Could corporation tax cuts lose the UK £6.2 billion a year?

Could corporation tax cuts lose the UK £6.2 billion a year?

Although the government has stated that cuts in corporation tax will ultimately increase revenue, HMRC has argued that it could actually cost the public around £6.2 billion a year.

In a policy proposed in 2015 by former Member of Parliament George Osbourne, taxes on company profits are set to fall by two per cent. Currently, corporation tax in the UK stands at 19 per cent – which is already one of the lowest globally. This has gradually fallen since 1979 when corporation tax stood at 52 per cent.

There have been steep cuts to budgets for councils and departments, a £20 billion NHS spending shortfall, and a freeze on benefits for the fourth year in a row which has led to high levels of poverty among workers. This perfect storm of issues has brought about this drastic proposed change.

The government argues that a decrease in corporation tax will make the UK a more attractive country for new companies to base themselves while also giving those pre-existing companies more money to invest in UK capital. There is currently no evidence of this being the case, however.

According to Ministers, corporation tax is funding public services better than it ever has done in the past, bringing in £56.2 billion last year – although cause and effect appears to have been implied rather than proven between the lowering of corporation tax and the rising of receipts.

Helen Miller, Deputy Director at the Institute for Fiscal Studies disagrees, stating: “Changes to corporate tax have represented some of the largest giveaways in both parliaments since 2010.”

Services sector exports record numbers, report shows

Services sector exports record numbers, report shows

The UK services sector has experienced a record year, increasing exports to regions all around the world.

The report, published by the Department for International Trade (DIT), shows that services exports grew the most to the Americas, rising by 2.6 per cent to £74.6 billion in the year to Q3 2018.

Alongside the Americas, Asia saw strong growth of 1.9 per cent to £42.1 billion, followed by Europe (up 1.7 per cent to £149.4 billion) and Australasia & Oceania (Up 1.1 per cent to £7 billion).

The services sector includes retail, banks, hospitality, real estate, education, media and other recreational activities.

When looking at individual services, the financial sector outperformed in terms of growth, rising 3.9 per cent to £60.9 billion during the period recorded. The report notes that the US was the largest single country contributor to the increase, importing £14.5 billion worth of financial services from the UK.

In total, the services sector exported £281 billion worth of products in the year to November 2018, a rise of £2.1 billion compared to the year previous.

Commenting on the figures, International Trade Secretary, Liam Fox said the report shows how our “world-leading services sector” continues to play a key part in our position as one of the world’s largest exporters.

“British services, ranging from our renowned financial sector to its expertise in management consultancy are in demand all over the world, with the US alone importing over £62.7 billion worth of British services,” he said.

The report follows recent figures which show that the number of UK businesses trading abroad has increased by 6.6 per cent to 235,800.

Employment and overall wages hit record highs

Employment and overall wages hit record highs

In November, Britain saw the largest rise in overall real wages since September 2016, raising the spending power of the average British worker to the highest it has been in two years.

The dramatic increase in spending power as of November last year has been attributed to average wages, which rose by 3.3 per cent, and inflation, which fell to 2.3 per cent.

Real wages declined throughout 2017 into the beginning of 2018 so companies are showing great optimism in light of these recent numbers. The Trades Union Congress, however, warn that this peak won’t truly be noticed by employees, who are still suffering from “the longest pay squeeze in 200 years.”

Employment has also hit a record high with 32.54 million people in jobs as of November, according to the Office of National Statistics. That’s 75.8 per cent of working-age members of the public employed, the highest since 1971 when this data began being recorded.

There’s also good news for unemployment rates which are at their lowest level since 1975 – four per cent. Job vacancies were also up, as of November, as 100,000 people joined the job market.

While the data appears positive, experts in the industry say that self-employment is responsible for the huge rise in employment, with 93,000 people registering themselves as self-employed in the three months leading up to November.

It is believed that this rise in self-employment is due to economic uncertainties, where companies are choosing to pay self-employed contractors or freelancers to complete jobs for them, rather than take on more full-time staff.