Business group makes pre-Second Budget submission

The Federation of Small Businesses (FSB) has announced their recommendations for the Second Budget 2015, calling on the Chancellor George Osborne to secure small business growth in the coming year.

John Allan, National Chairman for the FSB, said: ‘The UK’s small businesses are reporting record high levels of confidence. Unemployment is continuing to drop, UK wage growth is at a four year high and there are encouraging indications that productivity is finally on the rise.

‘The Budget is an early opportunity to provide a boost to the increasing positive sentiment, and for the Chancellor to demonstrate his pro-enterprise credentials by again backing small business to deliver the growth and jobs the economy needs.’

Included in the FSB’s recommendations are calls to:

Tax reform – Widen the scope of reform to radically simplify the system and improve incentives to encourage investment.

Raising skills – Support the creation of business-led apprentices, and promote apprenticeships as an equally valued alternative to academic study amongst schools and young people.

Exports – Continue the Government’s ambition to raise UK exports to £1 trillion by 2020.

Access to finance – Increase competition in the business banking market, improve credit data sharing, and consider incentives such as credit ‘passports’.

Construction – Encourage small construction firms back into the house building industry to enable growth outside of the South East.

Universities – Raise the Higher Education Innovation Funding by £90 million to a total of £250 million.

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Government urged not to rush through annuity changes

The Government is being urged not to rush through plans to allow an extra five million pensioners to sell their annuities for cash, amid fears that people could be put at risk.

The warning came from the Association of British Insurers (ABI) in response to the Government’s consultation on the reforms.

In his March Budget the Chancellor announced his intention to extend the recent pension reforms to enable people who have already purchased an annuity with their pension pot to sell it back.

While it supports the proposals in principle, the ABI said it has reservations over the proposed April 2016 start date, given the ‘considerable challenges in establishing a functioning market, and many unresolved complex legal, regulatory and prudential questions.’

The trade body also expressed concerns over how the rights of dependents and beneficiaries would be protected and how people would be safeguarded against fraud and scams.

‘We want to work with government to help resolve these issues, but given the lessons learned from the [recent] reforms and the need for clarity in many areas, we urge the government not to rush these proposals through for 2016,’ commented Yvonne Braun from the ABI.

‘Allowing more time will ensure an appropriate regulatory regime can be developed to give this new market a chance to succeed.’

A spokesman for the Treasury said: ‘We are removing restrictions on selling annuity income so that the five million people who have already bought them have the same freedom as everyone else’.

Government delays network rail improvements

A series of major modernisation projects planned for Network Rail will be delayed or cut back, the Government has announced.

The plans were due to cost £38.5bn and were heralded as the ‘largest modernisation of the railways since Victorian times’. They included improvements to the Trans-Pennine route between York and Manchester and the Midland main line from York to Sheffield. Both of those works will be ‘paused’, with only the electrification of the Great Western line between London and South Wales going ahead as planned.

Transport Secretary Patrick McLoughlin said rising costs and missed targets made the plans untenable and blamed Network Rail, which controls 2,500 stations and many tracks, for having overambitious targets.

Shadow transport secretary, Michael Dugher, said: ‘We have been warning time and time again there needs to be fundamental changes in how our railways are run. You spent the election campaign repeating promises you knew you would break after the election. Ministers may try to shift all the blame to Network Rail, but this happened on the Government’s watch and the responsibility for this mess lies squarely with the Government.’

Anthony Smith, chief executive of the independent watchdog Transport Focus, said: ‘This… follows years of above-inflation fares increases, crowded carriages and engineering works. Passengers have put up with much inconvenience in the expectation of a better, more reliable, and more comfortable rail service.

‘What passengers will want now is a clear plan of action, setting out exactly when Network Rail will start to deliver some of the promised improvements’.

Prime Minister signals cuts to tax credits

23 Jun 2015

During a recent speech, Prime Minister David Cameron has indicated the specific welfare cuts the Government intends to announce in the coming Second Budget.

The Conservatives declared the need for £12 billion in welfare cuts when they won the general election, pledging instead an increase to the minimum wage and tax free personal allowance in order to support working families.

Mr Cameron said: ‘There is what I would call a merry-go-round. People working on the minimum wage having that money taxed by the Government and then the Government giving them that money back – and more – in welfare.

‘Again, it’s dealing with the symptoms of the problem – topping up low pay rather than extending the drivers of opportunity – helping to create well-paid jobs in the first place.’

However the move has already met with criticism. General Secretary of the Trades Union Congress (TUC) Frances O’Grady said: ‘Tax credits play a vital role in making sure the UK’s working families are better off in work’.

Shadow Chancellor Chris Leslie said: ‘The Prime Minister still hasn’t come clean and said exactly what cuts he is proposing.

‘The Government have a clear choice – will they tackle low pay or will they hit the low paid?’

Business group says confidence in growth is high

The Federation of Small Business (FSB) has released its latest Small Business Index (SBI) showing that small businesses are showing improved confidence in the second quarter of 2015.

Growth and investment plans are some of the highest the SBI has ever shown, with job creation and productivity also expected to progress well throughout the year.

National Chairman of the FSB, John Allen, said: ‘The results of the Q2 SBI are very positive and show the major role that small businesses play in the growth of the UK’s economy. It is critical the new Government continues to develop the right environment to support businesses planning to grow, invest and take on new staff in the next 12 months’.

Confidence levels are remaining steady, showing +37.9 on the SBI compared to +28.7 in the first quarter. Small business revenue is up, with more businesses reporting increased revenues and higher profits.

The SBI also shows that small business average wage increases are now in line with the economy, showing an increase of 1.9%. However, businesses also remain concerned about the cost and availability of skilled workers – 35.4% concerned that this is a barrier to growth.

Chancellor considers cap on pension exit fees

Chancellor George Osborne has said that the Government will consider putting a cap on early exit penalties for people wishing to withdraw money from their pension savings, following complaints about providers charging ‘excessive’ fees. Mr Osborne announced that the Treasury would investigate fees as part of a consultation starting next month.

New pension rules introduced in April allow people over 55 to withdraw cash from their pension savings, but since not all pension companies are allowing partial cash withdrawals a significant number of savers have been looking to switch providers. The consultation will examine the costs, speed and ease of transferring to a new pension company.

Speaking in the House of Commons, Mr Osborne said: “There are clearly concerns that some companies are not doing their part to make [pension] freedoms available. We are investigating how to remove barriers and we are considering now a cap on charges.”

However, the Association of British Insurers (ABI), speaking on behalf of the pension provider industry, claimed that nearly 90% of customers eligible for withdrawing cash from their pension pot would not face early exit fees, and that the fees that were being charged reflected expenses already paid by the provider in setting up the policy.

Responding to the Chancellor’s comments, Huw Evans, director general of the ABI said: “We agree that further clarity is needed and have been calling for it for some time. But we reject any suggestions that the industry is putting up unnecessary obstacles to hinder customers exercising their pension options.”

Royal Mail regulation under review

Communications watchdog Ofcom has announced a fundamental review of Royal Mail’s regulation, after its only national competition withdrew from the direct delivery market.

Whistl, the Dutch-owned delivery service, announced its withdrawal on 10 June, prompting Ofcom to launch its review.

The watchdog said: ‘The review will ensure regulation remains appropriate and sufficient to secure the universal postal service’.

It also aims to ‘assess the Royal Mail’s efficiency; consider its performance in the parcels market; and assess the company’s potential ability to set wholesale prices in a way that might harm competition’.

Ofcom established more commercial freedoms for Royal Mail in 2012. These were intended to ensure continued flat-rate, affordable services, during financially unstable times. Prices for second-class stamps are tied to the rate of inflation, while no cap exists for the cost of first-class stamps, leading some to speculate on a potential price increase.

Reports indicate that services have been steadily improving since the company was privatised in 2013.