Government launches Tax-Free Childcare scheme

The government has launched its Tax-Free Childcare scheme, which is designed to help parents with the cost of childcare.

Under the new initiative, tax relief worth 20% is available for use against the costs of childcare, up to a total of £10,000. The scheme is therefore worth up to £2,000 per child, or £4,000 for a disabled child.

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Tax-Free Childcare applies to children aged under 12, or up to 17 for those with disabilities.

Parents are able to create online accounts, into which they can contribute money to pay for childcare. By the end of the year, eligible parents will be able to receive government ‘top ups’ of £2 for every £8 that a parent pays into the account.

Commenting on the Tax-Free Childcare initiative, David Gauke, Chief Secretary to the Treasury, said: ‘This government is on the side of working families and our childcare support will cut thousands of pounds off bills for millions of households, as well as supporting parents to return to or remain in work.

‘The new Childcare Choices website provides busy families with options that suit their needs, so they can clearly see which childcare offer works best for them.’

The Childcare Choices website can be found here.

In addition to Tax-Free Childcare, from September, working parents of three and four-year-olds living in England will be able to apply for 30 hours of free childcare, worth around £5,000 per child.

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Significant fall in government borrowing, official data reveals

Government borrowing fell to £52 billion in the year to the end of March, data published by the Office for National Statistics (ONS) has revealed.

As a result, government borrowing is now at its lowest level since the 2008 financial crisis.

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However, experts have stated that the fall in borrowing was helped by one-off factors, and warned that rising inflation, an ageing population and an increase in healthcare costs will continue to add pressure to public finances.

Samuel Tombs, UK Economist at Pantheon Macroeconomics, said that the Office for Budget Responsibility (OBR) ‘expects borrowing to rise to £58.3 billion this year’.

He continued: ‘The chance that the Autumn Budget contains net tax rises – like all of the last six post-election Budgets have done – is very high.’

Chancellor Philip Hammond recently hinted that the Conservative party may amend or potentially abandon its 2015 manifesto pledge not to raise income tax, national insurance or VAT.

Small businesses concerned over impact of Brexit on EU workers, FSB suggests

Over half of small businesses employing workers from the EU are concerned that Brexit may hinder their recruitment of skilled staff, a report published by the Federation of Small Businesses (FSB) has suggested.

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59% of businesses surveyed reported that they are worried that they could lose access to individuals with the ‘right skills’, while 54% of firms are concerned about growing their business post-Brexit.

According to the FSB’s report, 21% of small businesses currently employ EU workers. The report also found that small firms with EU workers ‘mainly employ mid-skilled staff’, such as care and construction workers, mechanics and office managers.

The FSB has stated that securing the right to remain in the UK for EU workers ‘must be a priority’.

Mike Cherry, National Chairman of the FSB, said: ‘There is a real concern among small firms with EU staff that they will lose access to the skills and labour their business needs to survive and grow. EU workers are a vital part of our economy, helping to plug chronic skills gaps across a wide range of sectors, and filling jobs in an already tight labour market.’

UK manufacturers report ‘strong growth’ in domestic and export orders

A survey carried out by the Confederation of British Industry (CBI) has revealed that, in the three months to April, UK manufacturers’ domestic orders improved at the ‘fastest pace since July 2014’.

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Meanwhile, export orders recorded the strongest growth in six years, according to the CBI’s latest Industrial Trends Survey. This was conducted before the announcement of a General Election.

However, the CBI also revealed that the weak pound pushed up costs, with manufacturers reporting the strongest rise in unit costs in six years.

Rain Newton-Smith, Chief Economist at the CBI, commented: ‘UK manufacturers are enjoying strong growth in demand from customers in the UK and overseas, and continue to ramp up production.

‘Exports have surged and firms are at their most optimistic about selling overseas in over four decades. Even so, the combination of the weak pound and recovering commodity prices means that cost pressures continue to build, and manufacturers report no sign of them abating over the near-term.’

Surge in online card payments sees UK dominate global spending

New data suggests consumer online shopping has risen by more than a quarter in two years, putting the UK at the top of global online spending.

According to a report by the UK Cards Association, UK online card spending totalled £154 billion in 2016 – up from £120 billion in 2014.

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Furthermore, in 2015 the average UK household spent the equivalent of $5,900 (£4,611) online, which was more than any other country, including Norway ($5,400), the US ($4,500) and Australia ($4,000).

Online spending on entertainment, such as digital music, cinema and concert tickets, made up a significant proportion of online purchases, accounting for one in four online transactions, although the monetary value of these purchases was relatively low at just 7%.

Of the total amount monetary value spent online, the financial services industry enjoys the biggest share at 27%. This is thought to reflect the increasing popularity of renewing contracts such as insurance cover online.

Commenting on the findings, Richard Koch, Head of Policy at The UK Cards Association, said: ‘The internet enables millions of people to access services around the clock from wherever they are based. Payment cards have driven this revolution, providing an easy and secure way to shop online, whether it is to buy an app for your phone or a sofa for your living room.

‘Since the early days of internet shopping there has been a host of innovations, from digital wallets to one click purchases, which bring enhanced security, choice and convenience for customers and which will lead to continued growth in the sector,’ he added.

‘The additional protection provided when using a card also gives consumers extra peace of mind when they are shopping online’.

Grandparents to pass down ‘wall of wealth’ to millennials, research suggests

New research published by insurers Royal London has suggested that over £400 billion in housing wealth is set to be passed down from older generations to benefit millennials in the coming years.

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The data, which was collected by YouGov for Royal London, was obtained by surveying over 5,000 individuals from three generations: an older generation of 65 to 85-year-old homeowners, a ‘baby boomer’ generation of 45 to 64-year-olds and a millennial generation of 25 to 44-year-olds.

The research revealed that, although most of the wall of housing wealth is to be passed initially to baby boomers, the majority of this group expect to give some or all of the inherited wealth to millennials.

However, the research also suggested that only a small number of young people stand to benefit: only around four million of 17 million young people have grandparents with housing wealth.

Steve Webb, Director of Policy at Royal London, commented: ‘Grandparents still attach great importance to passing on their wealth rather than consuming it.

‘Those millennials lucky enough to have home-owning parents and grandparents may be set to benefit from significant inheritance which will help them onto the housing ladder. But the majority of millennials are not in that position.

‘Schemes such as the Lifetime ISA which provide a government contribution of £1,000 per year for those who have £4,000 per year to save will tend to favour precisely those groups who already have access to wealth.’

IMF upgrades UK growth forecast

The International Monetary Fund (IMF) has raised its UK growth forecast for 2017 for the second time in three months.

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Within its half-yearly World Economic Outlook, the IMF predicts that the UK economy will now grow by 2% this year, up from its previous forecast of 1.5%. This makes the UK economy the second fastest growing advanced economy, after the US economy.

The IMF stated that the forecast has been raised in response to the stronger than expected performance of the UK economy since the vote to leave the EU last year.

However, UK economic growth is expected to slow to 1.5% in 2018.

Commenting on the IMF’s decision to raise its growth forecast, Chancellor Philip Hammond said: ‘The fundamentals of our economy are strong and we continue to invest in the skills needed for a stronger and fairer Britain.’ Mr Hammond also stated that Britain will play ‘an active and engaged role in the global economy’.