risk & Growth

ICAEW held their annual SME conference in London recently and discussions centred on the importance of balancing growth with effective risk management. Whilst small and medium sized organisations across the country have cause to be optimistic after a lengthy period of consolidation, the message from economic thinkers is still one of caution.

The audience consisted of ICAEW members either heading up SMEs or operating on behalf of them, with an open floor discussion. Tony Tydeman, heading up the Commercial Finance division of asset-based lender ABN Amro, was the first to initiate proceedings at One Moorgate Place. He was followed by Steve Merchant of chartered accountants Baker Tilly, who introduced himself with the line “what a difference a year makes” – pointing to the predicted economic growth rate of 2.4% by the end of this year, rising to 3.8% in 2014. “Pretty stunning,” in his own words, and certainly cause for real optimism. His sentiments were echoed by recent research carried out by ABN Amro which discovered that 69% of SMEs are actively planning growth in the next one or two years. Though despite this, Merchant still urged caution.

“If your head is in the oven and your feet are in the freezer, your body temperature on average is OK,” he stated in reference to being wary of statistics coming off the back of surveys. In other words, whereas some companies and industries are enjoying a positive spell others are still lagging behind. However, his conclusion derived from spending time talking to business owners up and down the country was that there is a lot of “energy, optimism and activity” in evidence.

Corporate asset finance was discussed by the panel, with ABN’s Tydeman pointing to supplier-side finance issues through traditional finance and a growing appetite for alternative ways to access funding. Whilst a lot of SMEs are indeed keen to grow, research found that 44% of SMEs don’t feel that they have the right kind of people in charge to realise their growth ambitions.

Joining the discussion at this stage was Joe Jouhal of Data Duplication, a company pleased to have utilised asset-based lending in order to grow their business into the corporate sector. Backing up Merchant’s analogy, he explained that “things are mixed at the moment, it depends on where you are based and what your marketplace is as to whether you find the economy in a positive state or not.”

In conclusion, he referred to “downward pressure” on the economy, despite a growing surge of confidence in it. “The media’s coverage is important,” he went on to say. “During the Olympics, everyone felt great and it contributed to the uplift in public mood. The media can be quite negative in its take on the economy and it will filter into a business’ way of thinking.”

 

Google Targets Payday Loan Ads That Break The Rules!

The internet giant Google have announced that they will be paying very close attention to advertisements by payday loan companies on their AdWords network. If any of these ads are found to be breaking the rules, then they face an immediate life ban.

This move comes after it was revealed that Google have been under increasing pressure from government agencies and consumer watchdogs who want to see tighter advertising regulations imposed on the payday loan industry.

Due to this, Google announced earlier this year that payday loan lenders using the AdWords network needed to be clearer about exactly what was on offer, with fees, interest rates, and penalty charges being more visible to potential borrowers.

Despite these warnings from Google, there were many payday lenders that did not adjust their advertising materials, which means they now face being banned from the AdWords network for life.

A spokesperson for Google said, “we have strict policies for those advertising short term loans, and we make it very clear that advertisers need to comply with regulations and be transparent about their fees. If we discover sites that are breaking this policy we will take immediate action.”

In recent years, there has been thousands of new payday lenders appearing online, with many of them getting substantial traffic from the Google AdWords network and search engine.

This message from Google sends a clear message to the lenders, letting them know that they need to play by the rules or run the risk of losing traffic from the AdWords network.

Further information about payday loans…

Despite the payday loan industry getting a bad name, there are those that argue they fill a valuable need that is not offered elsewhere.

For example, when people are struggling to pay the bills or need urgent cash to pay for a medical expense, where else are they going to get the money?

Many people don’t have thousands stashed away for a rainy day, and getting a loan from a bank these days is no easy task. With all this in mind, it’s clear to see that payday loans can offer a valuable service, as many borrowers would be in a worse position without them.

However, these type of loans are also open to abuse, as there are a minority of people who get into financial trouble after getting payday loans that they can’t afford to pay back.

Conclusion

Ultimately, Google targeting payday loan ads is a good move. Consumers should be fully aware of what they are getting themselves into before applying for a loan, and advertisements which are more clearer will go a long way to achieving this.

HSBC Loses Out on Profit in Compensation Payouts and Fines

HSBC has had to set aside more than $1.4bn in order to compensate British victims who were mis-sold payment protection insurance. Money laundering issues have also led to the bank paying out nearly $2bn in fines to the United States.

As a result, HSBC has had a 6% percent decline in annual profits. The bank made a pre-tax profit of $20.6bn (£13.7bn/€15.8bn) in 2012.

According to the bank, the underlying profit rose 18% to $16.4bn. Underlying group revenues also increased 7% to $63.5bn due to a 10% to $18.2bn from its global banking and markets division. The bank was also faced however with $5.3bn accounting charge due to the rising value of its own debt in the financial markets.

The Chief Executive Officer, Stuart Gulliver said “HSBC made significant progress in 2012.”

“Based on our current understanding of the capital rules we are extremely well-placed with regard to Basel III compliance, re-establishing our position as one of the best capitalised banks in the world. This provides a firm base on which to keep growing the business organically and allows us to increase dividends to US$8.3bn”, he added.

The bank has said that Gulliver’s pay for the entire year will total to $7.4m, with a $1.95m bonus although overall bank bonus payments fell back 15% to $2,9bn.

The two major assets which have assisted the bank are the Capital One Financial, the US credit Card division and Ping An, a China-based insurance group. Both together have provided the bank with a further $12bn.