The Times reports this morning that Chancellor Rachel Reeves is planning to impose national insurance (NI) on employers’ pension contributions to raise £15.4bn, but that in a highly controversial twist, public sector workers’ pension pots will be shielded from the tax hike, as they will be reimbursed by the Treasury at a cost of around £5bn.  The Labour General Election manifesto included a commitment not to raise national insurance as part of a “tax lock on working people”, but has since been spun as applying only to employees, and not businesses. Sir Steve Webb, a former pensions minister and a partner at the pensions consultancy LCP, told the newspapers: 'If this policy was implemented, private sector firms would in future be less willing to offer generous pension packages, thereby reducing the retirement incomes of today's workers. This would further increase the already large gap between public sector workplace pensions and private sector pensions” He added: “Any increase in payroll costs would be likely to depress wages, probably in the form of lower future pay increases. There is also the risk of unintended consequences; that this could hit salary sacrifice schemes and ultimately affect the take-home pay of workers who currently benefit from such schemes”. Writing on X, Political Insight consultant Patrick O’Flynn was more forthright, He said: “If Rachel Reeves exempts public sector pensions from a Budget tax raid on employer pension contributions, as is being reported, then that is an extremist ideological step in my opinion: in effect making private citizens serfs sustaining a preferred class of state employees”. John Longworth, the former Director General of the British Chambers of Commerce and now the Chair of the Independent Business Network of family businesses called it “outrageous”.

Meanwhile, shadow Chancellor Jeremy Hunt says that putting up employer national insurance contributions in the Budget would be an “absolute disaster” for Britain economically. “I’m really worried that Labour is going to trash an economy, which has better growth prospects than it has for many years,” Hunt told the Financial Times. “From a government point of view this is a politically painless tax rise, but from an economic point of view it’s an absolute disaster,” he added, saying Reeves should think “very carefully” about measures, such as hiking NI and taxing private equity, which he said would dampen growth and investment. Treasury officials, he said, had suggested an  a NI increase on employers to him in 2022 but, he said: “I rejected it because of the damage it would do to business investment and job creation.”

Reeves is also said to be exploring plans to impose higher taxes on the likes of Amazon by increasing the Business Rates paid by online tech giants as part of a wider shake-up on property taxes. The Telegraph says she is launching a review of how business rates are set, and could scrutinise how much Amazon’s warehouses pay in tax compared to high street stores. However, it is also suggested that she will launch a consultation on the proposal after her maiden Budget, rather than make any announcements regarding the detail of such a plan on the day. 

Meanwhile, Reeves has confirmed she has reached spending settlements with all government departments ahead of her Budget on 30^th October. She told BBC Radio 5’s Matt Chorley that, in in line with tradition, she popped all balloons put up in the Treasury to represent each department's funding agreement.  "There are no balloons left in the Chief Secretary's office - the balloons have been burst," she said in the interview. Earlier, Sky News reported the Treasury initially had a 16^th October deadline to finalise major Budget measures for submission to the Office of Budget Responsibility, a deadline that was missed. There have also been reports that Angela Rayner, the Deputy Prime Minister and Secretary of State for Housing, Communities and Local Government, as well as Justice Secretary Shabana Mahmood and Transport Secretary Louise Haigh all wrote to Prime Minister Sir Keir Starmer to complain about the scale of cuts their departments were facing, however in response to this, Reeves said, "I wouldn't believe everything you read" in the media. She added: "I'm very sympathetic towards the mess that my colleagues have inherited. But any additional money, in the end, it has to be paid for either by taking money from other departments or raising taxes."

The International Monetary Fund (IMF) has upgraded its projections for the UK economy, but also warned about possible risks ahead as a consequence of Chancellor Rachel Reeves’ first Budget in eight days’ time.  The international fiscal watchdog now expects the UK economy to grow by 1.1% in 2024, up significantly on its previous forecast of 0.7% growth, and by 1.5% in 2025. It linked its brighter outlook to “falling inflation and interest rates (that will) stimulate domestic demand.” The IMF reckons UK inflation will average 2.6% this year and 2.1% next year. In October 2023, the IMF predicted the UK would be the worst-performing G7 economy in 2024, but this latest forecast puts it in line with France and ahead of Germany, Japan, and Italy. Meanwhile, the IMF has also warned that plans to channel more pension savings into riskier assets, saying that poses a growing threat to the UK’s financial systems. The IMF cited former Chancellor Jeremy Hunt’s desire to make pension funds invest in high growth British companies as an example of an initiative that “encourage[s] further allocation to illiquid investments,” yet it is one Reeves has indicated she intends to build on. The current Chancellor has “spoken about consolidating the UK’s broad universe of pension schemes into larger pots with the scale and financial firepower to invest in high-growth, less liquid assets,” the Telegraph’s economic editor Szu Ping Chan writes. The IMF suggests, however, that nervous savers around the world may withdraw or switch pension investments in a panic, potentially causing a bond market meltdown, dragging down stock prices and triggering a dangerous chain reaction.

Foreign Investors for Britain (FIFB), a newly formed non-dom lobby group, is seeking to meet with the newly appointed Investment Minister Poppy Gustafsson, City AM understands, having already met with Treasury officials. The FIFB plans to discuss with the Darktrace co-founder their proposals to replace non-dom status with a new Tiered Tax Regime (TTR), under which non-doms would pay an annual charge of between £200,000 and £2m across four bands in tax based on their net wealth, plus income tax as usual on any UK earnings. However, paying into the TTR scheme means they would be exempt from tax on their foreign assets or UK investments. The FIFB argues this would help stem the exodus of wealthy foreigners that appears to be happening already, and which many tax and wealth management advisers have warned would increase were the government to proceed with its current plans to abolish non-dom status, meaning wealthy foreigners would have to pay tax on their foreign as well as their UK income. Labour also plans to make them liable to pay inheritance tax on assets held in a foreign trust. Sources with a key role in the non-dom debate told City AM that Gustafsson had “asked Foreign Investors for Britain to brief her team, which includes officials responsible for capital markets and asset management”.

The Independent Water Commission, a new body launched today to review the water industry, could see water regulator Ofwat abolished, it is reported this morning.  Chaired by former deputy governor of the Bank of England Sir Jon Cunliffe, the commission will aim to strengthen regulation, boost investment and guide reforms to address "inherited systemic issues", the government said in a statement. It will report its findings by the middle of next year, but one recommendation that will not be on the cards is renationalisation of the industry; the Labour Government has ruled that out on the grounds it will be too costly and too slow to address the problems of polluted waterways, degrading infrastructure, the challenges of a rising population and indebted water companies that are failing to meet targets set by Ofwat.  Ofwat has been criticised for its poor record in regulating the industry, but welcomed the plans for the new commission. "We are ready to back record investment, the challenge for water companies is to match that investment with the changes in company culture and performance that are essential to rebuilding the trust of customers and the public," Ofwat CEO David Black said.

Meanwhile, water companies have made fresh requests to increase household water bills to Ofwat. Southern Water, one of Britain’s worst-performing water utility, has made the biggest request for extra income: it now wants to charge residential customers an extra £350 a year, a 84% hike, claiming new environmental laws will force up its costs, hence it needs the additional income. If approved, bills in Kent, Hampshire, the Isle of Wight and parts of Sussex would increase from £420 to £772 by 2029. Thames Water, meanwhile, is seeking a £231 or 53% increase, £40 more than its earlier plan sought. Severn Trent, which supplies households across the Midlands, Bristol and parts of Wales, has asked for an increase of £182 or 46%, £34 more than it requested previously. Only one company, Wessex Water, has lowered its request, by £32, to £150. All in all, the water companies have raised their spending requests to Ofwat by £7bn since earlier this year, taking the total bill increases requested to £19bn.

A nuclear waste site in Cumbria is leaking about 2,100 litres of radioactive water into the ground every day, a National Audit Office (NAO) reports says. The Magnox Swarf Storage Silo at Sellafield, Europe’s largest nuclear site, is in the process of having its contents transferred into newer, safer facilities, but progress is so slow that an estimated completion date for the work has been pushed back to the late 2050s, with “significant safety and financial consequences,” the NAO says. The findings, reported in the Telegraph, say the ageing building sprung a leak in 2019 but, due to the extreme hazards involved in accessing the building, engineers are unable to fix the leak or even determine its exact cause – meaning it is poised to continue for another 30 years. Sellafield Ltd, the taxpayer-owned company tasked with cleaning up the silo and the wider Sellafield site, insists the risk posed to workers and the public from the leak is “low,” however the newspaper points out that the amount leaked daily could fill about seven standard-sized bathtubs, and that it would take just over three years to fill an Olympic-sized swimming pool.

Former Abercrombie & Fitch CEO Mike Jeffries was arrested in the US yesterday as part of a criminal sex trafficking investigation. The New York police department alleges that Jeffries, his British partner Matthew Smith and a third man, Jim Jacobson, ran an “international sex trafficking organization” that coerced “dozens and dozens” of men into sexual acts, often in return for the promise of a modelling career with the clothing retailer. Some men allege they were abused or injected with drugs by the defendants, who are said to have spent millions of dollars on the enterprise. Paying Jacobson a salary for his alleged role as a ‘recruiter;’ hiring staff for sex parties; renting hotels; buying tickets for domestic and international travel; paying off those who accused Jeffries of sexual abuse or harassment; and spending “hundreds of thousands” in cash for commercial sex acts are among the ways in which money was spent, the prosecutors say. “Powerful individuals for too long have trafficked and abused, for their own sexual pleasure, young people with few resources and a dream – the dream of securing a successful career in fashion or entertainment,” the US attorney in Brooklyn, Breon Peace, said at a press conference, adding: “To anyone who thinks they can exploit others by using the so-called casting couch system – this case should serve as a warning. Prepare to trade that couch for a bed in federal prison.” Jeffries and Smith denied all allegations in a court filing in response to the lawsuit. “We will respond in detail to the allegations after the indictment is unsealed, and when appropriate, but plan to do so in the courthouse – not the media,” Jeffries’ lawyer Brian Bieber told the Wall Street Journal.

Barclays bank is reported by Sky News to have re-entered talks about offloading a stake in its UK merchant acquiring arm to Canadian asset management firm Brookfield. The talks with Brookfield and other suitors have stalled several times since Barclays confirmed in February it was exploring a sale or partnership of the division, but are now said to be back on, with Brookfield looking to acquire a majority stake in the division. One source close to Barclays told Sky the deal under discussion would involve Brookfield bearing the costs associated with growing the business, rather than paying a significant up-front sum for the stake. Estimates of the value of Barclays' merchant acquiring arm have varied wildly, ranging from less than $1bn to $2.5bn.

Chanel will sponsor Britain's historic Oxford and Cambridge Boat Race next year, it has been revealed. It will be the first sporting sponsorship for the French luxury brand founded by fashion icon Coco Chanel. The Boat Race is rowed by crews of eight from Oxford and Cambridge universities along a four-mile stretch of the Thames. It was first run in 1829 and is the oldest major sporting event in the country. It attracts a TV audience of more than 2m and under Chanel’s sponsorship will be titled The Chanel J12 Boat Race, promoting the company's line of unisex wristwatches, which retail between £5,000 and £122,000. No financial details of the arrangement have been provided.

McDonald’s shares plunged up to 9% in after-hours trading yesterday after its Quarter Pounder hamburgers were linked to a fatal e.coli outbreak. One person died and at least 49 people across 10 US states were taken ill, including a child who was hospitalised with severe kidney complications, according to the US Centers for Disease Control and Prevention (CDC). It is believed the outbreak is linked to onions provided by a single supplier. The Quarter Pounder has been removed from menus in the affected states, and also in portions of Idaho, Nevada, New Mexico and Oklahoma. A McDonald’s spokesman said: “We take food safety extremely seriously and it’s the right thing to do.”