Budget fallout, UK inflation and house prices, and more on Brexit

Tax

OBR chair warns Osborne over disability cuts U-turn   – George Osborne will have to increase taxes or slash spending to meet the Government’s U-turn on disability cuts, Robert Chote, chairman of the Office for Budget Responsibility (OBR) has warned, adding that the levels of household deficit in the UK are “unprecedented”. Mr Chote indicated the Chancellor will now breach the welfare cap by £4bn in 2019/20 because of the decision not to cut Personal Independence Payments, leading to a £20bn overspend above the cap over the next five years.

ABI warns on pension tax relief complacency – Huw Evans, director general of the Association of British Insurers, has warned MPs not to be ‘complacent’ about pension tax relief after the chancellor dropped Budget plans to overhaul the system. George Osborne did however unveil plans to introduce a lifetime ISA, which some experts have described as ‘stealth’ tax relief reform. Mr Evans told MPs on the Work and Pensions Select Committee that the pension ISA idea was not ‘off the table’, and suggested reform could still take place.

Sugar tax will cost £1bn in extra debt payments – The Office for Budget Responsibility has said a tax on fizzy drinks will likely raise the Retail Price Index measure of inflation by about 0.25%, leading to higher interest paid on index-linked bonds issued by the Government and a one-off extra £1bn in debt payments.

Small business and the enterprise economy

Angels campaign to bring in extra £1bn investment for SMEs – A new campaign aiming to more than double the number of active angels backing UK firms by 2019 hopes it will lead to an extra £1bn worth of growth capital made available to SMEs. The Become An Angel campaign plans to recruit 23,000 new angels into the investor community and is the brainchild of Angels Den, a network that has signed deals with RBS and Grant Thornton. The initiative comes a week after the UKBAA announced the creation of the first angel accreditation and changes to CGT rules in the Budget that extend relief to angel investors.

Small businesses elect new FSB leader – The Federation of Small Businesses (FSB) has elected Mike Cherry as its new National Chairman, to lead the organisation for the next three years. Discussing his vision for the future of the FSB, Mr Cherry says: “There is no other organisation which has the foundations in place to deliver the first class services, the real policy change, and the fantastic networking opportunities we can. Like any business, FSB needs to modernise and evolve if we are to continue to grow and meet the real challenges our members face. I’m confident we are more than up to the task.”

UK economy and markets

UK inflation rate stays at 0.3% – UK inflation as measured by the Consumer Prices Index was unchanged at 0.3% in February, according to the Office for National Statistics (ONS). Under the separate Retail Prices Index measure, which includes housing costs, inflation was 1.3% in February, also unchanged from the previous month. Other ONS figures published at the same time indicate that George Osborne is close to missing his target for cutting the country’s budget deficit in the 2015-16 financial year. Government borrowing fell less than expected in February, bringing the total deficit for the 11 months of the year so far to £70.7bn, as against the chancellor’s full-year target of £72.2bn.

UK house prices up 7.9% – UK house prices climbed 7.9% in January compared with the same month last year, according to latest Office for National Statistics data. Price growth is being driven by the South East and London where prices rose 11.7% and 10.8% respectively. Excluding London and the South East, UK house price growth was 5.1%. Richard Snook, senior economist at PwC, said that the figures “show strong momentum”, adding that: “The recent changes to stamp duty, whereby supplementary rates will be charged on purchases of additional homes, may be providing a small boost to the market, as people rush to complete transactions before the changes come into force in April this year.”

Other

Johnson: No risk of economic shock  – The Mayor of London, Boris Johnson, has said that leaving the EU would result in no “economic shock” at all to the UK. He compared fears over an economic shock on the event of a Brexit to the concerns people had over the “millennium bug”, a much prophesied computer glitch which was set to wreak havoc as the world moved into the year 2000, but passed without incident. Mr Johnson said that “people would understand the consequences [of Brexit]”, adding that as with the millennium bug the nation will have “freaked out so much that it passed without the batting of an eyelid”.

Creditors vote to support BHS rent cut plan – Creditors of BHS have agreed to a pair of CVAs for the retailer, which has debts of more than £1.3bn, including a pensions deficit of £571m. One agreement will see 47 stores pay a 50-75% reduction in rent while a plan involving 23 other stores was agreed in a separate deal. Despite the landlords’ support, BHS has warned that it needs extra funding to trade beyond March 25th and it is trying to raise £100m.

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