States of Guernsey to close loop-hole to stop tax avoidance
The States has confirmed it will close a tax loophole as part of plans to help tackle the government's £44m deficit.Under the current law, people are able to create their own personal investment companies, lend them money, and then take it back as loan repayments without paying any tax.Extra guidance has been added to the Statement of Practice M45 "Legal avoidance" to make it clear that if anyone uses this type of company to take money out as a loan repayment, it will be treated as a dividend, and taxed.The Policy and Resources Committee also approved a proposal to amend the Income Tax (Guernsey) Law, 1978, so the change will be included in the island's 2026 budget.
Deputy Lyndon Trott, committee president, said: "When it comes to income tax, we have to ensure that everyone is paying their fair share, including businesses and individuals."But we are even more acutely aware of this at a time when we as a government have a £44 million deficit."This isn't the panacea for our financial woes, but we're taking action to close this loophole to make sure that we're collecting tax that belongs to the public purse."
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Glasgow Times
15 minutes ago
- Glasgow Times
Labour in ‘good place now' on welfare, Kendall insists after Government U-turn
Work and Pensions Secretary Liz Kendall sought to downplay party splits over the legislation after Downing Street offered concessions in a late-night climbdown to head off Prime Minister Sir Keir Starmer's first Commons defeat. Meanwhile, Number 10 said there will be no 'permanent' increase in borrowing as a result of the U-turn but declined to rule out tax rises in the autumn amid mounting questions about how the changes will be funded. Some 126 Labour MPs had signed an amendment that would halt the Universal Credit and Personal Independence Payment Bill in its tracks when it faces its first Commons hurdle on Tuesday. Leading rebels now believe the concessions on offer, which include protecting personal independence payments (Pip) for all existing claimants, will be enough to win over a majority. However, the fallout threatens to cause lasting damage as harder line rebels remain opposed to the legislation and some backbenchers have called for a reset of relations between Number 10 and the parliamentary party. Facing questions about the climbdown on Friday, Ms Kendall denied suggestions she had found it 'difficult' to water down reforms she had so strenuously defended and said the concessions left the Bill in 'the right place'. 'We have listened to people, we have engaged with them,' she said. 'I think we're in a good place now, alongside the huge investments we are putting in to create the jobs that people need in every part of the country… but also to make sure there's employment support for those who can work and protections for those who can't.' Asked how she felt about softening the impact of the policy, Ms Kendall said: 'I don't find it difficult, because the principles that I strongly believe in, that work for those who can is the best route out of poverty… that we must protect those who can never work, that is really, really important. 'Those principles are ones we all agree on. 'We're in the right place with the changes we've made.' The Government has also left the door open to further reform later down the line, with Ms Kendall saying there need to be 'changes in the future' to ensure 'people who can work do'. Ministers had hoped the Bill would save up to £5 billion a year, but the changes announced after crisis talks with rebels on Thursday mean Chancellor Rachel Reeves would need to find the money elsewhere to make up the shortfall. The Government's original package had restricted eligibility for Pip, the main disability payment in England, as well as cutting the health-related element of universal credit. Existing recipients were to be given a 13-week phase-out period of financial support in an earlier move that was seen as a bid to head off opposition. Now, the changes to Pip will be implemented in November 2026 and apply to new claimants only while all existing recipients of the health element of universal credit will have their incomes protected in real terms. The concessions on Pip alone protect some 370,000 people currently receiving the allowance who were set to lose out following reassessment. Work and Pensions Secretary Liz Kendall confirmed the U-turn in a letter to MPs late on Thursday night (Ben Whitley/PA) The changes represent a major climbdown for the Prime Minister, just days after he insisted to reporters he would 'press on' with the cuts, arguing there was a 'moral case' for them. Ms Kendall confirmed the U-turn in a letter to MPs late on Thursday night, along with plans for a review of the Pip assessment to be led by disabilities minister Sir Stephen Timms and 'co-produced' with disabled people. A Number 10 spokesperson said: 'We have listened to MPs who support the principle of reform but are worried about the pace of change for those already supported by the system. 'This package will preserve the social security system for those who need it by putting it on a sustainable footing, provide dignity for those unable to work, support those who can and reduce anxiety for those currently in the system.' Dame Meg Hillier, one of the leading rebel voices, hailed the concessions as 'a good deal' involving 'massive changes' to protect vulnerable people and involve disabled people in the design of future reforms. She said: 'It's encouraging that we have reached what I believe is a workable compromise that will protect disabled people and support people back into work while ensuring the welfare system can be meaningfully reformed.' Not all the rebels have been satisfied with the changes, with several suggesting they would create a 'two-tier system' and raising questions about who would be classified as a new claimant after November 2026. One told the PA news agency that discontent and low morale among the backbenches would 'continue to fester' without a 'wider reset' of relations between Number 10 and the Parliamentary Labour Party. Another accused decision-makers in Government of operating as an 'exclusive club' and showing 'disregard' for both its MPs and experts outside Westminster. The concessions could also leave Ms Reeves scrambling to fill a hole in her budget come the autumn, with economists suggesting they could reduce the projected savings by at least £1.5 billion per year. The Institute for Fiscal Studies said the changes make further tax rises in the budget 'even more likely' in order for the Chancellor to balance the books. Meanwhile Ruth Curtice, chief executive of the Resolution Foundation think tank, suggested the changes could cost as much as £3 billion. Facing questions from reporters about how the reduction in cuts would be funded, Downing Street said there would be 'no permanent increase in borrowing' and promised further detail on the policy next week. 'We'll set out how this will be funded at the budget, alongside a full economic and fiscal forecast in the autumn, in the usual way,' a Number 10 spokesman said. 'The full details (of the changes) will be set out to Parliament ahead of the second reading on Tuesday.' Asked whether the Government could say there would be no tax rises to pay for the changes, the spokesman said: 'As ever, as is a long-standing principle, tax decisions are set out at fiscal events.' Number 10 dismissed suggestions that Sir Keir's leadership had been marked by a pattern of caving in 'if enough people kick up a fuss' following similar policy changes over the winter fuel payment and grooming gangs. Sir Keir Starmer bowed to backbench pressure over the Bill on Thursday (Ben Stansall/PA) Sir Keir earlier this month announced the fuel allowance would be reinstated for millions of pensioners and also agreed to a national inquiry into grooming gangs after an independent audit recommended a probe, following months of opposition pressure. 'It's not unusual as part of the parliamentary process to introduce a Bill, have a debate about the principles and then look at how those are implemented,' the spokesman said. 'Sometimes that's with amendments along the way.' On Friday morning, care minister Stephen Kinnock refused to be drawn on how the changes would be covered, saying it was 'very much the Chancellor's job as we move into the budget in the autumn'. He also declined to comment on whether it was fair that two people with the same condition would receive different amounts of money depending on when they started their claim. Mr Kinnock told Times Radio there were 'many different individual circumstances' and it was 'not possible to generalise'. Asked whether the Government now expected the Bill to pass, he said: 'Yes.' There was mixed reaction among charities to the prospect of concessions. Learning disability charity Mencap said the news would be a 'huge relief to thousands of people living in fear of what the future holds'. Director of strategy Jackie O'Sullivan said: 'It is the right thing to do and sends a clear message – cutting disability benefits is not a fair way to mend the black hole in the public purse.' The MS Society urged rebels to hold firm and block the Bill, insisting any Government offer to water down the reforms would amount to 'kicking the can down the road and delaying an inevitable disaster'. Charlotte Gill, head of campaigns at the charity, said: 'We urge MPs not to be swayed by these last-ditch attempts to force through a harmful Bill with supposed concessions. 'The only way to avoid a catastrophe today and in the future is to stop the cuts altogether by halting the Bill in its tracks.' The Tories described concessions as 'the latest in a growing list of screeching U-turns' from the Government. Shadow chancellor Mel Stride said: 'Under pressure from his own MPs, Starmer has made another completely unfunded spending commitment. 'Labour's welfare chaos will cost hardworking taxpayers. We can't afford Labour.'
Powys County Times
15 minutes ago
- Powys County Times
Labour MPs demand ‘reset' in relations with Number 10 after welfare U-turn
Labour MPs have called for a reset in relations with Downing Street as the fallout from the welfare rebellion threatens to cause lasting damage. A late-night climbdown on welfare cuts from Number 10 may have seen off the threat of Sir Keir Starmer's first major Commons defeat, with rebels suggesting they now expect the Universal Credit and Personal Independence Payment Bill to pass its first hurdle on July 1. But speaking to the PA news agency, a number of Labour backbenchers expressed deeper frustration with how Downing Street has handled its backbenchers since last year's election. One warned that discontent and low morale among MPs would 'continue to fester' without a 'wider reset' in relations between Number 10 and the Parliamentary Labour Party after 'a year of poor party management'. Another accused decision-makers in Government of operating as an 'exclusive club' and showing 'disregard' for both backbenchers and experts outside Westminster. They told PA: 'I think the Government have got to stop pretending they know everything and start listening, because they might learn something.' Several backbenchers pointed to the Prime Minister's words at a press conference on Wednesday, in which he referred to keeping a 'focus on the change that we want to bring about' rather than the 'noises off'. Although Government sources suggested Sir Keir was talking in more general terms, rebels have taken his 'noises off' comment as referring to them. One said: 'A lot of colleagues are sickened at language being used, from the PM's 'noises off' to the senior source saying they thought Keir and Morgan (McSweeney, the Prime Minister's chief of staff) had cleansed the party of self-indulgent rubbish.' But their frustration is not shared by all Labour backbenchers, with others suggesting Friday's U-turn on welfare cuts shows Downing Street is willing to listen. One told PA: 'They're a new team, they're a year in and occasionally teams do need to have a moment where things come to a head and they learn.' Arguing that some backbenchers needed to 'chill out and have a cup of tea', they added they thought the Prime Minister had 'clocked that it's important that we work as part of a team. 'All of us want him to succeed and all of us want the Government to succeed,' they said. A Number 10 spokesman insisted on Friday that the Prime Minister 'remains fully committed to engaging with parliamentarians'.
The Guardian
17 minutes ago
- The Guardian
Reeves expected to freeze income tax thresholds to raise fresh funds
Rachel Reeves is expected to extend a freeze on income tax thresholds to raise fresh funds after the government's U-turn on welfare cuts left her with a growing budget hole. The chancellor was already facing pressure to backtrack on pledges not to increase taxes further as she attempted to fix public services and grow the economy while meeting her fiscal rules. However, Keir Starmer's U-turn late on Thursday has increased the likelihood that she will raise taxes or cut spending in the autumn budget. Independent commentators are all but unanimous in expecting taxes to go up – and many point to the threshold freeze, which is estimated to raise £8bn a year, as the most likely option. The freeze, introduced by the former Conservative chancellor Jeremy Hunt, drags ever more people into paying the higher rate of tax and is due to end in 2028. The number of people in the UK paying income tax at the higher rate is already expected to increase by 500,000 this tax year, to 7 million. 'The most obvious thing would be to extend the income tax thresholds, for another two years,' said Ruth Curtice, director of the Resolution Foundation thinktank – which estimates that the U-turn on disability benefits will cost the chancellor £3bn a year by 2029-30. That bill comes in addition to the £1.25bn price of Reeves' recent decision to reverse most of the cut to pensioners' winter fuel allowance – and the widely held expectation that the Office for Budget Responsibility will downgrade its growth forecasts in the autumn. The Treasury's independent watchdog is revisiting its estimate of productivity – a key determinant of economic growth – which looks optimistic relative to most independent forecasts. Paul Johnson, the outgoing director of the Institute for Fiscal Studies, said the U-turns on benefits could be dwarfed by the probable downgrade from the OBR. 'In one way this [the welfare U-turn] doesn't change anything very much – it's a £3bn-£4bn change at the end of the period, and the OBR forecast could change things by a lot more than that – but obviously if the OBR moves in the wrong direction then this adds to the pressure,' he said. Johnson pointed out that the most straightforward ways of raising large enough sums had been ruled out by Labour's pre-election tax pledges. 'There are always ways of finding small numbers of billions, but if you are looking for £10bn or £20bn it gets really quite difficult, if you're not going to increase income tax or VAT,' he said, adding, 'the threshold freeze is obviously the politically easiest thing to do.' Simon Wells, chief European economist at HSBC, agreed. 'They're boxed in and something has to give,' he said. 'The income tax thresholds is by far and away the line of least resistance.' Mujtaba Rahman, managing director at the consultancy Eurasia Group, said: 'Reeves may have to find up to £20bn to balance the books and give her enough headroom for future emergencies from a series of small-scale changes. They are likely to include extending the freeze on income tax thresholds and allowances for another two years.' The chancellor's team continue to insist that there is no inevitability about tax increases, pinning their hopes on a rosier economic outlook by the time of the autumn budget. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion They claim that firms have become more upbeat about the UK as an investment prospect, and many consumers are benefiting from above-inflation pay rises. 'Sentiment is really changing,' argued a Treasury source. Asked earlier this week about recent worse-than-expected public finances figures, Reeves said: 'I wouldn't read too much into one month's data. It's just one of a number of factors that will affect the next forecast that the Office for Budget Responsibility will produce.' However, there is also frustration in government at the way the OBR's forecasting process, combined with the slim £10bn of headroom Reeves has against her fiscal rules, has led to constant market speculation about the chancellor's next move. One proposal made recently by the International Monetary Fund (IMF) was for just one OBR forecast a year. The Treasury is understood to be sceptical about this idea, as it would make the UK an international outlier – but officials are understood to be looking at the nature of the spring forecast. Downgrading its role could prevent the scramble for savings seen in the run up to this year's spring statement which led to the welfare cuts. The Bank of England governor, Andrew Bailey, this week warned against 'over-interpreting' the Office for Budget Responsibility's forecasts.
