Conservatives pledge new law to ‘freeze taxes’, as General Election approaches

30 Apr 2015

As the General Election looms closer, the Conservative party has pledged to introduce a new law guaranteeing that there will be no increase in income tax, national insurance or VAT during the course of the next Parliament.

According to the party, the legislation would be brought in within 100 days of a Conservative government assuming power.

The latest pledges on taxation from the Conservatives also include a promise not to extend VAT to new items, and a pledge to align the upper earnings limit for national insurance with the higher rate threshold for income tax.

However, opposition parties and some economists have cast doubt on the claims, with Labour describing the announcement as ‘a desperate last minute gimmick’ and maintaining that the Conservatives will raise VAT in the future.

The Institute for Fiscal Studies has warned that the Conservatives are relying too heavily on income from unspecified tax avoidance measures to tackle the deficit, and has urged all of the main political parties to stop announcing ‘piecemeal changes’ to tax policy.

Nick Clegg insists on emergency post-election Budget in any coalition

29 Apr 2015

Liberal Democrat leader Nick Clegg has announced that his party will only enter another coalition government with either the Conservatives or Labour on the condition that an emergency “stability Budget” is held within 50 days of the General Election.

In a press conference yesterday Mr Clegg insisted that the economy was a ‘red line’ issue in any post-election agreement. He said: “I choose my words very carefully. If we don’t have, in any coalition agreement which we enter into… a stability budget within 50 days to keep the economic recovery and economy on track, Liberal Democrats will not enter government”.

Continuing his efforts to position his party on the middle-ground between the Conservatives and Labour, Mr Clegg claimed that the Lib Dems would keep both major parties “on the straight and narrow”.

He said: “We won’t let Labour risk your job or your economy with reckless borrowing. And we won’t let the Conservatives risk our schools, hospitals and public services with reckless cuts”.

The Lib Dems have previously been critical of Labour for failing to set out a clear timescale for eliminating the deficit, but have also rejected Tory plans to cut £12bn from welfare without increasing higher rates of income tax.

Mr Clegg insisted that the Lib Dem plans would: “calm jittery markets, keep interest rates low, keep Britain on track and show the British people how we will finish the job fairly and continue to support our public services”.

The ‘stability Budget’ is the second issue which Mr Clegg has described as a “red line” in any coalition negotiations, the first being a pledge to increase education funding in England from £49bn to £55.3bn. He said he would “not accept under any circumstances the cuts to nurseries, to schools and to colleges that both Conservatives and now Labour have announced”.

Economic growth rate slows to 0.3%

UK economic growth fell to 0.3% in the first quarter of this year, the latest figures from the Office for National Statistics (ONS) have revealed.

The estimated figure of 0.3% GDP for Quarter 1 2015 compares with 0.6% growth in the final quarter of 2014.

While output increased in the services sector by 0.5% during the first quarter of 2015, output in the other three main industrial groupings fell, with construction output decreasing by 1.6%.

The news follows a series of recent economic pledges made by the main political parties, in the run-up to the General Election.

However, in its analysis of the fiscal plans of the four main parties (Conservatives, Labour, Liberal Democrats and the SNP), the Institute for Fiscal Studies (IFS) has branded them as lacking in ‘anything like full details’ regarding the likely nature of any necessary spending cuts and tax increases.

According to the IFS, Conservative plans involve a significantly larger reduction in borrowing and debt than those put forward by Labour, but the plans are ‘predicated on substantial and almost entirely unspecified’ spending cuts and tax increases.

The IFS concludes that ‘Unfortunately, the electorate is at best armed with only an incomplete picture of what they can expect from any of these four parties’.

Small businesses support Conservatives in letter

27 Apr 2015

5,025 small businesses have signed an open letter in the Daily Telegraph calling for the Conservative Party to be ‘given the chance to finish what they started’.

The letter states: ‘We run small businesses right across the country . . . It was tough during the recession, but we kept going. This Conservative-led Government has been genuinely committed to making sure Britain is open for business.’

It continues: ‘We’ve been helped by the steps to lower taxes, reduce red tape, simplify employment law and get the banks lending.’

Business leaders who have signed the letter include managing directors, owners and CEOs operating businesses in every region of the UK.

Labour’s Shadow Business Secretary, Chuka Umunna, has responded: ‘The Tories have spent five years letting down Britain’s small businesses.

‘Government scheme after Governments scheme designed to boost finance for small firms has failed, and small business lending has fallen by £500 million in the last three months.’

Annuity rates fall in the wake of pension reforms

Annuity rates have fallen to a record low following a major shake-up of the pension regime, new research suggests.

In his 2014 Budget the Chancellor, George Osborne, unveiled a raft of changes to the pension rules in a bid to give individuals more freedom over their pension pots.

The reforms, which took effect from April 2015, include removing the requirement to purchase an annuity, an insurance product which pays out a guaranteed income for life.

As a result, the average annual income payable from a standard annuity has dropped by 5.7%, according to findings from financial data service, Moneyfacts.

Meanwhile, the income from an average annuity held by a 65 year-old with a £50,000 pension pot is thought to have dropped by some 6.4%.

‘The prospects of securing a comfortable retirement have taken a further blow with news that standard pension annuity rates have hit an all-time low,’ commented Richard Eagling, head of pensions at Moneyfacts.

‘In many cases, retirees looking for a secure income now face the unenviable position of annuitising at the lowest point in the product’s history.

‘This is particularly unfortunate for those individuals who may have deferred making a choice until the introduction of the pension freedoms but have since decided that an annuity is still the most suitable product for them’.

Business leader urges parties to ‘rein in’ pledges as General Election approaches

23 Apr 2015

The Director General of the British Chambers of Commerce, John Longworth, has appealed to the main political parties to rein in populist pledges and regain a focus on long-term economic strategies, rather than ‘headline-chasing’ measures, ahead of the forthcoming General Election.

In an open letter to the leaders of the main parties, Mr Longworth said: ‘While there are some encouraging statements and positive ideas in manifestos, on the campaign trail it seems strategic vision and evidence-led policy announcements have been left on the bus. In their place we’ve had tactical headline-chasing and lazy assumptions; a reliance on populist statements, not economic common sense; and niche policy announcements, rather than a focus on the fundamentals. For example, issues like how the UK earns its way in the world go unaddressed’.

‘Parties are competing to make ever more strident pledges to freeze taxes and ring-fence spending for the life of the next Parliament, without being able to see very far down the economic road ahead. No well-run business would tie its hands in this way,’ he added.

Mr Longworth has called on party leaders to offer a ‘clear and unapologetic vision’ for the UK’s future success.

The letter comes as the election campaigning turns its focus on the economy, with Labour and the Conservatives set to contest each other’s economic plans.

The policies of the main parties will be assessed by independent analysts, including the Institute for Fiscal Studies.

AA warns of projected rise in car insurance costs

22 Apr 2015

The AA has warned that it expects car insurance costs to rise over the rest of 2015, despite a fall in the first three months of the year.

Many insurance premiums have become cheaper in recent years, largely due to a high level of competition. AA figures show that the cost of annual comprehensive car insurance fell by 1% in the first quarter of 2015, taking the cheapest deals down by £5.58 to £530.47.

Furthermore, the cost of car insurance has fallen by nearly 6% compared with the same quarter in 2014.

However, premiums rose for drivers aged over 60, and the AA claims that other age groups would also soon start to see rises.

‘We are starting to see insurers quoting higher prices. I think that is the beginning of a trend,’ said Janet Connor, managing director of AA insurance. However, she added: ‘But the market remains very competitive. The rate of increase is not going to be turbo-charged.’

Earlier in the month the AA accused fuel retailers of ‘plundering drivers’ pockets’ by disproportionately raising the price of petrol and diesel at the pump. The organisation claimed that in March and April the price of oil had fallen by nearly 5%, but petrol prices were up by 1.2%.

Edmund King, the AA’s president, complained that: ‘Cars are like blank cheques for whoever feels the need to balance the books by plundering drivers’ pockets.’