BUDGET LATEST:

As if we weren’t all terrified enough of what Wednesday’s Budget will bring, Prime Minister Sir Keir Starmer is set to pour petrol onto the flames by saying in a speech later today that it will embrace the "harsh light of fiscal reality" necessary because of “unprecedented” economic challenges which the Government will “run towards” to fix “crumbling public services”. He will again talk about “tough decisions,” but will also claim that "better days are ahead", at a speech in the West Midlands. "We choose a different path: honest, responsible, long-term decisions in the interests of working people," he will add.  

But who are ‘working people?’ The row over what that phrase means in the eyes of the Labour Government deepened over the weekend when Prime Minister Sir Keir Starmer said in a Sky News interview that people who get additional income from shares or other assets on top of working a full time job “wouldn’t come within my definition” of that term. “I would define a working person as somebody who goes out and earns their living, usually paid in a monthly cheque. But I think that’s obviously very broad so let me be clear: what I mean are… the sorts of people who go out, work hard and maybe save a bit of money but don’t have the wherewithal to write a cheque to get out of difficulties if they and their family get into difficulties,” he added before going on to insist that “people will know whether they’re in that group or not”. Later, Education Secretary Bridget Phillipson said on the BBC that while she believed she was a ‘working person’, on a salary of £160,000, she would not confirm whether a small business owner with profits of £13,000 a year fell into the same category. Before the General Election, Labour promised not to raise taxes on ‘working people’ but did not define who those people were. This weekend’s developments on that front, much condemned, have fuelled fears that Wednesday’s Budget will hike taxes on assets and savings, including a hike to Capital Gains Tax, an increase in employer National Insurance, and the application of National Insurance to employers’ pension contributions, as well as changes to Inheritance Tax.  

“So there we have it. He doesn’t mean working people at all; he means those below a certain ill-defined level of income who ‘struggle to make ends meet,’” the Telegraph’s assistant editor, Jeremy Warner commented, adding: “The more we see of the new Government, the more obvious it is that it never had any intention of keeping its word in the first place". Conservative MP Nigel Huddleston said on X: “It is becoming increasingly clear who Labour politicians mean by 'Working People': 1) Trade Union members 2) Public sector workers 3) Themselves That's it. If you are not in any of these categories, don't expect anything from this government”. Neil Wilson, chief market analyst at the trading platform Finalto, told City AM: “Keir Starmer thinks owners of shares don’t count as ‘working people’. Just give up and go home now, the revolution is going to be televised next Wednesday. No wonder we are so poor relative to our US cousins.”

David Blunket, the former Labour Home Secretary and Secretary of State for Work and Pensions, has described rumours that National Insurance will be levied on employers’ pension contributions as “very worrying”. In a letter to The Times, he would “advise strongly against” the changes. “It is one thing to increase the rate of national insurance, and quite another to levy this on employer pension contributions,” he wrote, adding that in his Ministerial work under Prime Ministers Tony Blair and Gordon Brown, pensions auto-enrolment had come into force because they recognised the “genuine crisis, for generations to come, in maintaining living standards in retirement”. As reported here last week, rumours also abound that the public sector is likely to be exempted from any such change because Government departments would need to make significant cuts to their budgets to fund the move.

The Telegraph also says hundreds of technology entrepreneurs have issued a “last-ditch warning” to the Chancellor ahead of the Budget. The StartUp Coalition says founders’ confidence in Britain will be “shaken” further if Reeves targets entrepreneurs with an increase in CGT, and warns that in a recent survey of more than 500 company founders, 72% said they had “already investigated moving themselves or their business abroad”. 90% of them said they would consider starting their next company abroad if she increases CGT above 20%. The StartUp Coalition represent businesses employing more than 22,000 people and have combined revenues totalling £2.6bn.

However, Dale Vince, the millionaire green energy tycoon and Labour donor, has said the argument that higher taxes will destroy entrepreneurship in the UK is “profoundly stupid” and that “rich people” threatening to flee Britain to avoid tax rises should “f--- off”. “This is a brilliant country. There’s no way people won’t live here because of a fairer tax system.” He also hit out at those who oppose electricity pylons and overhead cables: “Countryside dwellers need to accept that this is a contribution to our national economy,” he said. “Some aren’t used to it”.

There will be no mention of five new freeports in the Budget, despite the Chancellor announcing ono Friday there would be, because of "a cock-up with the comms", a government official confirmed to the BBC on Sunday.  Instead, Reeves will outline plans and funding for some existing designated freeport sites to become "operational".

Former Chancellor Jeremy Hunt has criticised the Office for Budget Responsibility (OBR) for a report it will release on Budget day that will criticise his party and help make the case for Labour's tax rises. The OBR is supposed to be independent of the government, but Hunt claims a review into the alleged £22bn "black hole" Labour says it has found in the public finances will question the "adequacy of information" supplied to it by the previous Conservative government. The publication date makes it a “political intervention” Hunt claims. "I do not believe publishing a review with criticisms of the main opposition party on the day of a Budget is consistent with political impartiality," he said in a letter to Richard Hughes, head of the OBR. Hughes, however, defended the decision telling Hunt the report would not include "decisions of ministers". Rachel Reeves flagged the report last week when she said the OBR would be publishing a review into how the claimed £22bn "hole" in the public finances - which she says require £40bn in tax rises and public spending cuts – “was allowed to happen".

Nick Winters, a partner at tax accounting and advisory firm Blick Rothenburg has suggested that the UK economy is in danger of “crumbling” as a result of the Chancellor’s move to change fiscal rules on Government debt to allow her to borrow up to another £50bn. “Tinkering with the definition of borrowing could be a big, if temporary, win,” he said, adding: “This proposal gives the impression that Labour is tweaking a large spreadsheet to attempt to meet all of their promises. But unlike a spreadsheet, there are only so many tweaks our economy can take before it crumbles”.

And yet another survey this morning shows how badly business confidence is being battered ahead of Reeves’ first Budget. The Lloyds’ Business Barometer fell by three points to 44 in October, down three points on the month before, hitting a four-month low.

The number of companies listed on London’s junior AIM market has fallen below 700 for the first time since 2001. 92 companies have delisted in the past year alone, leaving just 695, according to data from UHY Hacker Young, revealed as speculation mounts that Chancellor Rachel Reeves intends to remove an inheritance tax exemption for shares held in AIM-listed companies after they have been held for two years.  

New figures from online estate agents Zoopla show there are currently 306,000 homes in the process of being sold, representing transactions worth a total of £113bn. This is a 30% increase on last year, which The Telegraph attributes to an exodus of landlords ahead of the Budget.  

IN OTHER BUSINESS NEWS:

Former Defence Secretaries Grant Shapps and Ben Wallace have criticised the “virtue-signalling” of banks who refuse to lend to or open accounts for defence companies, accusing them of undermining the UK’s defence base. An investigation by The Telegraph found that defence companies singled out HSBC and NatWest - which is part-owned by taxpayers – as being particularly difficult to deal with, while Santander and Barclays were also cited as having turned down defence companies. Some, but not all firms, however, highlighted Lloyds as a supportive lender. Defence industry lobby group ADS told the newspaper that the problem is widespread, but that many firms are afraid to speak out publicly for fear it will make their problem worse or that they will be targeted by violent protesters. In private conversations with bank employees, they are routinely told their account applications will be unsuccessful because of internal ESG (environment, social and governance) policies or the “reputational risk” they pose, ADS said. Brett Phaneuf, CEO of Plymouth-based MSubs, which is building unmanned submarines for the Royal Navy, said his company initially struggled to find any bank that would deal with it until it eventually settled with its current lender.  “We went to every major bank and it was always the same. We were viewed as unclean,” he said. “But the only reason they’re free to discriminate is because small businesses and large businesses like ours provide the arsenal of democracy. I mean, where does this end?” Rob Taylor, an ex-Royal Marine who now runs 4GD, which makes high-tech training facilities used by the British Army, said his company – which does not make weapons – faced “a complete reticence” from banks when it started out in 2016. Referring to the conflict in Ukraine, Grant Shapps said: “Unless we want our way of life and liberty to be eroded, it is time for the banks to get off their high horses… Denying banking access to defence businesses literally gives the likes of Vladimir Putin the upper hand”. “It is [banks’] patriotic duty to ensure that the freedoms that we all enjoy in the West are upheld,” he added, and that means “providing banking facilities to companies who are working day and night to provide our collective defence.” Ben Wallace said: “As war and insecurity spreads across the globe, it is time for our financial institutions to stop this vacuous virtual signalling. Without security there can be no ESG. We need to unlock funds for British technology that will help keep us safe.”

The Court of Appeal has ruled in favour of British consumers in a landmark decision regarding commission payments made to the motor finance industry. The Appeal Court judges overturned rulings by lower courts in three cases involving merchant banking group Close Brothers, the South African Firstrand Bank, Firstrand Bank and Motonovo Finance, saying that a broker could not lawfully receive a commission from the lender without obtaining the customer’s fully informed consent to the payment. In order for consent to be given, they added, the consumer would need to be told all material facts that might affect their decision, including the amount of the commission and how it was to be calculated. They ruled that did not happen in any of the cases put before them. The Financial Conduct Authority (FCA) has launched a wholesale review into whether drivers were mis-sold loans that were not in their best interest, reviewing sales going back to 2007, and potentially exposing banks and other finance houses to billions of pounds in compensation payments. When the Appeal was given the go-ahead in July, the Financial Ombudsman Services said it recognised that “the Court of Appeal’s decisions could have an impact on our approach to complaints that include similar issues”. Analysts have suggested that the cost to the motor finance industry in compensation payments could be as high as £16bn. Close Brothers is known to have set aside around £400m in response to the probe, while Lloyds Bank has made a £450m provision. Shares in Close Brothers tumbled around 15% on Friday, as did shares in Lloyds Banking Group, which fell 4.3% lower. Close Brothers said it intends to appeal the decision to the Supreme Court.

The Competition and Market Authority (CMA) has begun legal action against mattress seller Emma Group after finding “harmful online selling practices” including its use of online urgency claims, such as countdown clocks. The CMA said it asked the company to address issues raised in July, threatening legal action if it dd not act without unnecessary delay. This morning, the watchdog revealed it is seeking an enforcement order from the High Court against Emma Group, requiring it to change its online selling practices. A spokesperson for Emma Group said: “Emma UK considers that it is now in full compliance with consumer law and has been for some time. However, the CMA wants Emma UK to also limit the number of products sold at a discount off the full or ‘reference’ price. This unnecessary red tape will harm consumers in the UK. And this intervention is happening at a time when consumers have already suffered from inflation and a tough economy. Hence, we have decided not to settle with the CMA to implement a practice that will harm consumers. As a growing, innovative business, Emma UK remains committed to providing excellent deals to consumers for a great night’s sleep, while complying with consumer laws”.

Marks & Spencer is to put self-service checkouts into more than 100 of its 180 clothing stores by 2028, so shoppers don’t have to queue twice. Sacha Berendji, M&S’s operations director, said: “We’d like customers to be able to walk straight into the fitting room with no queue, try on what they’ve chosen, then pay there and just walk out.” He said M&S would add one checkout per changing room area, but could add more based on customer demand. Staff would “host” changing room areas to make sure customers did not leave without paying, he added.  

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