Bank of England could cut base rate if jobs market continues to slow
Companies are 'also having pay rises that are possibly less than they would have been if the NICs change hadn't happened', Mr Bailey said.
In an interview with the newspaper, the governor said the British economy was growing behind its potential.
This could open up 'slack' to bring down inflation, he said, meaning prices on goods would rise less swiftly compared with earnings in future.
Mr Bailey said he believes the base rate set by the Bank of England would be lowered in future, after it was held in June.
The current Bank rate of 4.25%, which has a bearing on all lending in the UK – including mortgages – will be reviewed again on August 7 by the Bank's Monetary Policy Committee.
'I really do believe the path is downward,' Mr Bailey told The Times.
He added: 'But we continue to use the words 'gradual and careful' because… some people say to me 'why are you cutting when inflation's above target?''
The governor's indication that lower lending rates and reduced inflation could be around the corner comes as the Government is facing pressure to improve living standards.
Ms Reeves' tax and spend plans are also being constrained by the current borrowing costs, as well as downgraded growth forecasts.
The Chancellor's fiscal headroom has been in part eroded by U-turns on the winter fuel payment and welfare reforms, as well as global shocks to the British economy.
Some in the Labour Party, including former leader Lord Neil Kinnock and Wales's First Minister Baroness Eluned Morgan, are calling for a wealth tax to help bolster the public finances.
On Sunday, Transport Secretary Heidi Alexander said such a tax had not been 'directly' discussed when ministers held an away day at the end of last week.
But speaking to Sky News' Sunday Morning With Trevor Phillips programme, she would not rule out tax rises at the autumn budget, only saying tax decisions would be made based on 'fairness'.
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Western Telegraph
21 minutes ago
- Western Telegraph
Windrush commissioner: Apprehension and suspicion remains towards Home Office
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Daily Mail
31 minutes ago
- Daily Mail
ALEX BRUMMER: A reckless plan risks a return to boom and bust
Chancellor Rachel Reeves was working at Halifax Bank of Scotland (HBOS), a major mortgage lender, during the great financial crisis of 2008. But she appears to have forgotten the key lessons of that searing experience. HBOS collapsed after embarking on a mad dash to become Britain's largest consumer and mortgage bank. It had abandoned the prudence which should be at the core of safe lending. As a result, HBOS was forced into a rescue merger with Lloyds-TSB, while Gordon Brown's Labour government propped up the enlarged institution with £20.3billion of taxpayer money. Yet under new proposals unveiled by Ms Reeves last night amid the grandeur of the Mansion House in the City of London, tough rules designed to keep the financial system safe will be swept away. Helping young people gain a foothold on the housing ladder is a laudable goal and ending the 'red tape' sounds like a great idea – particularly if it supports the dream of a home-owning democracy first advocated by Margaret Thatcher more than four decades ago. But those of us old enough to remember the collapse of the housing market in the 1990s – when interest rates soared under John Major's government – and the subsequent catastrophic collapse of Northern Rock in 2007 cannot but be horrified. Ms Reeves's plan is a slap in the face for prudence. In the 1990s 'negative equity' – when the cost of mortgages exceeded the value of the homes purchased – saw thousands of buyers abandon their properties and drop the keys back through the doors of mortgage lenders. Northern Rock collapsed after it junked historic affordability rules and granted buyers 100 per cent-plus mortgages –destroying confidence in its prospects of remaining solvent. The subsequent run on the bank, not to mention the long queues of customers seeking to withdraw their money, are etched on the national memory. The then head of the employers' group the CBI, Richard Lambert, argued that it sent a terrible image around the world and made the UK 'look like a banana republic'. It was hard to disagree. Yet under the Chancellor's proposed arrangements, borrowers will be able to obtain home loans at up to six times their salaries, a huge leap from the current four-and-a-half times limit. Prospective home owners could, in future, apply for mortgages with an income of just £30,000, down from £35,000, and with joint incomes of only £50,000. The Treasury says that these new 'Helping Hand' mortgages – to be administered by Nationwide – are aimed at people with low incomes. True, they might genuinely help aspirational homeowners in some regions of the country. But they will do little to address the plight of young people in London and other areas of fast economic growth such as Cambridge, where house prices are driven ever higher by the availability of well-paid starter jobs. Moreover, together with the weaker income and spending checks that Ms Reeves plans to usher in, easy-to-get mortgages are bound to increase the prospect of defaults. And that, in turn, could damage future lending capacity. Since taking office, Ms Reeves has been seeking new tools to drive growth. She believes that prosperity has been held back by rules imposed by the Financial Conduct Authority (the City regulator) and the Bank of England. Yet there is no escaping the real reason for Britain's vanishing growth and the accompanying assault on jobs: the culprit is the Chancellor and her £40billion tax-raising budget with its crippling rise in employers' National Insurance contributions. Now Ms Reeves is seeking a backdoor solution to a flatlining economy by reinvigorating the housing market and encouraging consumer credit. Yet she also risks returning to Britain's appalling record of financial boom and bust.
Daily Mirror
33 minutes ago
- Daily Mirror
HMRC 'doesn't know how many billionaires actually pay tax in the UK', MPs reveal
MPs have criticised the taxman for its lack of detailed information on the super-rich and what they pay, potentially making it harder to impose a wealth tax HMRC doesn't know how many billionaires pay tax in the UK - or what they cough-up, MPs have revealed. This worrying lack of know-how is despite there being relatively few billionaires to keep tabs on, and the huge amounts of money involved, they say. Critics claimed it showed HMRC had 'one set of rules for the wealthiest, and another for everyone else.' The Commons Public Accounts Committee, in a report, also flagged a wider problem that could hamper efforts to impose a wealth tax. Former Labour leader Lord Kinnock recently suggested imposing a 2% tax on assets valued above £10million would bring in up to £11billion a year. Downing Street and senior ministers have refused to rule out the idea as Chancellor Rachel Reeves faces a battle to plug a massive hole in the public finances. Yet efforts could be complicated by the crucially important information HMRC gathers. According to the report: 'HMRC has no overview of an individual's total wealth and faces challenges in getting all the data it needs to risk assess and target wealthy people.' The committee says the taxman has had some success in cracking down on the rich, including those trying to dodge tax. Through better enforcement of the rules, it collected £5.2billion from the wealthy in the 2023/24 financial year, more than double the £2.2billion in 2019/20. They are defined as individuals with incomes of £200,000 or more, or assets equal to or above £2million, in any of the past three years. HMRC - whose work collecting tax is vital for funding public services - has around 1,000 in a team dedicated to getting tax from the rich, and has secured funding to take on another 400. But the report says the authority 'can and must' do more. It found HMRC 'does not know how many billionaires pay tax in the UK or how much they contribute overall.' Yet the Sunday Times Rich List includes figures in its annual update, recently finding there were 155 billionaires in the UK. The Public Accounts Committee suggests HMRC 'immediately start work' comparing available data on known billionaires, including the Rich List, with its own records. It notes they do something similar already in the US, where the Inland Revenue Service worked with researchers to link its data to the Forbes 400 list of the super-rich. There were also just 25 criminal prosecutions of wealthy people for their tax affairs in 2023/24. Meanwhile, the number of penalties slumped from 1,747 to 456 penalties. Another area of concerns was the so-called tax gap - the difference between what HMRC thinks the wealthy may owe and what it collected. The report questioned whether the estimate of £1.9billion is "over optimistic". It points to estimates of £300million due from offshore sources, when UK residents held £849billion in offshore accounts in 2019. The committee recommends HMRC use artificial intelligence to speed up the data gathering process. Lloyd Hatton, a Labour MP member of the committee, said it was crucial for taxpayers to have trust in the system and for the rich to be paying their fair share. "This report is not concerned with political debate around the redistribution of wealth," he said. "Our committee's role is to help HMRC do its job properly ensuring wealthy people pay the correct tax. While HMRC does deserve some great credit for securing billions more in the tax take from the wealthiest in recent years, there is still a very long way to go before we can reach a true accounting of what is owed.' Fariya Mohiuddin, interim deputy director at the group Tax Justice UK, said: 'If HMRC isn't able to tax the super-rich fairly, how can anyone have faith in a system that seemingly has one set of rules for the wealthiest, and another for everyone else. At the heart of this story is the urgent need for HMRC to have the resources and political backing for it to be an effective and efficient tax authority that can administer a tax system that is fair and fit for the 21st century. 'With millions waiting for healthcare treatment to essentials being unaffordable for many, HMRC needs to be able to collect the right tax from the super-rich. Failing to do so lets money be squirrelled away into tax havens like some of the British Overseas Territories which deprives our communities, hospitals and schools of the cash they need. he government must give HMRC backing by investing in it for the long-term, to make the system fair, and ensure British tax havens implement transparency measures to prevent offshore hoarding of wealth.' An HMRC spokesperson said: "The government is determined to make sure everyone pays the tax they owe. Extra resources were announced in the recent spending review which allows us to significantly step up our work on closing the tax gap amongst the wealthiest. This includes recruiting an extra 400 officials specialising in the wealthy and offshore tax gap, and increasing prosecutions of those who evade tax." They added that large amounts of data was already used to collect the tax that is legally due, relying on multiple sources, including our own records, information that is already in the public domain and detail shared by other countries.
