From next year, the Bank of England is set to take over most British financial regulations; with the support of their watchdogs; and the FPC's main role is to stop credit booms getting out of control and to monitor risks that cut across individual banks and threaten the financial system as a whole.
Last month, the Chancellor George Osborne announced that he wanted the Financial Policy Committee (FPC) to support government economic policies in the same way its Monetary Policy Committee does.
Although there had been some uncertainty about whether the FPC’s members thought having to take growth into account would distract from their main role; a record of their June 22 meeting showed that the policymakers did not see that there would be a major conflict.
The record is reported to say: “It was noted that the primary objective to protect and enhance resilience and the new secondary objective were compatible.
“Indeed, the committee's recommendations... over the past year had been specifically designed to build resilience while supporting lending and growth.”
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It has been revealed that taxpayers may no longer be able to appeal against shock tax bills by claiming they had no reasonable way of knowing they were paying too little.
Currently, the Extra Statutory Concession, A19, allows underpaid tax to be cancelled if taxpayers had reasonable belief they had paid the right amount.
However, under new proposals, HMRC plan to re-write the controversial rule which has let over 40,000 taxpayers in the past year have income tax and National Insurance underpayments – worth an estimated £54 million – written off.
It has been suggested that the majority of underpayments are as a result of a wrong tax code – normally because someone has changed jobs or started taking a pension.
Moving forward, HMRC want to impose stiffer tests on taxpayers, which will make them responsible for checking their own tax code and for notifying the taxman of any changes in their circumstances.
Under the proposals, if taxpayers have not made the appropriate checks, they will not be able to apply to have shock tax bills cancelled.
For more information, please visit www.milsted-langdon.co.uk
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After the government’s chief construction advisor claimed that pension funds were unlikely to invest in billions of pounds of new infrastructure projects, it is feared the Chancellor’s growth strategy could be “in tatters.”
In November last year, the Chancellor announced plans to raise £20 billion from pension funds, to help pay for five-hundred building projects; in a bid to prevent the country sliding back into recession.
However, the government’s chief construction advisor, Paul Morrell – who is due to step down later this year – has said the government would need to come up with a guarantee that would underwrite the development risk in new products.
Speaking earlier this week, Mr Morrell said: “I think it’s a pretty common view that there won’t be a barrel-load of funding coming in from pension funds for Greenfield new infrastructure. It’s not their business and I don’t know anyone who thinks it is.
“I’m sure pension funds will come for Brownfield developments – assets that are already built and earning. But with debt-funded projects, it’s a different story. The pension funds don’t like them. It will be a while before there is the £20 billion investment in new infrastructure.”
Last week it was revealed that the Treasury was considering a plan under which banks would agree to underwrite any losses involved in the construction of new infrastructure in exchange for a fixed-fee paid by future project revenues; whilst pension funds have also suggested they will pull together to raise funds to invest in new infrastructure.
So far they have only agreed to set up a fund of £2 billion, which may be launched next year; and Mr Morrell has said that they will need to develop skills to assess projects.
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Tax experts have said that red tape and out of date rules have limited the appeal of share schemes for both employers and employees.
Although there are a number of firms who offer some form of employee share plan, the number of schemes being opened each year is small, with critics suggesting that part of the reason for this is because the incentives for employee schemes are inadequate.
In addition an investigation, by the Office for Tax Simplification, into the application process businesses must go through to set up an employee share scheme, found the approval process with HMRC caused multiple problems.
John Whiting, the tax director for the Office of Tax Simplification added that although the schemes were if real benefit to employers, the current system was putting companies off due to heavy paperwork and lengthy delays.
He went on to say: “We spent a lot of time looking at the benefits of schemes, asking if they are worth the tax benefits on offer and the evidence we received was yes, they are.
“It’s about more than motivation, its identity. If employees have shares in their company they may not be glued to the share price, but they will identify more closely with the company and its fortunes.”
Following their investigation, the Office for Tax Simplification have suggested that rather than make companies wait for HMRC to approve schemes, they should be self-certified which would cut the time required to set up a share plan.
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It is widely believed that later this week, the Bank of England will announce that it is to increase their quantitative easing programme; as policy makers seek to cushion the UK from a worsening Eurozone crisis.
Last month, the Bank of England’s Monetary Policy Committee (MPC) came close to increasing the quantitative easing programmes, as four of the nine strong committee, – including the banks governor Sir Mervyn King, – voted in favour of additional stimulus.
Now, it is believed that on Thursday, as the bank announces the outcome of its latest monthly meeting, they will also announce a further £50 billion increase in the quantitative easing programme, taking the figure to £375 billion.
Speculation that the Bank of England are to increase the quantitative easing programme has been growing over recent weeks, as the bank and Treasury launching a number of schemes to kick-start lending; including the bank – late last week – calling for rules to be relaxed to free up billions of pounds which are currently being held in “liquidity buffers.”
One economist has said on the mounting speculation that the quantitative easing programme is set to be increased: “The MPC were on the brink of approving more quantitative easing at their June meeting.
“With latest economic data and surveys largely grim, the outlook uncertain and troubling, the Eurozone crisis continuing and latest inflation developments largely favourable, we believe that a majority of MPC members will decide that more quantitative easing is now warranted and justifiable.”
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