Households face council tax hikes and £10billion stealth levies as Reeves gets boxed into corner by shrinking economy
Economists warned the circumstances meant tax hikes are almost certain this autumn
GOGGLE-BOXED IN Households face council tax hikes and £10billion stealth levies as Reeves gets boxed into corner by shrinking economy
HOUSEHOLDS face council tax hikes and £10billion in stealth levies as Rachel Reeves gets boxed into a corner by the shrinking economy, experts warn.
The Chancellor, who wore protective goggles during a visit to the University of Derby yesterday, learned growth fell 0.3 per cent in April — less than 24 hours after her £113billion spending review splurge.
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Rachel Reeves wears protective goggles during a visit to the University of Derby
Credit: Simon Walker / HM Treasury
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Households face council tax hikes and £10billion in stealth levies
Credit: Getty
Businesses are reeling from the National Insurance rise, a jump in the minimum wage and ongoing uncertainty over Donald Trump's global trade war.
Economists warned the circumstances meant tax hikes are almost certain this autumn — along with hard-pressed town halls having to up council tax rates by five per cent next year to pay for local services.
Former Office for Budget Responsibility committee member Andy King said 'the writing was on the wall for another fiscal hole' — which would trigger tax rises or possible spending cuts in the Budget.
Another expert accused Ms Reeves of 'making up numbers' in her spending review as there were few clues where savings would be found.
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READ MORE ON SPENDING REVIEW
TAX BLOW Council tax bills to rise at fastest rate in 20 years after Reeves' review
Paul Johnson, from the Institute for Fiscal Studies, said her demands that all Whitehall departments cut administration budgets by ten per cent a year were not the result of a 'serious analysis'.
He also said that if Ms Reeves was forced to raise taxes, the most politically straightforward approach would be to extend the freeze on income tax thresholds.
Mr Johnson added that her plans will result in a 'sting in the tail' because local authorities would have to raise their levies.
More than half of Brits — 52 per cent — reckon Ms Reeves' spending review will have a negative economic impact rather than positive.
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But one piece of good news did emerge yesterday, as it was revealed the UK was finally ready to sign its trade deal with the US.
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Telegraph
3 hours ago
- Telegraph
Rachel Reeves's plan is unravelling. She could be gone before the next Budget
It can't be easy living in the maelstrom of 11 Downing Street these days. First, Rachel Reeves had to endure almost four months of being warned what not to do with taxes, such was the brittleness of the UK economy. Then – after she chose to both increase taxes by a record amount and increase borrowing so she could afford her spending commitments – came months of warnings about the dire consequences. People are losing their jobs because of her choices, which will push up benefit claims and spending. Tax revenues will fall rather than increase by the numbers she expected. The economy has been flatlining with miniscule and highly erratic growth as it stops, starts, then stalls – seemingly on an endless repeat. Then there were the cuts to pensioners' heating allowances, the cuts to disability benefits, the death tax changes for farmers, businesses and pensions. On top of that, there were the tax rises we always knew were likely because Labour had refused to rule them out – the increases in capital gains tax and stamp duty, and the removal of incentives to entrepreneurs. It has maybe taken longer than some of us expected, but the bad news for the Chancellor – and us – now seems to be arriving like buses. I've imagined what it's like to be at the end of that constant deluge of bad numbers. 'Incoming!' The annual estimate for public sector borrowing for year ending March 2025 is £148.3bn – £17.2bn more than last year and £11bn more than the OBR forecast. Reeves carries on with her Sudoku. 'Incoming!' Oh no! The latest inflation figures for April have surged to 3.4pc, trending towards double the Bank of England's target of 2pc. Reeves stares out the window. 'Incoming!' The unemployment rate is up 0.2pc to 4.6pc – the highest since 2021. The unemployed claimant count is up 107,000 year-on-year to 1.73 million. 'Incoming!' Monthly GDP is down -0.3pc, three times worse than the -0.1pc consensus prediction. Reeves purses her lips. Looking forward, we can imagine over the months of July, August and September an unrelenting series of indicators breaking bad. 'Incoming!' The latest tax receipts are below estimates. The latest borrowing numbers are up again. Finally, the markets are beginning to react. 'Incoming!' The pound has fallen to $1.20, the lowest since 2023. Gilts are moving too. 'Incoming!' Ten-year gilt yields are over 5pc. The Bank of England reverses course and puts rates up to 4.5pc. 'Incoming!' The team from the IMF has arrived. 'Incoming!' Prime Minister! I have the Chancellor's letter of resignation. That type of scenario might seem far-fetched, but it is the trajectory the country is travelling. Unemployment is already up 10pc since Labour came to power, and sadly there's no reason to believe this trend will be reversed. Since 'modern' records began, in 1971, every Labour government has left office with unemployment higher in percentage and absolute numbers than when it took power. Reeves is continuing that tragic tradition. The spending statement from Rachel Reeves was not so much a review as a litany of unfunded spending commitments aimed not at reassuring the markets, but at reassuring Labour backbenchers. The brighter among them will not buy it. They will soon notice the important numbers getting worse every month as the full effect of the employers' National Insurance increase, the lowering of the threshold to start paying it and the increase in the minimum pay rates costs jobs and halts hiring. What does this all mean for people trying to get by: the savers, pensioners and those running their own businesses? It means that tax rises are not just inevitable in October's Budget, they will become a must-do if an embarrassing bail out is to be avoided. Labour likes to talk of having ended austerity – something that Philip Hammond, former Conservative chancellor, first claimed back in 2017. The truth of it is the UK has never had real austerity this century. The direction of travel of our public spending has always been up. When you hear of spending cuts, what you are being told about is cuts to the rate of increase in government spending, not a cut in the total amount of spending, which continues to rise year-on-year. Increasing taxes means an attack on our pensions, our savings and our properties. The tax hikes will be passed off as necessary to save the NHS when the NHS really requires an overhaul that boosts its productivity. The much hyped increases for the NHS of £29bn each year over the next three years is most likely to be eaten up by rising pay awards. The NHS is one of the world's largest employers, with around 1.3 million full-time equivalent staff in England (as of February 2024). Consequently, the wage bill for the NHS makes up a substantial proportion of its budget. Nurses are already being balloted about strike action over an 3.6pc inflation-busting pay offer – junior doctors are also wanting more again. In 2022-23, the total cost of employing the staff in the NHS was £71bn – 45.6pc of the NHS budget. These statistics don't include salaries for GPs (who are not directly employed by the NHS), nor employees in the Department of Health and Social Care and other national bodies, such as NHS England. GPs and GP practice staff are indirectly funded by the NHS through a complex system of contracts. The Resolution Foundation think tank estimates that, by the end of the decade, half of all public spending will be going to the NHS – and continuing to rise. So optimistic has Reeves been about 'fixing the foundations' and 'delivering growth' while 'making the right choices', that there will be no way back for the Chancellor when the next crisis begins. The next time someone shouts 'incoming!' in the Treasury, everyone had better duck under their desks. It will be to announce a new Chancellor.
The Guardian
3 hours ago
- The Guardian
Investing apps: which offer the most for beginners?
Rachel Reeves and her government colleagues are keen to get more Britons investing in the stock market. She said recently that a lot of money was being put into cash savings accounts 'when it could be invested in equities, in stock markets, and earn a better return'. The good news is that the rise of DIY tools and mobile apps means it is now easier than ever to get investing. However, the vast array of options can make it daunting to know where to start. For new investors who don't have the time or confidence to manage a portfolio, 'robo-advisers' can be a good option. They might sound like something out of a sci-fi movie but are basically online investment platforms that use technology to help automate the process. Most are app-based and typically offer a range of ready-made investment portfolios tailored to your individual preferences. You usually fill in a short questionnaire to determine your goals, how long you want to invest for, and how much risk you want to take. Typically, the longer you are investing for, the more risk you can afford to take. But you need to factor in your personal attitude to risk, too. Stocks and shares have historically delivered better returns than savings accounts, but there is also a chance you could lose money – and there will be ups and downs along the way – so you need to feel comfortable about this before taking the leap. The ready-made portfolios typically invest in a selection of exchange traded funds (ETFs). These are low-cost funds that track a chosen index such as a UK or US stock market, government bonds (such as UK gilts or US Treasury bills) or the price of a commodity such as gold. The apps put a selection of these funds together to create a balanced portfolio which spreads your money across different assets. So which of the apps – if any – is right for you? We looked at some of the most popular ones to see how they stack up. Who? One of the first robo-advisers to hit the market, Nutmeg launched in 2012, and in 2021 it was bought by the investment company JPMorgan Chase. It has more than 200,000 users in the UK, with more than £4.5bn invested through the app. Minimum investment: £500 for Isas and pensions, £100 for lifetime Isas and junior Isas. Investment choice: Nutmeg has different tiers of service, which will affect costs. With its fully managed option, you choose a risk level from one to 10, and a team monitors the portfolio and makes regular adjustments. With the fixed allocation option, there are five risk levels and the portfolio is set by the investment team once a year. Fees: Nutmeg says the total charge for the fully managed option is 0.98%. Someone investing £3,000 would pay about £29.40 a year. For fixed allocation, it is 0.65% – about £19.60 a year for that example. We like: Nutmeg is transparent about performance, and you can see how its fully managed portfolios have done over the past decade. For example, the 6/10 risk portfolio has returned 43.4% over 10 years, compared with 36.7% on average for comparable funds. The 5/10 portfolio is up 31.9% over that time, compared with 36.7% for its peers. Anything else? For those who want more support, Nutmeg offers free guidance to help with general questions, and full financial advice starting from £900. Who? Launched in 2016, Moneybox specialises in savings and investments and is reported to now have more than 1.5 million customers and in excess of £10bn of assets under management. Minimum investment: You can open an account with as little as £1. Investment choice: There are just three core options: cautious, balanced and adventurous. The cautious option has just 15% in company shares, with 40% in bonds and 40% in cash, which makes it less risky but means your returns may not be as impressive as with other options. The adventurous option has 80% in shares, 15% in property and 5% in bonds. Fees: A £1-a-month subscription fee covers trading costs. Then there's a 0.45% platform fee, plus the cost of your actual investments – 0.17% for the core funds. Moneybox says someone with £3,000 invested in its balanced fund would pay total charges of 0.85% – about £25.60 a year. We like: The round-ups feature. Link your bank account or credit card to the app, and it will round your spending to the nearest pound and automatically invest the difference. For example, if you spent £1.87, it would be rounded to £2, with 13p invested – a handy way to boost your contributions. Anything else? Those who feel more confident can pick their own ETFs to invest in rather than the ready-made portfolios. Or, if you want to cherrypick specific companies, there is a limited range of stocks to select – though currently only US stocks are available. Who? Dodl is the newest of this cohort, launched only in 2022, but it is owned by the wealth management giant AJ Bell, which has been around since 1995. Dodl offers a simpler process and lower minimum investment level than its parent company, and a more limited choice of investments. Minimum investment: £100, or set up a direct debit from £25 a month. Fees: 0.15% a year, with a minimum of £1 a month, plus the cost of your investments – 0.31% for the core range. Someone with £3,000 invested would pay about £19.30 a year. Investment choice: The range of ready-made funds, run by AJ Bell, are labelled by risk level – from cautious to global growth. You can also choose individual shares, with the ability to browse by region (either the UK or US) and sector (such as finance, health or technology). We like: The option to invest by theme, which directs you to a relevant ETF for your trend of choice. For example, the 'On top of the world' theme invests in the HSBC FTSE All-World, an index of some of the biggest companies around the globe, which charges 0.13%. Other options include 'the home team' for UK-focused investments, and 'robo revolution' for a fund investing in robotics companies. Anything else? It pays a competitive 4.25% (variable) on cash you have not yet invested. Who? Founded in 2014, Wealthify is now owned by the insurance giant Aviva and has about 100,000 customers. It has a big focus on keeping things simple and jargon-free. Minimum investment: Currently £1 for Isas and £50 for pensions, though from Wednesday 25 June the minimums will be £1 for junior Isas, and £500 for stocks and shares Isas and pensions. Investment choice: There are five risk levels: cautious, tentative, confident, ambitious and adventurous. The cautious portfolio has 85% of its assets in government bonds and just 5% in company shares. The adventurous option has 74% in shares and 14% in government bonds, and also invests in property and infrastructure. Fees: The platform fee is 0.6%, which includes the cost of managing your portfolio. The cost of your investment on top is 0.16% for a general portfolio, and 0.7% for the ethical option. That adds up to £22.80 a year, or £39 for the ethical option, for someone with £3,000 invested. There is no minimum fee. We like: Its outlook page, which offers a short overview of the prospects for different investment regions and assets. It's a handy way for investors to learn a bit more without hours of research. Anything else? Wealthify boasts of various customer service awards on its website – a good reminder to consider factors aside from fees and the investment range. Always be sure to do your own research and read independent reviews before choosing a provider. Who? Moneyfarm originated in Italy and launched in the UK in 2016. It now has about 160,000 active users and more than £5bn in assets under management. The firm has backing from big investment groups such as M&G and Allianz. Minimum investment: £500. Investment choice: There are seven risk levels for its managed funds, which are regularly rebalanced by the investment team. For example, the 6/7 risk option has 72% of its assets in developed market companies and 10% in emerging markets companies, while the 2/7 risk option invests predominantly in bonds. Fees: Someone with £3,000 in the actively managed option would pay management fees of 0.75%, plus 0.3% for their investments – equivalent to about £31.56 a year. For the fixed allocation options, which are adjusted just once a year, the management fee is 0.45% plus 0.17% for the investments – a total of 0.62%, or about £18.60 a year for that example. We like: It is easy to see a breakdown of each portfolio on the website to understand how it is invested. You can see how it invests by asset type, region and sector – and there's a simple explanation of each, too. Anything else? As with most of these apps, there is an option to apply environmental, social and governance (ESG) criteria to your investments, which is good for any investor worried about where their money is going. This will screen out certain investments – for example, heavy polluters or companies with a poor human rights record. Selecting this option typically increases the costs. Before choosing a robo-advice app or service, make sure the company is regulated by UK watchdog the Financial Conduct Authority (FCA). It should also be a member of the Financial Services Compensation Scheme (FSCS), the UK's official consumer 'lifeboat' scheme which protects up to £85,000 of your money if your provider collapses. Most apps offer a variety of accounts, but a stocks and shares Isa is usually the best choice. You can put up to £20,000 a year into an Isa, and any interest or growth is sheltered from HMRC, meaning you get to keep all of your gains. When it comes to fees, you are usually charged a percentage of the amount you invest – for example, if you invested £1,000 and the fee was 1%, you would pay £10 a year. However, sometimes there is a minimum charge, so check carefully what you would pay.
Scotsman
3 hours ago
- Scotsman
Edinburgh school Fettes College looks to cut staff in face of rising costs and shrinking student roll
Sign up to our daily newsletter – Regular news stories and round-ups from around Scotland direct to your inbox Sign up Thank you for signing up! Did you know with a Digital Subscription to The Scotsman, you can get unlimited access to the website including our premium content, as well as benefiting from fewer ads, loyalty rewards and much more. Learn More Sorry, there seem to be some issues. Please try again later. Submitting... One of Scotland's most exclusive fee-paying schools has said that some of its workforce may be made redundant amid ongoing financial pressures, The Scotsman can reveal. Fettes College, which counts former prime minister Tony Blair among its alumni, is undertaking a consultation process designed to lower its staff headcount as it contends with the fallout from the introduction of VAT on private school fees and the rise in National Insurance contributions. Advertisement Hide Ad Advertisement Hide Ad The esteemed private school, which dates back to the 19th century, said that despite being 'financially very well managed' and having a 'strong' student roll, such factors were 'having an impact on our costs and numbers.' It said it was obliged to run its operations as 'efficiently as possible,' and said parents of its pupils needed to be certain that it was using their money 'effectively.' It is understood that teaching staff as well as operational staff at the school are among those whose positions are at risk as part of the proposed changes. The development is one of the starkest signs yet of the growing financial pressures faced by private schools, and comes at a time when student numbers at Fettes have been falling. The prestigious Fettes College in Edinburgh counts former prime minister Sir Tony Blair among its alumni. Picture: PA | PA Student numbers down from 803 to 751 Fettes said it began a consultation process last month to 'right size our staffing model,' adding: 'This difficult decision may result in some redundancies.' However, sources at the school have expressed misgivings over the process, with one characterising it as "insensitive" and 'tone deaf.' Accounts submitted by the school with Companies House show a modest decline in the number of students it educates. Over the 12 months to 31 August 2024, the most recent period for which filings are available, the school educated 751 students, down from 780 across the previous 12 month period, and 803 in 2022. Advertisement Hide Ad Advertisement Hide Ad The total income of the school for the 12 months to the end of August 2024 stood at nearly £24.2m, while its total expenditure amounted to more than £26.2m, with staffing accounting for the greatest share of that figure at some £15.4m. Fettes employs approximately 125 teaching staff and around 210 operational staff who work across various departments, such as estates, housekeeping, catering, IT, finance, admissions, security, and marketing. The school is currently recruiting for a new head teacher, with the incumbent, Helen Harrison, set to retire next year. All | PA School says it has use money 'effectively' In a statement, a spokesman for Fettes said: 'Various factors have conspired to increase costs on all organisations and schools are not immune, particularly with the recent imposition of VAT on school fees and rise in National Insurance contributions. Despite being financially very well managed with a strong student roll, these factors are having an impact on our costs and numbers, and we are obliged to run our operations as efficiently as possible. Advertisement Hide Ad Advertisement Hide Ad 'These headwinds obviously affect our families too, and our parents need to be certain that we are taking the necessary decisions to run the school efficiently and to use their money effectively.' The spokesman said that Fettes will continue to provide the 'highest standard of educational experience,' and deliver its 'innovative vision' for the school while maintaining its position as 'a leader in the sector.' He added: 'Looking after our staff is fundamental to who we are and we have undertaken this process with care, following ACAS guidelines. This is a tough time for our sector and we ask for everyone to be sensitive to the privacy and circumstances of the individuals who may be affected. Accordingly, we will not be making any further comment at this time.' As part of their efforts to raise income, the governors of Fettes are also looking at setting up further international schools to join the purpose-built facility in the Chinese city of Guangzhou that bears the Fettes name, and which is owned by the Country Garden Education group. Advertisement Hide Ad Advertisement Hide Ad The most recent accounts for Fettes note that 'the governors' ambitions to explore options and derive additional income from overseas schools continue and a team comprising governors and senior management is in dialogue with investors and operators in new parts of the world where they believe the Fettes proposition will be well received.' VAT charge a 'step too far' for many schools It comes as the head of the body that represents most private schools in the UK warned last week of the increasing financial pressures facing the sector, amid reports of school closures. Julie Robinson, chief executive of the Independent Schools Council (ISC), said that after enduring the challenges of the pandemic, the cost of living crisis, and rising costs and inflation, the introduction of VAT on school fees was a 'step too far' for many schools, and had 'tipped them over the edge.' The ISC has estimated that around 13,000 children around the UK have left private education this year as a result of the VAT policy and its impact on their families. Previously, private schools did not have to charge 20 per cent VAT on their fees thanks to an exemption for organisations providing education. However, that exemption was removed at the start of this year. Fettes was among those schools to make representations as part of a government consultation over the policy, claiming that a 'negligible number' of schools would be able to simply absorb the cost of the VAT. The majority of private schools in Scotland have posted deficits in recent years. Advertisement Hide Ad Advertisement Hide Ad According to its website, fees at Fettes College - attended by youngsters aged 13 to 18 - stand at £15,150 per term for day pupils, rising to £18,000 per term for boarders. Its prep school fees - for children aged seven to 13 - are £8,500 per term for day pupils and £12,500 per term for boarders. Earlier this month, a group of private schools, pupils and their parents lost High Court challenges over the imposition of VAT on school fees. They claimed the levy was discriminatory and incompatible with human rights legislation, but Dame Victoria Sharp, Lord Justice Newey and Mr Justice Chamberlain said there was a 'broad margin of discretion in deciding how to balance the interests of those adversely affected by the policy against the interests of others who may gain from public provision funded by the money it will raise.' The UK government welcomed the judgment, and said the VAT policy would raise around £1.8 billion a year to support pupils in state schools.
