CHANCELLOR Philip Hammond was accused of unleashing a near £500million stealth tax on ten million savers who invest through insurance firms.
Former Pensions Minister Steve Webb said details buried in this week’s Budget show anyone who puts money into popular products such as an endowment or “whole of life policy” will be walloped by the stealth tax.
AP:Associated Press The change that will affect millions was hidden in the small print of Philip Hammond’s Budget All you need to know about the 2017 Autumn budget
Previously the taxman took a slice of any annual increase in the savings pot after inflation. But under the new plans the whole of the increase will be taxed.
Mr Webb, now director of policy at Royal London, said: “This is a tax raid on ordinary hard-working savers.
“What sounded like a technical Budget change will take millions of pounds from people who have been faithfully saving for years.”
The move is expected to clobber customers of not only Royal London, but giants such as Prudential and Aviva.
The new system will tax interest on endowments and ‘whole of life’ policies
Treasury insiders on Budget Day branded the tax change a tweak to Corporation Tax Indexation.
But companies are not affected as they only collect the tax for the Treasury from customers’ policies.
Mr Webb added: “From January we will have to collect more tax from savers to give to the Treasury.
“This is not a tax on fat cats or City firms but on people who have done the right thing and made sacrifices. The Government needs to think again about this policy.”
EPA Economic growth forecasts for the whole of the UK were also revised down in the Budget
Sources at the Treasury claim the move brings the system into line with Capital Gains Tax, which punters pay when they make a big profit on an investment themselves rather than through a company.
But Mr Webb points out that the current CGT threshold is around £10,000 — far above what most ordinary savers would make through insurance policies.
A Treasury spokesman insisted insurance companies could choose to pay the tax themselves.
He said: “The changes in this Budget correct an imbalance in the system by removing an outdated measure.
The Treasury said it was up to companies whether they passed the cost on to customers
“Most fund managers can choose not to pass on any additional costs to their clients.”
But Mr Webb said the tax was purely based on the increase in an individual’s savings rather than a company’s profits.
Details of the tax grab came amid grim forecasts from think tanks of the pain facing hard-up families over the next decade after downgrades to economic growth.
And it follows fury from those missing out as penny-pinching banks fail to pass on a recent 0.25 per cent interest rate rise to savings accounts.
EPA A Bank of England chief called on consumers to boycott banks that didn’t increase their interest rates to compensate for the tax hike
Budget 2017: ‘I’ve never been able to afford my own home’
The BBC asked a selection of young people for their reaction to measures announced in the Budget.
What do the measures introduced in the Budget mean to young people in the UK?
The Chancellor Philip Hammond, announced the immediate abolition of stamp duty for properties up to £300,000 in England, Northern Ireland and, for a time, Wales.
The average first-time buyer pays about £1,600 in stamp duty, according to Halifax Building Society.
The BBC spoke to a number of young people to find out if they thought the chancellor had gone far enough.
Image copyright PA Image caption The stamp-duty reform was welcomed by some first-time buyers, but some worried it was not enough to enable young people to get their foot on the ladder
Hollie Croft, 31, is buying a house in London with her husband.
“Our stamp duty would have been £9,000,” she said.
“Now, we can afford to redo the bathroom straight away instead of living with the rundown one until we’d saved up.
“Saving for a deposit whilst paying London rent has meant no holidays, no new clothes and very few nights out.
“I still think current house prices are disproportionate to wages and I don’t know if this change will help in the long term, but for us right now? We’re very happy.”
Madeleine van Oss, a 25-year-old law student in Oxford, told the BBC the stamp-duty cut reflected the difficulty many young people faced accessing the housing market.
“If I get a good job and I can buy a house, the stamp-duty [cut] will help me,” she said.
“It’s good to see an acknowledgement that things are harder for us now than it was for them back in the day.
“Personally, I do well out of [this Budget],” she added.
Others were more circumspect. Nick, 19, said: “A lot of [this Budget], I felt, was just empty promises and things to attempt to win over voters.”
He added: “I’m not sure how much of an impact the stamp-duty change will make to first-time buyers.
“With property prices rising, especially in London, £300,000 in house terms isn’t a lot, in my opinion.”
Nikki Entwistle, 33, agrees. After being made redundant from her job at British Gas in 2016, she decided to go back to college, where she is now studying animal management.
“I’ve never been able to afford my own home,” she said.
“I’ve rented property since I was about 19.
“It seemed expensive then, but prices have gone up a lot.
“I don’t know how the government expects us to be able to afford to save.
“With council tax, energy bills, rent and food, there’s not enough left.
“I think there needs to be a cap on rent.
“Paying almost £700 a month makes it impossible.”
Image copyright James Furniss-Rees Image caption James Furniss-Rees welcomed the cut in stamp duty but thinks that measures could be introduced to address student debt
James Furniss-Rees, who graduated from university in July with £58,000 of debt, said there had been “not enough” in the Budget for him.
“There was no real talk about debt, where there will be changes to timeframes, when to pay back and how,” he said.
“The government should revise whether we pay tuition fees at all, because it’s unrealistic for us to pay that all back.”
By BBC UGC & Social News
Echoes of Ed in Theresa May’s policies?
The PM and former Labour leader are from different political tribes but appear to share some policy ideas.
The most dramatic policy announced in Wednesday’s Budget was an overhaul of stamp duty – the tax will be abolished for first time buyers on homes worth up to £300,000.
It wasn’t the first time this has been proposed.
During the 2015 general election campaign, Labour leader Ed Miliband unveiled a policy remarkably similar to the one just announced by the Conservatives.
And stamp duty isn’t the only time Theresa May’s Conservatives have announced a policy similar to one proposed by Ed Miliband – nor is it the only similarity between the two party leaders.
Energy price cap
Back in 2013, Ed Miliband announced a plan to freeze gas and electricity bills for 20 months.
“The companies won’t like it because it will cost them money. But they have been overcharging people for too long because of a market that doesn’t work,” the then Labour leader said.
At the time, this plan was savaged by Conservative politicians.
Then prime minister David Cameron derided the policy as “Marxist”, while Chancellor George Osborne said it would mean companies would not invest and prices would go up for consumers in the long term.
But four years later, Theresa May announced a price cap would form part of the Conservatives’ 2017 general election manifesto. She insisted the policy wasn’t exactly the same as Miliband’s, but the two plans were undoubtedly very similar.
When the plan was floated, Miliband – liberated from the constraints of frontline politics – tweeted sarcastically:
Skip Twitter post by @Ed_Miliband
Why didn’t I think of that? https://t.co/BgiGzmYl7m
— Ed Miliband (@Ed_Miliband) March 12, 2017 Report
Exit poll upsets
At 21:59 BST on 7 May 2015, it seemed very possible that Ed Miliband would become the next prime minister.
The two big parties were neck-and-neck in the polls throughout the campaign, with Labour ahead slightly more often than the Conservatives. But it wasn’t to be.
Image copyright Reuters Image caption David Cameron unexpectedly won a majority in 2015 – Mr Miliband quit the next day Image caption The 2017 exit poll was the first sign that the Conservatives had lost their majority
The exit poll at 22:00 BST showed Labour had done far worse than expected. The Conservatives ended up winning an overall majority and Mr Miliband resigned the next morning.
“It was a terrible shock,” he told the BBC, two years later. “The days afterwards were very, very upsetting days.”
In June 2017, the Conservatives lost that overall majority after Theresa May called a general election, asking voters to “strengthen her hand” in the Brexit negotiations.
She started the campaign with a huge lead in the polls. They tightened during the campaign, but the result was still a big surprise to most pollsters and pundits – and May herself, who told the BBC she shed a “little tear” when she saw the exit poll.
Soon after he was elected in 2010, Ed Miliband sought to distinguish himself from New Labour, which many in the party felt had become too close to business and too accepting of free market capitalism.
In his speech to Labour Party conference the following year, Mr Miliband said that although he was pro-business, there was a distinction between “producers” and “predators”.
Image copyright PA
“Are you on the side of the wealth creators or the asset strippers?” he asked.
One of the policies that came out of this rhetoric was a crackdown on executive pay. He called for the publication of pay ratios between bosses and lower paid staff. He also wanted MPs to vote on bonuses paid to bosses at state-owned firms – like Network Rail.
In a speech given just two days before she became prime minister, Theresa May called for the publication of pay ratios – as well as calling for workers to be represented on company boards, going even further than Mr Miliband.
A few months later Mrs May’s government published more details of the plans – and Mr Miliband tweeted sarcastically again:
Skip Twitter post 2 by @Ed_Miliband
More Marxist anti-business ideas. These Tories…. https://t.co/TkL5fWF8wk
— Ed Miliband (@Ed_Miliband) November 26, 2016 Report
In August, the prime minister unveiled a package of reforms which were considerably less radical – and less similar to Ed Miliband’s – than she had those previously proposed.
Those food pictures…
Media playback is unsupported on your device Media captionEd Miliband eating a sandwich in front of the cameras in 2014 Image copyright Getty Images Image caption Theresa May eating chips in front of the cameras in 2017
Housing has become a bigger and bigger political issue in recent years as prices keep rising and the level of home ownership falls.
Back in 2013, Ed Miliband proposed a plan to boost house building, calling for penalties for developers “hoarding” land to force them to “use it or lose it”.
This was mocked by then Conservative Mayor of London Boris Johnson, who compared the Labour leader to then Zimbabwean President Robert Mugabe.
Four years later, Boris Johnson is foreign secretary in Theresa May’s cabinet. He called yesterday’s budget “great”, singling out the chancellor’s house building plans for praise.
Skip Twitter post by @BorisJohnson
Tories continue to be party of homeownership with stamp duty cut and £44bn for house building plan, while maintaining strong public finances. Great #budget2017 from @PhilipHammondUK.
— Boris Johnson (@BorisJohnson) November 22, 2017 Report
The budget contained proposals to reclaim land that was not developed quickly enough.
This seems similar to the policy announced by Mr Miliband, and denounced by Mr Johnson, four years ago.
Brexit: Irish border won’t be resolved until EU-UK trade deal struck – Fox
The Irish government says it won’t accept a hard border and that it could veto UK trade talks with the EU.
There can be no final decisions on the future of the Irish border until the UK and the EU have reached a trade agreement, Liam Fox has said.
The UK’s international trade secretary also blamed the EU for Brexit delays.
The comments came after the Irish Republic’s EU commissioner said Dublin could veto Brexit trade talks.
The EU has said “sufficient progress” has to be made on the Irish border before negotiations on a future relationship can begin.
Downing Street has said the whole of the UK will leave both the customs union and the single market when it leaves the EU in 2019.
“We don’t want there to be a hard border but the UK is going to be leaving the customs union and the single market,” Mr Fox told Sky News.
He added: “We can’t come to a final answer to the Irish question until we get an idea of the end state. And until we get into discussions with the EU on the end state that will be very difficult – so the quicker we can do that the better, and we are still in a position where the EU doesn’t want to do that.”
Mr Fox accused the European Commission of having an “obsession” with ever-closer union between EU member states, which was delaying progress in Brexit talks.
Phil Hogan, the EU’s agriculture commissioner, told the Observer that staying in the customs union would negate the need for a hard border – with customs posts and possible passport checks – on the island.
Image copyright Reuters
He said Dublin would “play tough to the end” over its threat to veto trade talks until it had guarantees over the border.
Shadow chancellor John McDonnell said he was “worried” by Mr Fox’s comments, adding that Labour would not take continued membership of the single market and the customs union off the table.
“I think the one thing that we don’t want to do is jeopardise any movement quickly, because we need movement to enable us to get into the proper trade negotiations,” Mr McDonnell told ITV’s Peston on Sunday.
“So I’m hoping that isn’t a Downing Street-sanctioned statement that’s he’s made.”
Image copyright PA
By Chris Mason, BBC political correspondent
It’s 310 miles (499km) long – a squiggle on the map that meanders from Carlingford Lough in the east to Lough Foyle in the west.
The border between Northern Ireland and the Republic is the soon-to-be frontier between the UK and the European Union.
And right now it is the most troublesome frontier between Brexit negotiations stalling or progressing.
London and Dublin each say they are committed to maintaining an open border. But Ireland wonders how that will be possible.
Oh and one other thing to throw into the mix – after all the talk of how wobbly Theresa May’s government is, so is Ireland’s.
There could be a general election there before Christmas.
The EU has given Prime Minister Theresa May until 4 December to come up with further proposals on issues including the border, the Brexit divorce bill and citizens’ rights, if European leaders are to agree to moving on to trade talks.
But Mr Hogan accused some in the British government of having what he called “blind faith” about securing a comprehensive free-trade deal after Brexit.
He said it was a “very simple fact” that “if the UK or Northern Ireland remained in the EU customs union, or better still the single market, there would be no border issue”.
In these circumstances regulations on either side of the border would remain the same, and so a near-invisible border would be possible.
Media playback is unsupported on your device Media captionUK and Irish politicians clashed over Brexit and the Irish border on BBC One’s the Sunday Politics
The Irish government has always insisted there must not be a hard border between the Republic and Northern Ireland, with Taoiseach Leo Varadkar saying he must have written assurance from the UK before Brexit talks can move on.
Irish Foreign Minister Simon Coveney has said the UK’s desire for no hard border on the island of Ireland was “aspirational”.
It comes as Ireland’s deputy prime minister faces a motion of no confidence over her handling of a case involving a whistle-blower alleging corruption within the police.
The issue could see Prime Minister (Taoiseach) Leo Varadkar’s coalition government fall and an election held before Christmas.
In her speech in Florence, this September, Mrs May restated that both the UK and EU would not accept any physical infrastructure at the border.
The Democratic Unionist Party said Northern Ireland and the rest of the UK must not be different.
Arlene Foster, the leader of the DUP, which is in a confidence-and-supply arrangement with the Conservative government, said she would not support “any suggestion that Northern Ireland, unlike the rest of the UK, will have to mirror European regulations”.
Suggestions for alternate arrangements have included a new partnership that would “align” customs approaches between the UK and the EU, resulting in “no customs border at all between the UK and Ireland”.
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