Tag: HM Treasury

Pension ‘megafunds’ could unlock £80 billion of investment

Chancellor takes radical action to drive economic growth

  • Biggest pension reforms in decades will merge Local Government Pension Scheme assets and consolidate defined contribution schemes into megafunds
  • Changes could unlock around £80 billion of investment for infrastructure projects and businesses of the future  
  • Local Government Pension Scheme changes will free up money for local public services in the long-term and secure more than £20 billion for investment in local communities

Pension megafunds will be created as part of the biggest set of pension reforms in decades, unlocking billions of pounds of investment in exciting new businesses and infrastructure and local projects.   

After her inaugural Budget that ‘fixed the foundations to deliver stability’, Rachel Reeves will use her first Mansion House speech as Chancellor to announce bold action to tackle the fragmented pensions landscape, deliver investment and drive economic growth – which is the only way to make people better off.  

The radical reforms, which will be introduced through a new Pension Schemes Bill next year, will create megafunds through consolidating defined contribution schemes and pooling assets from the 86 separate Local Government Pension Scheme authorities.  

These megafunds mirror set-ups in Australia and Canada, where pension funds take advantage of size to invest in assets that have higher growth potential, which could deliver around £80 billion of investment in exciting new businesses and critical infrastructure while boosting defined contribution savers’ pension pots.

Chancellor of the Exchequer, Rachel Reeves said: “Last month’s Budget fixed the foundations to restore economic stability and put our public services on a firmer footing. Now we’re going for growth.   

“That starts with the biggest set of reforms to the pensions market in decades to unlock tens of billions of pounds of investment in business and infrastructure, boost people’s savings in retirement and drive economic growth so we can make every part of Britain better off.”

Deputy Prime Minister, Angela Rayner said: “We’ve all seen the fantastic work carried out day in, day out, by our frontline workers and it’s about time their pension started working just as hard by driving investment in their communities. 

“This is about harnessing the untapped potential of the pensions belonging to millions of people, and using it as a force for good in boosting our economy.”

Pensions Minister, Emma Reynolds said: “Harnessing the power of this multi-billion-pound industry is a win-win, benefiting future pensioners, and our wider economy.  

“These reforms could unlock £80 billion of investment into exciting new businesses and critical infrastructure.”

The UK pension system is one of the largest in the world – with the Local Government Pension Scheme and Defined Contribution market set to manage £1.3 trillion in assets by the end of the decade.

However, our pension landscape is fragmented and lacks the size needed to invest in exciting new businesses or expensive projects like infrastructure.  

The government’s analysis – published today in the interim report of the Pensions Investment Review at Mansion House – shows that pension funds begin to return much greater productive investment levels once the size of assets they manage reaches between £25-50 billion.

At this point they are better placed to invest in a wider range of assets, such as exciting new businesses and expensive infrastructure projects. Even larger pensions funds of greater than £50 billion in assets can harness further benefits including the ability to invest directly in large scale projects such as infrastructure at lower cost.  

This is supported by evidence from Canada and Australia. Canada’s pension schemes invest around four times more in infrastructure, while Australia pension schemes invest around three times more in infrastructure and 10 times more in private equity, such as businesses, compared to Defined Contribution schemes in the UK.

Benchmarking against domestic and international examples show how consolidation of the Local Government Pension Scheme and defined contribution schemes into megafunds could unlock around £80 billion of investment in productive investments like infrastructure and fast-growing companies.  

The government is therefore consulting on proposals to take advantage of pension fund size and improve their governance. 

Local Government Pension Scheme

The Local Government Pension Scheme in England and Wales will manage assets worth around £500 billion by 2030. These assets are currently split across 86 different administering authorities, managing assets between £300 million and £30 billion, with local government officials and councillors managing each fund.  

Consolidating the assets into a handful of megafunds run by professional fund managers will allow them to invest more in assets like infrastructure, supporting economic growth and local investment on behalf of the 6.7 million public servants – most of whom are low-paid women – whose savings are managed.  

These megafunds will need to meet rigorous standards to ensure they deliver for savers, such as needing to be authorised by the Financial Conduct Authority. Governance of the Local Government Pension Scheme will also be overhauled to deliver better value from investment decisions, which independent research suggests could free up money in the long-term to support local public services. 

Local economies will be boosted by the changes as each Administering Authority will be required to specify a target for the pool’s investment in their local economy, working in partnership with Local and Mayoral Combined Authorities to identify the best opportunities to support local growth. If each Administering Authority were to set a 5% target, that would secure £20 billion of investment in local communities.  

A new independent review process will be established to ensure each of the 86 Administering Authorities is fit for purpose.   

Defined contribution schemes

Defined contribution pension schemes are set to manage £800 billion worth of assets by the end of the decade.  

There are currently around 60 different multi-employer schemes, each investing savers’ money into one or more funds. The Government will consult on setting a minimum size requirement for these funds to ensure they deliver on their investment potential.  

The government will also consult on measures to facilitate this consolidation into megafunds, including legislating to allow fund managers to more easily move savers from underperforming schemes to ones that deliver higher returns for them.

Budget pay rise for millions of low paid workers

  • Chancellor announces pay rise for over 3 million workers next year, as National Living Wage rises by 6.7% 
  • Pay boost worth £1,400 a year for an eligible full-time worker – a significant move towards delivering a genuine living wage.  
  • 18-20 National Minimum Wage will rise by £1.40 per hour – the largest increase on record – and marks first step towards a single adult rate.  

Over 3 million workers will receive a pay boost after the Chancellor confirmed the National Living Wage will increase from £11.44 to £12.21 an hour from April 2025.  

The 6.7% increase – which is worth £1,400 a year for an eligible full-time worker – is a significant step towards delivering the manifesto commitment to make sure the minimum wage is a genuine living wage.  

The National Minimum Wage for 18 to 20-year-olds will also rise from £8.60 to £10.00 an hour – the largest increase in the rate on record. This £1.40 increase will mean full-time younger workers eligible for the rate will see their pay boosted by £2,500 next year. This marks the first step towards aligning the National Minimum Wage and National Living Wage to create a single adult wage rate, which would take place over time. 

The move comes ahead of today’s Budget which will ‘fix the foundations’ to deliver change by fixing the NHS and rebuilding Britain, while ensuring working people don’t face higher taxes in their payslips. 

It builds on the commitment to be a pro-business, pro-worker, pro-growth Government – delivering a key plank of the Plan to Make Work Pay, which is already set to boost the pockets of the lowest-paid workers by up to £600 a year through the Employment Rights Bill.  

The plan will boost productivity, creating a workforce that is fit and ready to help us deliver our first mission to kickstart economic growth – with good jobs and growth in every part of the country making everyone, not just a few, better off. 

Chancellor of the Exchequer Rachel Reeves said:  “This Government promised a genuine living wage for working people.

“This pay boost for millions of workers is a significant step towards delivering on that promise.”  

Business Secretary, Jonathan Reynolds said: “Good work and fair wages are in the interest of British business as much as British workers. 

“This government is changing people’s lives for the better because we know that investing in the workforce leads to better productivity, better resilience and ultimately a stronger economy primed for growth.” 

Deputy Prime Minister, Angela Rayner said: ““A proper day’s work deserves a proper day’s pay. 

“Our changes will see a pay boost that will help millions of lower earners to cover the essentials as well as providing the biggest increase for 18–20-year-olds on record.” 

The minimum hourly wage for an apprentice is also boosted next year, with an 18-year-old apprentice in an industry like construction seeing their minimum hourly pay increase by 18.0%, a pay bump from £6.40 to £7.55 an hour.     

These increases will mean 3.5 million workers will receive a pay rise this year in total. They confirm the Low Pay Commission’s recommendations, whose advisory remit was overhauled by ministers in July to consider the cost of living.  

Ethics Director at Lush Cosmetics, Hilary Jones said: ““Lush staff making and selling our products are crucial to our success, so we commit to the Living Wage Foundation’s independently calculated real living wage rates each year to feel confident our rates of pay are fair and that our staff can afford what they need to thrive, not just survive.

“In these tough times where the cost of living continues to rise, it is great to see the Government increase minimum wage closer to these calculations to support the hardest working and most vulnerable workers across the UK.” 

Chair of the Low Pay Commission, Baroness Philippa Stroud said:  “The Government have been clear about their ambitions for the National Minimum Wage and its importance in supporting workers’ living standards.

“At the same time, employers have had to deal with the adult rate rising over 20 per cent in two years, and the challenges that has created alongside other pressures to their cost base.  

“It is our job to balance these considerations, ensuring the NLW provides a fair wage for the lowest-paid workers while taking account of economic factors. These rates secure a real-terms pay increase for the lowest-paid workers. Young workers will see substantial increases in their pay floor, making up some of the ground lost against the adult rate over time.” 

Good news for low paid workers, then. but some businesses – small businesses remain the bedrock of the UK economy – point out that it’s not the government that will be paying the pay rises, it’s them.

Coming on top of the likely increase in employers National Insurance contributions likely to be announced today they say that these additional costs could force some small businesses, working on small profit margins, to close.

Government launches British Infrastructure Taskforce

  • The Chancellor to convene first meeting of the British Infrastructure Taskforce to boost infrastructure investment.
  • Experts from some of the UK biggest finance institutions including HSBC, Lloyds and M&G will, alongside wider industry engagement, advise government on a long-term infrastructure investment strategy to benefit every corner of the UK.
  • Follows launch of a new body that brings infrastructure strategy and delivery together to address the systemic delivery challenges that have stunted growth for decades.

Private finance experts will meet the Chancellor at No11 Downing Street today to boost investment in infrastructure and drive growth nationwide.

Rachel Reeves will convene the inaugural meeting of the British Infrastructure Taskforce as part of a new approach that involves government working with business to design policy that will unlock private investment, including by building business confidence in UK infrastructure investments.

The Taskforce will explore different options to support the Government’s infrastructure goals to drive growth for the whole of the nation, and some of the UK’s biggest financial companies including LLoyds, HSBC, and M&G will be in attendance.

This Government has committed to turbocharge infrastructure investment across the width and breadth of the UK. Invitees have been selected to ensure a wide range of experience and expertise in UK infrastructure. This marks a significant shift in approach, with key businesses and stakeholders invited to work with the government to support the delivery of its infrastructure agenda.

It follows the announcement to launch a newly formed National Infrastructure and Service Transformation Authority (NISTA) which will bring a much-needed oversight of strategy and delivery under one roof, revolutionising the UK’s approach to infrastructure projects.

The NISTA will support the development and implementation of the ten-year infrastructure strategy in conjunction with industry which was outlined for the first time last week by the Chief Secretary Darren Jones.

The Chancellor of the Exchequer Rachel Reeves MP said: “Increasing investment in infrastructure is a vital part of delivering on our number one mission to grow the economy and create jobs.

“Just days after our International Investment Summit, we are delivering on our promise to work with business to drive growth across the country, and the expertise of this Taskforce will be invaluable in the weeks and months ahead.”

Chief Secretary to the Treasury Darren Jones MP said: ““We are serious about ending the cycle of underinvestment that has plagued our infrastructure systems for over a decade. The best way to do that is to design the solution with business in the room. That’s what this taskforce is all about.”

The Taskforce will meet regularly, offering insights that deliver long-lasting solutions for job creation, growth, and environmental goals.

This builds on the success of the International Investment Summit, which saw hundreds of top international investors attend the event, £63bn of confirmed investment into Britain, along with the launch of the £27.8 billion turbocharged National Wealth Fund.

Tracy Blackwell, CEO, PIC said: “We have a huge amount to invest and we want to invest more in Britain. There is no shortage of capital that can support the British economy’s capacity to grow.

“The right combination of policies and ideas will unlock that capital and boost growth.  From planning reform and better use of public sector pension funds to a streamlining of institutions and regulations, there is a lot that Government can do to crowd in more private investment and deliver social value.

“It’s great to be in an ongoing conversation with the Chancellor about taking that agenda forward.”

Andrea Rossi, CEO, M&G plc said: “M&G has been an active investor in the UK for 175 years. Of the £100 billion M&G invests in the UK, infrastructure remains a core part of delivering sustainable returns for our savers, clients and shareholders.

“The UK’s clear focus on infrastructure presents a significant opportunity to deliver economic and social progress and we are delighted to contribute our expertise.”  

Deepa Bharadwaj, Head of Infrastructure Europe, IFM Investors said: ““IFM is a major global infrastructure investor, a major investor in the UK, and is owned by pension funds.

“We look forward to solutions-based discussions that can unlock new investment across UK infrastructure sectors and themes”.

Stephen Cohen, Chief Product Officer, Blackrock said: “There’s a rapidly growing pool of capital to invest in infrastructure, but deploying it requires pragmatism in policy.

“We’re pleased to be working with the government in identifying policies that will support private investment.”

Charlie Nunn, CEO, Lloyds Banking Group said: “At Lloyds Banking Group, we are committed to helping the UK deliver the infrastructure the country needs, supporting jobs and growth.

“We welcome the British Infrastructure Taskforce’s focus on increasing investment in UK infrastructure and addressing some of the fundamental barriers that have existed to date.

“As the UK’s leading bank for project finance, we will work closely with the government in the development of this taskforce, ensuring the work supports communities, businesses, and industries across the regions and nations of the UK.”

Anne Richards, Vice Chair, Fidelity International said: “We have a shared ambition to drive growth in the UK by unlocking investment in infrastructure for the benefit of savers. 

“Our best opportunity to achieve that is through collaboration with government and the industry.”

Andy Briggs, CEO, Phoenix Group said: “Over the last three decades there has been an underinvestment in the UK economy compared to other developed nations. I am delighted there is a growing consensus that in order to grow we need to work together to invest.

“The British Infrastructure Taskforce provides the opportunity for business and government to work on shared priorities, help finance the social and economic infrastructure the country needs for the future, and give potential for better returns for pension savers.”

The following attendees of the first Taskforce meeting discussed investment opportunities, financial mechanisms, and strategies to maximise economic value:

  • Tracy Blackwell, CEO, Pension Insurance Corporation;
  • Anne Richards, Vice Chair, Fidelity International;
  • Charlie Nunn, CEO, Lloyds Banking;
  • Vivian Nicoli, Managing Director, CDPQ;
  • Andy Briggs, CEO, Phoenix Group;
  • Ian Stuart, CEO, HSBC UK;
  • Andrea Rossi, CEO, M&G;
  • Stephen Cohen, Chief Product Officer, BlackRock (represented by Helen Lees-Jones Global Head of Sustainable & Transition Solutions)
  • Deepa Bharadwaj, Head of Infrastructure Europe, IFM Investors;  
  • Mike Regnier CEO, Santander UK;
  • Sir Douglas Flint, Chairman, ABRDN;
  • Nick Smallwood, CEO, Infrastructure and Projects Authority;
  • James Heath, CEO, National Infrastructure Commission;
  • John Flint, CEO, National Wealth Fund.

Shoppers to be protected by new Buy-Now, Pay-Later rules

  • Providers will have to ensure lending is affordable – stopping users from accumulating unmanageable debt  
  • Rules deliver better protection for shoppers and clarity for innovative sector after years of uncertainty

Millions of shoppers are set to be protected by new rules for Buy-Now, Pay-Later products.  

Buy-Now, Pay-Later products have become increasingly popular in recent years as they allow people to spread the cost of purchases over time, but users currently do not have access to a range of key protections provided by other consumer credit products.  

The Government has today launched a consultation on proposals to fix this by bringing Buy-Now, Pay-Later companies under the supervision of the Financial Conduct Authority (FCA) and applying the Consumer Credit Act, ensuring users receive clear information, avoid unaffordable borrowing, and have strong rights when issues arise.  

Economic Secretary to the Treasury Tulip Siddiq said: “Millions of people use Buy-Now, Pay-Later to manage their finances, but the previous government’s dither and delay left them unprotected.

“We promised to take action before the election and now we are delivering. Our approach will give shoppers access to the key protections provided by other forms of credit while providing the sector with the certainty it needs to innovate and grow.”

The new rules will allow the FCA to apply rules on affordability – meaning that Buy-Now, Pay-Later companies will have to check that shoppers are able to afford repayments before offering a loan, which will help to prevent people building up unmanageable debt.

Companies will also need to provide clear, simple and accessible information about loan agreements in advance so that shoppers can make fully informed decisions and understand the risks associated with late repayments.

Consumer Credit Act information disclosure rules will be disapplied so that the FCA can consult on bespoke rules that ensure users are given this information in a way that is tailored to the online setting in which Buy-Now, Pay-Later products are generally used.    

Buy-Now, Pay-Later users will be given stronger rights if issues arise with products they purchase, making it quicker and easier to get redress. This includes applying Section 75 of the Consumer Credit Act, which allows consumers to claim refunds from their lender, and access to the Financial Ombudsman Service to make complaints. 

Rocio Concha, Which? Director of Policy and Advocacy, said: “Which? has been a leading voice calling for the regulation of Buy Now Pay Later for years so it’s positive that new rules are coming in that should provide much-needed protections for users of these products.

“Our research found that many BNPL customers do not realise they are taking on debt or consider the prospect of missing payments, which can result in uncapped fees, so clearer information about the risks involved as well as the use of affordability checks and options for redress would be a win for consumers.

“We are keen to see legislation quickly passed to ensure that BNPL users are protected as strongly as consumers using other credit products.”

Sebastian Siemiatkowski, Co founder and CEO of Klarna, said: “Congratulations to Tulip Siddiq and the government on moving quickly!

“They have been working with the industry and consumer groups long before coming into office. We’re looking forward to carrying on that work to put proportionate rules in place that protect consumers while fostering growth.”

Michael Saadat, International Head of Public Policy at Clearpay said: “We welcome today’s update from City and FinTech Minister, Tulip Siddiq, on BNPL regulation.

“It is encouraging that HM Treasury has listened to industry feedback and evolved the previous framework to ensure a more proportionate approach to regulation.

“We have always called for fit-for-purpose regulation that prioritises customer protection, delivers much-needed innovation in consumer credit and that sets high industry standards across the board.

“We will continue to support the Government and the FCA to deliver fit-for-purpose regulation that ensures consumers are protected in a way that supports the UK’s thriving FinTech sector.”

Chris Woolard, Author of the 2021 Woolard Review, which looked at change and innovation in the unsecured credit market, said: “Today marks a significant milestone for consumer-focused financial regulation.

“The proposed package of regulation would implement the recommendations of the Review and mean millions of people up and down the UK will benefit from stronger financial protection as they borrow using BNPL, especially the most vulnerable in society. The incoming regulation will also provide long-term certainty and standards for the market.”

The consultation will be conducted quickly – closing on 29 November – to reflect the urgent need for action to protect consumers.  

Final legislation is expected to be laid in Parliament in early 2025. Once the legislation is laid, the FCA will finalise the rules so they can take effect in 2026 – bringing clarity to the sector after years of uncertainty about how it will be regulated.  

This follows the Prime Minister saying he would remove regulation that needlessly holds back investment and growth. Today’s announcement brings in much needed regulation that stops people spiralling into debt.

Justin Basini, Co-Founder and CEO of The ClearScore Group said: “We welcome this consultation to bring Buy-Now, Pay-Later borrowers under the same protections and creditworthiness assessments as other mainstream financial products such as credit cards and loans.  

“It is a sensible step in ensuring that this new, important form of credit continues to provide much-needed flexibility for consumers while also managing any risks.”

New powers for banks to combat fraudsters

Banks to be given new powers to protect consumers against scams

  • New rules extend maximum delay for suspicious payments by 72 hours
  • Gives banks more time to investigate and break the spell of fraudsters

Banks will be given new powers to delay and investigate payments that are suspected of being fraudulent, helping to protect consumers against scammers.  

New laws proposed by the Government today will extend the time that payments can be delayed by 72 hours where there are reasonable grounds to suspect a payment is fraudulent and more time is needed for the bank to investigate.  

This will give banks more time to break the spell woven by fraudsters over their victims and tackle the estimated £460 million lost to fraud last year alone.

Economic Secretary to the Treasury, Tulip Siddiq said: “Hundreds of millions of pounds are lost to scammers each year, targeting vulnerable communities and ruining the lives of ordinary people.  

“We need to protect these people better, which is why we are giving banks more time to investigate suspicious payments and break the criminal spell that scammers weave.”

Minister of State with Responsibility for Fraud, Lord Sir David Hanson said: “Fraud is a crime that can devastate lives, and anyone can be affected.  

“That’s why measures like this are so crucial to provide banks the investigative powers they need to better protect customers from this appalling crime.”

Fraud accounts for over a third of all crime perpetrated in England and Wales, making it the most prevalent form of crime commitment in the country. This has been driven by a growing number of purchase scams and the emergence of so-called ‘romance scams’, where victims target vulnerable people and trick them into transferring large amounts of money by pretending to be interested in a romantic relationship.  

The new rules will help protect people against these types of scams by allowing banks up to an additional 72 hours to investigate suspicious payments. Currently banks must either process or refuse a payment by the end of the next business day.

Which? Director of Policy and Advocacy, Rocio Concha said: “This is a positive step in the fight against fraud. While it should not affect the vast majority of everyday payments, it’s important that banks can delay a bank transfer and take action if they think a customer is being targeted by a scam. 

“These measures should be used in a careful and targeted way. Financial firms of all sizes should also ensure they share intelligence and work with the police and other authorities to shut down accounts used for fraud and pursue the criminals behind them.”

UK Finance Managing Director of Economic Crime, Ben Donaldson said: “UK Finance has long called for firms to be allowed to delay payments in high-risk cases where fraud is suspected, and we are delighted to see proposed new laws supporting this.  

“This could allow payment service providers time to get in touch with customers and give them the advice and support they need to avoid being coerced by the criminals who want to steal their money.

“This could potentially limit the psychological harms that these awful crimes can cause and stop money getting into the hands of criminals.”

Banks who have reasonable grounds to suspect a payment is fraudulent will need to inform customers when a payment is being delayed. They will also need to explain what the customer needs to do in order to unblock the payment.  

The need for evidence to trigger a delay will help protect people and businesses from unnecessary payment delays. Banks will also be required to compensate customers for any interest or late payment fees they incur as a result of delays.

Chancellor vows to work in partnership with business ‘to fix the foundations’

The Chancellor ‘ushered in a new era of business partnership’ yesterday (29 August) as she met business groups together for the first time as Chancellor.

Rachel Reeves told senior business leaders that just as they had worked together in opposition to write their plans for government, they will work together now to deliver them.

In her first meeting with the BCC, CBI, FSB, Make UK and IoD as Chancellor, she said that businesses will be at the heart of delivering the government’s growth mission, as it takes action to fix the foundations of the economy to rebuild Britain and make every part of the country better off.

Ahead of October’s Budget, Reeves promised to ‘co-design’ policy with business on shared priorities to boost growth, pointing to the same approach being taken for designing the National Wealth Fund. 

She pledged to establish a new British Infrastructure Council to advise government on how to support more investment into UK infrastructure projects, and work closely with business to bring down barriers to growth and investment.

Reeves told senior business representatives the Treasury’s door was always open to valuable business insights on the opportunities and challenges they face. 

She added that the Business Secretary is committed to the new Industrial Strategy Council having a strong business voice and is also consulting with business on the details on Plan to Make Work Pay.

Business representatives also gave their views on what a successful partnership with government could look like and areas to prioritise to help their members grow and invest. 

Speaking after the meeting, Chancellor of the Exchequer Rachel Reeves said: “Under this new government’s leadership, I will lead the most pro-growth, pro-business Treasury in our history – with a laser focus on making working people better off. 

“That can only happen by working in partnership with businesses: big, medium and small. I want to continue the strong partnership we built with business in opposition now we are in government to deliver on our shared goal of fixing the foundations of our economy, so we can rebuild Britain and make every part of the country better off.”

Stephen Phipson CBE, CEO of Make UK, the manufacturers’ organisation said: “The Chancellor promised that she would engage properly with business and today was more evidence that the promise is being honoured.

“It was very welcome to have the Chancellor highlight further progress in delivering an Industrial Strategy with assurances that the governing Council would have a strong business voice.  

“In order to build confidence for businesses to increase investment, it is critical we keep this momentum going and see more detail on the delivery as well as vision. UK Manufacturers are fully behind the government’s growth agenda and look forward to working in partnership with government to achieve it.”

Shevaun Haviland, Director General of the British Chambers of Commerce said: “Today’s meeting was a valuable opportunity to reaffirm our commitment, on behalf of the businesses across our Chamber network, to work in partnership with Government. 

“We outlined our priorities for the Autumn Budget, recognising the public finance challenge. Boosting economic growth and investment is crucial, while maintaining a fiscal environment that protects the UK’s business competitiveness. 

“We welcome the Chancellor’s pledge to work with us on plans for an industrial strategy and to boost infrastructure investment. 

“We look forward to more discussions with the Chancellor and the Treasury team ahead of her statement on October 30th”

Tina McKenzie MBE, Federation of Small Businesses Policy Chair, said: “Today’s meeting was a crucial partnership moment, and I was pleased to raise issues and growth ideas from FSB members up and down the country, in every local community.

“You don’t get growth, jobs or wealth creation without UK small businesses; this was a core feature of our discussions in Opposition.  

“Now as the Chancellor and her team turn to the Budget, the diversity of UK businesses – 99% of which are the small, micro or self-employed that we represent – needs reflecting in Government policy-making just as much.”

CBI CEO Rain Newton-Smith said: “Businesses are the engine of growth and will be central to achieving the government’s mission to boost the UK economy. It’s why the CBI welcomes the Chancellor’s promise to co-design policy with the business community.

“Together, we can find shared solutions to shared problems – to increase productivity and business investment – in turn, improving living standards.

“The CBI is proud to work in close partnership with the Treasury, providing a cross-economy voice to help remove the roadblocks holding back investment and sustainable growth.”

Jonathan Geldart, Director General of the Institute of Directors, said: “For the government to successfully deliver its growth mission, it will be crucial that it works in partnership with business.

“Therefore, we look forward to building on the productive relationship that we have developed with the Chancellor, to ensure that the priorities and challenges of businesses and entrepreneurs are understood and acted upon.

“Specifically, as we approach her first Budget in the autumn, we are calling on the Chancellor to take time to get policy design right for the long-term, to deliver the stable tax and policy framework needed to support business confidence and investment.”

Public spending audit 2024-25: tax measures explained

  • The UK Government has set out the next steps for tax measures from the manifesto on which the Government was elected, including policies to close tax loopholes and tackling tax avoidance.
  • This is to provide taxpayers with certainty ahead of their final confirmation at the Budget on 30 October 2024.
  • Further details on all policies including costings will be published at the Budget, and will be certified by the Office for Budget Responsibility.

Ending tax breaks for private schools and raising revenue to fund state education priorities

  • The Government is publishing a technical note setting out its plan to introduce 20% VAT on education and boarding services provided by UK private schools from 1 January 2025.
    • o 20% VAT will also apply to pre-payments of fees for terms starting on or after 1 January 2025 made on or after 29 July 2024.
  • Over 94% of school children in the UK attend state schools and ending the tax breaks on VAT and business rates for private schools will secure additional funding to help recruit 6,500 new teachers and roll out breakfast clubs to all primary schools.
  • These changes will not impact pupils with the most acute special educational needs, where their needs can only be met in private schools. Where pupils’ places in private schools are being funded by local authorities (LAs) because their needs can only be met in private school (e.g. in England, where attendance at that private school is required by a child’s Education, Health and Care Plan (EHCP), LAs will be able to reclaim the VAT so it does not apply to those fees.
  • This change will only apply to tuition fees and boarding fees charged by private schools. The VAT treatment of other services or goods provided by private schools – such as nursery care, wrap-around childcare, school meals and holiday clubs, and part time classes operated by third parties within schools – such as music and drama clubs and Sunday schools – will not change.  The VAT treatment of state boarding fees will also continue to be exempt from VAT.
  • The government will also end business rates relief for private schools. This change means private schools in England will no longer be eligible for charitable rates relief and will pay their full business rates liability. This is intended to take effect from April 2025, subject to Parliamentary passage.
  • The VAT changes will be legislated for in the Finance Bill introduced following the Budget. The business rates changes will be legislated for through a Local Government Finance Bill led by the Ministry for Housing, Communities, and Local Government (MHCLG).

Non-Doms: Removing domicile status from the tax system and implementing a new internationally competitive residence-based regime

  • The Government is committed to addressing unfairness in the tax system, so that everyone who makes their home in the UK pays their taxes here.  
  • That is why the Government will remove the outdated concept of domicile status from the tax system and replace it with a new internationally competitive residence-based regime, focused on attracting the best talent and investment to the UK.  
  • A policy note has been published to set out the government’s plan to end the use of offshore trusts to avoid inheritance tax and scrapping the 50% tax reduction on foreign income in the first year of the new regime. 
  • From April 2025, anyone who has been tax resident in the UK for more than four years will pay UK tax on their foreign income and gains (FIG), as is the case for other UK residents. This is a simpler and clearer test, with less scope for ambiguity than the current regime.  
  • New arrivals to the UK will benefit from 100% UK tax relief on their FIG for their first four years of tax residence, provided they have been non-resident for the last 10 years. This is more attractive than the current approach, as they will be able to bring FIG into the UK without attracting an additional tax charge, encouraging them to spend and invest these funds in the UK. 
  • To support transition and provide time for adjustment, a Temporary Repatriation Facility (TRF) will be available for individuals to bring pre-6 April 2025 FIG held offshore into the UK at a reduced rate of tax, to encourage these funds to be spent and invested in the UK.
  • Behavioural impacts and costings will be published at the Budget.

Energy Profits Levy

  • The Government is publishing a policy document that confirms its intention to increase the rate of the Energy Profits Levy (EPL) by three percentage points to 38% from 1 November 2024.
  • The levy will also be extended from 31 March 2029 to 31 March 2030.
  • The Government will remove unjustifiably generous investment allowances from the EPL, starting by abolishing the levy’s core investment allowance from 1 November. The decarbonisation allowance will be retained.
  • The Government will reduce the generosity of capital allowances (including First Year Allowances) when calculating EPL profits – providing further details on these changes at Budget. 
  • The Energy Security Investment Mechanism will remain, helping to provide operators and their investors with confidence the levy will no longer apply if prices fall to, or below, historically normal levels for a sustained period.
  • Further details on the Government’s approach to all allowances in the EPL, and costings, will be set out at the Budget.
  • The Government recognises the importance of providing the oil and gas industry with long-term certainty on taxation after a period of change. The government will work with the industry and others to develop and implement a successor regime for responding to price shocks after the EPL ceases.

The UK Government is also:

  • Publishing a call for evidence confirming its intention to take action against the carried interest loophole, and to form the basis for detailed engagement with expert stakeholders.
    • o Carried interest is a form of performance-related reward received by fund managers, primarily within the private equity industry.
    • o Reforms will ensure fairness, whilst also recognising the vital role that our world-leading asset management industry plays in channelling investment across the UK.
  • Tackling the tax gap. Reforming the tax system by making policy changes to simplify tax, close loopholes and reduce non-compliance, designing out non-compliance before it happens. At the Budget, the government will provide an update on the implementation and development of measures that form its plan to close the tax gap.
    • The government will invest in HMRC’s compliance work, hiring around 5,000 additional staff to recover more tax revenues. HMRC has already started the process of recruiting additional staff into compliance roles.
    • The government will also invest in HMRC’s technology infrastructure, helping to make HMRC more efficient and improve taxpayers’ experience of interacting with HMRC.

Rachel Reeves: “It is time to level with the public and tell them the truth”

  • Chancellor to pledge to ‘fix the foundations of our economy’ as she unveils the spending inheritance left by the previous government.
  • Reeves to set out reforms to deliver economic stability and protect the public finances, as she announces date of Budget later this year.
  • Office of Value for Money formed to challenge government to deliver better value for money for taxpayers.

Chancellor of the Exchequer Rachel Reeves will this afternoon (Monday 29 July, after 3:30pm) vow to ‘fix the foundations of our economy’ as she publishes an audit of the spending inheritance left by the previous administration.

Accusing the previous government of ‘covering up the true state of the public finances,’ the Chancellor will announce immediate action to restore economic stability and deliver departmental savings this financial year.

The announcements will be a response to the findings of the Treasury’s spending audit, which shows that the previous government overspent this year’s budgets by billions of pounds after making a series of unfunded promises.

The Chancellor will confirm that she has commissioned an Office for Budget Responsibility forecast to coincide with a Budget and Spending Review to be held later this year.

The Budget will set out how the government’s robust fiscal rules will be met: balancing the current budget so that day-to-day costs are met by revenues and getting debt falling as a share of the economy by the fifth year of the forecast.

Speaking in the House of Commons later today, the Chancellor of the Exchequer Rachel Reeves is expected to say: “Before the election, I said we would face the worst inheritance since the Second World War.

“Taxes at a seventy year high. Debt through the roof. An economy only just coming out of recession. I knew all those things. I was honest about them during the election campaign. And the difficult choices it meant.

“But upon my arrival at the Treasury three weeks ago, it became clear that there were things I did not know. Things that the party opposite covered up from the country.”

She will add: “It is time to level with the public and tell them the truth.

“The previous government refused to take the difficult decisions. They covered up the true state of the public finances. And then they ran away. I will never do that.

“The British people voted for change and we will deliver that change. I will restore economic stability. I will never stand by and let this happen again.

“We will fix the foundations of our economy, so we can rebuild Britain and make every part of our country better off.”

The Chancellor will announce she is committing the government to one major fiscal event per year to put an end to ‘surprise budgets’ which have previously caused uncertainty for both the markets and family finances across the country.

A new Office of Value for Money will be established, using pre-existing civil service resource, to put an end to wasteful spending in government, providing targeted scrutiny of public spending so that value for money governs every decision government makes.

The Office will immediately begin work on identifying and recommending savings for the current financial year, while also establishing where targeted reforms of the system can ensure that poor value for money spending is cut off before it begins.

Reforms bearing down on waste in the public sector will also be announced today, driving efficiency through government departments and arms length bodies (ALBs). Immediate action will be taken to stop non-essential spending on consultants, alongside disposing of surplus estates and hastening delivering admin efficiencies in departments.

Earlier this month, the Government introduced the Budget Responsibility Bill at the King’s Speech to deliver economic stability by guaranteeing that never again can a government play fast and loose with the public finances.

The Bill ensures all significant fiscal announcements on tax or spending which are worth more than 1% of the UK’s GDP will be subject to scrutiny by the independent Office for Budget Responsibility. This will guard against large-scale unfunded commitments in the future.

FORMER Tory Chancellor Jeremy Hunt said the new Labour government is ‘peddling nonsense’. He added: “The books were wide open and what they show is a healthy, growing economy.”

The Conservatives claimed throughout the recent election campaign that Rachel Reeves secretly plans to raise taxes.

Chancellor Rachel Reeves delivers first address to HM Treasury staff

Chancellor of the Exchequer Rachel Reeves’ speech delivered to HM Treasury staff yesterday (Friday 5 July):

Thanks to all of you for being here. It is such an honour to be here today as the Chancellor of the Exchequer.

I know what a responsibility this brings – to guide our economy through uncertain times;

To restore stability in an age of insecurity;

To build prosperity that draws on the talents of working people.

The central mission of this new Government will be to restore economic growth.

During the election that was the Labour Party’s mission.

It is now our national mission.

And it will be for the Treasury to lead that mission.

Not growth for growth’s sake.

But growth for a purpose.

To make every part of our country better off.

To deliver on this mission, I want this to be the most pro-growth Treasury in our country’s history.

That will mean doing what the Treasury does best – building growth on a rock of economic stability.

But it also means taking on new challenges and new responsibilities.

To fix the foundations.

And to rebuild Britain;

To drive growth not just in a few pockets of our country but in every part of Britain.

To meet the challenges and seize the opportunities of the future – including our energy transition.

That is why this Treasury will play its full part in a new era of industrial strategy;

Working hand-in-glove with business, to make sure Britain is truly open to business once again.

And I know that in an uncertain world, if we can deliver the stability, investment and reform that the Prime Minister and I have set out, then Britain can reap the rewards.

But for families at home – I know that this is about more than just lines on a graph.

It is about tackling the causes of the cost of living crisis and making work pay.

Rebuilding our health service and our schools.

And driving opportunity in every part of Britain.

I will always hold in my minds eye the people across our country whose livelihoods, public services and aspirations will rise or fall based on the decisions we make here.

And I ask you to do the same – whether in Darlington, or Norwich, or in this building.

It is also a huge privilege to be the first ever female Chancellor of the Exchequer.

So every young woman and girl watching this:

Let today show that there should be no ceilings on your ambitions.

Your hopes,

or your dreams.

But there is a deeper responsibility too:

To women whose work is too often undervalued.

Who have borne the brunt of inequality.

And whose lives and interests are too often excluded from economic policymaking.

Together, we are going to change that.

Now, I have been a Member of Parliament for fourteen years now.

And if I’m honest, I’ve spent a lot of those years frustrated.

Talking, not doing.

Responding to constituents’ problems, but not being able to get to the root cause of those problems.

So as far as I’m concerned, there is no time to waste.

I will judge my time in office a success if I know that, at the end of it, there are working-class kids from ordinary backgrounds living richer lives, their horizons expanded, and their potential realised;

If we are leaving to the next generation a country that is more prosperous, with more good jobs paying decent wages, and a country better able to thrive in an uncertain world.

I know that a lot has been asked of you in the last few years – and I know, when the chips are down, staff at the Treasury have risen to the occasion, from furlough to energy price support.

I have often disagreed with the political choices that have been taken in this building.

But I have never been in any doubt about the talent, the dedication and the professionalism that Treasury staff have displayed.

I know too that at times it must have been frustrating for you, working under a weight of uncertainty, changes in direction, and without clarity of political purpose.

As Chancellor, I am determined to change that.

All our plans for government will rely on your hard work.

I’m under no illusion about the scale of the challenges we face.

The difficult choices that we will have to make.

I am not promising you that it will be easy.

There is a long road ahead.

It comes with a great weight of responsibility.

I embrace it.

It will demand hard work.

I am ready for it.

The British people have put their trust in this new government.

They have put their trust in us to run their economy.

And to protect their finances.

And that trust must not be squandered.

We’re a team.

It’s a new start.

So let’s get to work.

Thank you very much.

Drivers to save £50 this year as fuel duty cut extended

  • Boost for millions of motorists as 5p cut to fuel duty for petrol and diesel comes into effect.
  • Car drivers to save around £50 this year and £250 since the 5p cut was introduced – a £13 billion tax cut for motorists
  • Follows further tax cuts for working people announced at Spring Budget, rewarding work, boosting growth and helping families with the cost of living. 

Millions of drivers across the UK will continue to be supported at the pumps from today (Saturday 23 March) as the extension to the temporary 5p fuel duty cut for petrol and diesel comes into effect – putting yet more money in people’s pockets.

The Chancellor Jeremy Hunt announced the 12-month extension at the Spring Budget, as well as cancelling the planned inflation increase for 2024/25, saving car drivers around £50 this year and £250 since the 5p cut was introduced – a £13 billion tax cut for motorists overall over three years.

The temporary cut was first introduced in March 2022 to combat high fuel prices after global supply chain issues following the pandemic, as well as Russia’s invasion of Ukraine. Today’s extension takes effect as the government continues to support motorists with rising costs.

Taken with recent cuts to National Insurance Contributions – to the tune of around £1800 per household – this is putting even more money in people’s pockets. This is only possible because the government stuck to its plan to boost the economy. The economy has now turned a corner and 2024 is set to be the year that Britain bounces back.

In the past year, inflation has more than halved; the economy has recovered more quickly from the pandemic than first thought; and debt is on track to fall. The government is sticking to the plan to deliver the long-term change our country needs to deliver a brighter future for Britain.

Chancellor for the Exchequer Jeremy Hunt said: “Cutting people’s tax bill, while protecting our public services, is a priority.

“We’re already saving drivers £50 a year and the average earner £900 a year – and if we stick to our plan, we will go even further, rewarding work and growing our economy.”

Energy Security Secretary Claire Coutinho said: “We will always stand by UK drivers and today’s fuel duty cut is just one of the ways we are keeping costs down for families.

“Our plans for a new Pumpwatch will make sure motorists are getting a fair price at the pump.”

To mark the extension coming into effect, the Financial Secretary to the Treasury Nigel Huddleston visited an Asda petrol station in Worcestershire where he met staff and saw the supermarket chain’s more fuel-efficient fleet of vans.

Financial Secretary to the Treasury Nigel Huddleston said: “The last few years have been tough but we’re making real progress – which is why we are able to continue to support motorists for another 12 months.

“By cutting taxes for working families and sticking to the plan, we can keep building a stronger economy and a brighter future where hard work is rewarded”.

RAC head of policy Simon Williams said: “The Government’s decision to extend the 5p duty cut is certainly a help to cash-strapped drivers, particularly as this week wholesale fuel prices have risen on the back of a higher oil price.

“With the creation of Pumpwatch and a price monitoring body on the horizon, there should soon be more pressure than ever on retailers to price fuel fairly, which will ensure it is only drivers who benefit from the duty cut.”

The government’s support on fuel duty is already available for longer than in many countries including Germany, France, and the Netherlands. A large proportion of countries which lowered fuel duty rates after the energy crisis have now ended their support.

The existing duty rates on road fuel gases, which are lower than the equivalent rates on diesel, will also continue to 2032, giving the haulage industry greater certainty over future tax rates and supports the decarbonisation of the UK transport sector.

Today’s extension to the 5p cut follows more tax cuts for working people announced at the Spring Budget, putting over £900 a year back into the average worker’s pocket thanks to changes at Autumn Statement and a second Employee National Insurance tax cut from 10% to 8% in April. The Chancellor has also committed to abolishing National Insurance altogether – end the unfairness of a double tax on work.

Meanwhile pubs, breweries and distilleries will benefit from a further freeze to alcohol duty until February 2025 – which will also save consumers money on their favourite tipple. The six-month alcohol duty freeze announced at Autumn Statement will be extended until 1 February 2025, benefitting 38,000 pubs across the UK, while reducing inflation this year.

Today’s news follows the government’s ongoing work to make sure drivers are getting a fair price at the pump by improving competition in the road fuel market.

Proposals for a new Pumpwatch scheme announced earlier this year will see the UK’s 41.2 million drivers get the latest petrol station prices at the click of a button, transforming how the UK shops for its fuel.

Under the plans, all fuel stations would be legally required to share live information on their pump prices within 30 minutes of any change in price subject to the outcome of the government’s consultation.

This freely available data will enable tech companies to develop new ways for drivers to search for the cheapest fuel while on-the-go and access to this price comparison technology could see drivers save 3p per litre on fuel, while also helping to drive down prices by reigniting competition.