Latest news with #Chancellor
Telegraph
11 hours ago
- Business
- Telegraph
Angela Rayner has got one thing right. Britain needs a tourism tax
I never imagined saying this but I agree with Angela. The Deputy Prime Minister wants cities to have more autonomy to run themselves as they do on the continent, where they thrive largely free of national government diktat. When their economic performance is rated against their European counterparts, English cities fall well short. In a league table measured by GDP per head and headed by Munich, only London and Manchester (just) make the top 40 from England. German cities have by some distance out-performed British cities since 2007. Key factors in their success have been supportive state governments and high levels of autonomy. In France, the 14 'communautés urbaines'' mainly perform better, with Lyons, Toulouse, Nice and Marseille all in the top 40. They exercise substantial delegated powers over waste, water, public transport, roads, economic development and the environment. Spanish and Italian cities do the same. Ours, by contrast, have undergone political reform, with elected mayors, but have not got much in the way of economic autonomy. England is the most centralised country in Europe and its great cities are prey to Treasury cheeseparing and ineptitude. They should be able to run their own affairs and be accountable to local voters for their actions. But the Treasury has never liked relinquishing its all-encompassing power and Ms Rayner's muscle-flexing has predictably been fought off by a Chancellor who can see someone after her job. This latest spat between the Cabinet duo was ostensibly over whether mayors should be able to impose tourist taxes, a suggestion that has roused howls of fury from predictable quarters. Usually I might have joined them; but actually a tourist tax is not a bad idea, albeit not for the reasons Big Ange gives. She sees the revenues as a way of topping up town hall coffers where they would no doubt be diverted into employing diversity officers and staging pride events. But there is a very good use to which the proceeds can be put, which is to support the continued free entry to museums and galleries. One of the few great achievements of the New Labour government was to remove charges in 2001. It has since been possible to visit the British Museum or the National Gallery for nothing. In New York you will pay $30 to go to the Metropolitan Museum of Art and in Paris a ticket to enter the Louvre will set you back 22 euros. It is 25 euros for the Uffizi in Florence and 15 euros for the Prado in Madrid. If you have been to any of these recently you will not have noticed a dearth of visitors. In some of them you can hardly move. One of the arguments against reimposing museum charges is that it will put people off going yet this has not been seen elsewhere. Moreover, the heads of the great national institutions say they are getting increasingly into financial difficulties and cannot rely on a Government struggling with massive debt to bail them out. Nor is this just about London. The English Civic Museums Network says institutions across the country are in financial difficulties because of budget cuts and at risk of closure. The recent spending review allocated another £270m to the country's galleries but this is seen as inadequate to the task. Sir Mark Jones, a former director of the British Museum and the V&A, has proposed a £20 entrance fee to enter publicly funded museums across the UK, though they would remain free to British taxpayers (though how that would work without ID cards I am not sure). 'It would make sense for us to charge overseas visitors for admission to museums as they charge us when we visit their museums,' said Jones. Indeed, this country has everything back to front. You can get into the Tate for free but it costs £26 for an adult ticket to St Paul's Cathedral, and £10 for children, setting back a family of four more than £70 to visit a church. In Paris you can go to Notre Dame for nothing. The point is we should not want to charge for museums and galleries but the economic exigencies may prove overwhelming for a Chancellor looking to cut costs anywhere she can. Since most taxpayers don't visit a museum from one year to the next, why would they mind? The hospitality industry is said to be against a tourist tax; but if it was a hypothecated levy designed to support the museums and galleries would there be objections? If enough is raised it could be used to pay for more police, not detectives but dedicated beat officers. It is a bit odd calling for cuts in benefits because they are unaffordable while expecting taxpayers who never go near an art gallery to subsidise free entry for tourists. Is it seriously being suggested that a room tax of £5 a night, or one per cent on the total bill, would put off visitors to London where a West End show can set a family of four back at least £500? Does anyone say they are not going to Barcelona because it has a tourist tax? The reality for those working themselves into a fury about tourist charges is that their own taxes are paying for things they hardly use but which visitors, almost by definition, use all the time. That's why they come to cities like London or Bath or Oxford. The pressure for admission fees to meet high operations costs like maintaining buildings and conserving collections will only grow. The money comes from the taxpayer or generous philanthropists, but for how much longer? It could cost as much as £500m to restore the British Museum's buildings and create new facilities so that more of its eight million objects could go on permanent display. To raise funds, the galleries run regular 'blockbuster' exhibitions for which they charge exorbitant sums, often using works they already possess as the centrepieces. They also ask for voluntary donations at the door. Is it really such a bad idea to seek a contribution from tourists by way of a hotel room levy specifically earmarked for museum and gallery upkeep, especially if the alternative is to pay £20 to go in? For now Rayner seems to have lost the argument with the Chancellor but no doubt will be back.
Bloomberg
13 hours ago
- Business
- Bloomberg
Reeves' Tax Hike Deals Bigger-Than-Expected Hit to UK Businesses
A payroll tax hike on UK employers by Chancellor of the Exchequer Rachel Reeves is proving more costly than initially predicted, threatening to worsen the drag on the economy as businesses cut jobs to cope with the cost. The government generated £47.5 billion ($64.1 billion) from national insurance contributions from April through June, the first three months of the fiscal year, a £7.6 billion jump from a year earlier, data from the Office for National Statistics released Tuesday showed.
Daily Mail
14 hours ago
- Business
- Daily Mail
Rachel Reeves warns state pension must be 'affordable' after government launches review - amid fears 'triple lock' will push age to 74
has warned that the state pension must be 'affordable' amid fears the younger generation might not get it until they are 74. The Chancellor said increases in life expectancy have to be taken into account after ministers launched a review. Alarm has been sounded about the sustainability of the triple lock, which means the state's old-age payouts rise by whichever is highest out of rates of inflation, earnings or 2.5 per cent every year. The OBR watchdog warned earlier this month that the policy could cost three times as much as originally expected by the end of the decade, as the ageing population piles further pressure on public finances. A government review published last March indicated that if life expectancy returned to the trajectory expected in 2014 the state pension age could be 71 by the late 2050s The pension age is already slated to rise to 67 between 2026 and 2028. Currently the legal position is that it will reach 68 from 2044-46. But a previous report by former Tesco director Baroness Neville-Rolfe cautioned that might need to be accelerated. With the triple lock in place there are estimates the level would have to hit 74 by 2065–67 in order to maintain spending at around 6 per cent of GDP. Ms Reeves told reporters this morning: 'We have just commissioned a review of pensions adequacy, so whether people are saving enough for retirement, and also the state pension age. 'As life expectancy increases it is right to look at the state pension age to ensure that the state pension is sustainable and affordable for generations to come. 'That's why we have asked a very experienced set of experts to look at all the evidence.' Lady Rolfe has suggested setting a rule that Britons receive pensions for 31 per cent of the average life expectancy. Those principles would have big implications for younger workers, with the Tory peer saying that the retirement age should reach 68 between 2041 and 2043. It could then reach 69 between 2046 and 2048 - with those projections indicating that it would need to hit 70 in the early 2050s. That would be when people born in the 1980s would be looking to bow out of the workplace. Dr Suzy Morrissey has been commissioned to look at the 'factors government should consider' on state pension age. And the Government Actuary's Department has been asked to produce a report on the proportion of adult life in retirement. However, it is understood that final decisions are highly unlikely to be taken until the next Parliament, despite concerns about giving people enough time to prepare for changes. Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: 'There will be many factors that need to be assessed during this review of the state pension age. 'One of the most important will be healthy life expectancy which according to the latest data hovers in the early 60s. 'This means the reality is that many people will face real difficulties in continuing to work until their mid-to-late 60s and could face a sizeable income gap while they wait to receive their state pension.' Rachel Vahey, head of public policy at AJ Bell, said: 'An ageing population places an increasing burden on taxpayers, with state pension costs rising and fewer working-age taxpayers to cover the cost. 'Future governments will hope that an improved economy and growing tax receipts will help alleviate some of the pressure. But that can't be guaranteed and there needs to a be a credible plan for maintaining affordability.' The Government says 45 per cent of working-age adults are putting nothing into their pensions. Work and Pensions Secretary Liz Kendall said yesterday she was turning to the Pensions Commission, which last met in 2006, to 'tackle the barriers that stop too many saving in the first place'. The previous commission recommended automatically enrolling people in workplace pensions, which has seen the number of eligible employees saving rise from 55 per cent in 2012 to 88 per cent. DWP analysis suggested 15million people were undersaving for retirement, with the self-employed, low paid and some ethnic minorities particularly affected. Around three million self-employed people are said to be saving nothing for their retirement, while only a quarter of people on low pay in the private sector and the same proportion from Pakistani or Bangladeshi backgrounds are saving. Women face a significant gender pensions gap, with those approaching retirement in line to receive barely half the income that men can expect. The commission will be led by Baroness Jeannie Drake, a member of the previous commission, and report in 2027 with proposals that stretch beyond the next election. Laurence O'Brien, a Senior Research Economist at the IFS think-tank, said: 'Despite the success of automatic enrolment in increasing the share of employees saving in a workplace pension, our recent research has shown that, among employees saving in a defined contribution pension, almost seven million appear on course for a disappointing income when they reach retirement. 'Alongside this, only one in five self-employed workers are currently saving in a pension. 'In the face of these trends, the launch of a new Pensions Commission, focusing on the adequacy of retirement incomes is welcome. 'However, any reforms to boost pension saving must be carefully targeted to minimise falls in take-home pay among those who can least afford them.'
Telegraph
15 hours ago
- Business
- Telegraph
A wealth tax looks dead in the water. Reeves has other options
Finally, the proponents of a wealth tax have so far focused on lazy, big-picture claims that overlook the details of how such a tax would work. What assets would it be levied on? Would just UK assets or worldwide ones be in scope? How would it be collected? Could HMRC even do it? The Treasury has done a lot of thinking about how to tax wealth more and is well aware that to be effective, any tax increase on the very rich has to be almost impossible to avoid. I suspect once they got into the details, they would swiftly work out that this type of levy would be easily dodged. That's the good news. The bad news is that the Treasury certainly has views on how and why tax on wealth should be increased. Work will be underway to give the Chancellor a menu of options that mean she can dismiss this specific proposal as unworkable while pleasing backbenchers with an alternative tax raid on wealth. When I was at the Treasury, there were frequent mutterings from officials about the unfairness of taxing labour more than capital, and a lot of work looking at how to tackle intergenerational issues through inheritance tax and property taxes. I suspect this will be dusted down and presented as the answer to the Chancellor's fiscal and political problems. What might a wealth tax raid that isn't a wealth tax look like? The big area of focus will be property. Officials are very taken with the premise that recurring taxes on immovable property are the best way to increase the amount the wealthiest pay. So, if they want to work within the current system, we could see changes to council tax. Despite being delayed a bit, the Labour Government in Wales is committed to a council tax revaluation that Westminster could replicate. This would be done under the guise of fairness and would result in more expensive homes paying higher council tax. Alternatively, the Government could opt to add a new council tax band under existing valuations. A mansion tax like this might raise a few billion. More radical would be reform of the Primary Residence Relief (PRR) that exempts family homes from capital gains tax. This relief costs nearly £40bn a year, so even restricting it in a small way, such as levying it only on homes worth over £2m, might raise a few billion. PRR appeared on a list of options in the run-up to the Autumn Statement of 2022, but Jeremy Hunt, the then chancellor, had no intention of going near such an explosive policy. His successor may well view the idea differently. I would be surprised to see anything as complicated as this, but initial work was started last year on replacing all of our current property taxes (council tax, stamp duty and capital gains tax on property) with a new annual property levy. There has been no pitch rolling for this sort of approach, so I suspect moves will be limited to reforming council tax or PRR, plus some tinkering with stamp duty. More straightforward would be simple increases to capital gains, inheritance and dividend taxes. All of which could be dressed up as taxing the wealthy and could raise an extra few billion in combination. Increasing dividend tax and capital gains tax further towards income tax rates would certainly appeal to the Treasury's instincts that capital should not be taxed much less than labour. All of which means we may well see a specific new wealth tax ruled out more formally. But that does not mean a suite of wealth taxes isn't on the cards for the autumn Budget.
Daily Mail
17 hours ago
- Business
- Daily Mail
Red alert for Reeves as government borrowing hits record high outside Covid in June with £16bn spent on debt interest alone - DOUBLE a year ago - fuelling tax hike fears
' misery was compounded today as government borrowing hit a new record for June outside of Covid. The public sector borrowed £20.7billion last month, far higher than the £17.6billion analysts had pencilled in. The level was £6.6billion higher than a year earlier and only behind the height of the pandemic in 2020 since comparable figures began in 1997. Alarmingly for the Chancellor, the surge was driven by debt interest as well as higher spending. Servicing debt cost £16.4billion over the month, more than double the number for the previous June. Borrowing for the first three months of the financial year to date stood at £57.8billion, £7.5billion more than the same three-month period in 2024. Ms Reeves is desperately hunting for options to increase taxes as she faces an estimated £30billion black hole in the public finances at the Autumn Budget Ms Reeves is desperately hunting for options to increase taxes as she faces an estimated £30billion black hole in the public finances at the Autumn Budget. The tax burden is already set to hit a new high as a proportion of GDP after the last Budget imposed a £41billion increase - the biggest on record for a single package. Labour has ruled out increasing income tax, employee national insurance or VAT. Many believe the Chancellor will opt to extend the long-running freeze on tax thresholds. The policy, in place since 2022, is due to end in 2028-29. By that point it will have dragged an extra 4.2million people into the tax system as wages rise. Ms Reeves has been carefully avoiding ruling out a 'wealth tax' - with backbenchers pushing for 2 per cent levy on assets worth more than £10million. However, she is thought to be privately opposed to the move, with tax experts and Cabinet ministers warning it would only drive away more wealth people from Britain. A raid on pensions is still said to be on the table, with fears that the Treasury is again looking at slashing reliefs. Currently higher-rate earners are spared 40 per cent tax on money that is put into retirement funds. However, reducing the relief to the 20 per cent basic rate could raise around £15billion for the government. The idea was rejected at the Budget last year, but Ms Reeves' situation has dramatically worsened. Chief Secretary to the Treasury Darren Jones said: 'We are committed to tough fiscal rules, so we do not borrow for day-to-day spending and get debt down as a share of our economy. 'This commitment to economic stability means we can get on with investing in Britain's renewal, including fixing our NHS, strengthening our national defence and building hundreds of thousands of affordable homes through our plan for change.' But shadow chancellor Mel Stride said: 'Rachel Reeves is spending money she doesn't have. 'Debt interest already costs taxpayers £100billion a year – almost double the defence budget – and it's forecast to rise to £130 billion on Labour's watch. 'Labour's jobs tax and reckless borrowing is killing growth and fuelling inflation – paving the way for more tax hikes and more borrowing in the autumn. Make no mistake – working families will pay the price for Labour's failure and costly U-turns. 'Only the Conservatives, under new leadership, will break this cycle. Only the Conservatives believe in sound money and low taxes.'
