Phishers jump on PAYE bandwagon

Posted by John Stokdyk in Tax, Technology.

The media firestorm surrounding the PAYE under- and overpayment letters that went out to 45,000 taxpayers this week has provided an ideal opportunity for scammers, according to Sophos security experts.

In his blog, Sophos security consultant Graham Cluley published an example spam message now circulating, which arrives with the subject line, “You Have An HMRC Refund”.

The email explains: “Following an upgrade of our computer systems and review of our records we have investigated your payments and latest tax returns over the past years, our calculations show you have made over payments of 317.66GBP.”

A file called Refund-Form.zip is attached to the mail containing an HTML form with HMRC branding asking for credit card details, date of birth, and mother's maiden name.

“If you do make the mistake of filling in the form,” Cluley warned, “your confidential data is uploaded to a Chinese server. You're not going to receive a windfall because of this form - you've just been phished.”

HMRC will not be contacting people about rebates or tax owed either by email or telephone. Nor will it ask for bank details. HMRC's security page contains advice about scams like this, and clearly states that they would never inform customers of a tax rebate via email, or invite them to complete an online form to receive a rebate of tax.

Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Coalition government - the first 100 days

By Laura Kuenssberg
Chief political correspondent, BBC News channel

Only one person is ever in charge at 10 Downing Street - but what is decided behind the famous black door is now the responsibility of two men, and two parties.

The two men in question, David Cameron and Nick Clegg, barely knew each other 100 days ago.

Their two parties, the Conservatives and the Liberal Democrats, knew each other only too well.

Apart from a few isolated examples in local government, they had been at each other's throats for years.

So, as this most unlikely of political alliances reaches its symbolic 100-day milestone, should Mr Cameron and Mr Clegg be celebrating the successful birth of a new kind of politics, symbolised by their joint press conference in the Rose Garden at Downing Street on day one?

Or letting out an exhausted sigh of relief that they made it this far?

The chaos and calamity some, including the Conservative Party in a general election broadcast, warned would result from a hung Parliament has not yet come to pass.

But there are still formidable hurdles to clear before this experiment in coalition government - the first at Westminster since World War II - can be judged to have been a success.

'Further and faster'
Top of the coalition's list from day one was getting to grips with the deficit, the gap between what the Treasury takes in tax revenue and how much taxpayers' cash the government spends.

At the general election, the Liberal Democrats continually questioned the Conservatives' commitment to go "further and faster" than Labour was already planning.

But in the days after the election, it became clear to political insiders that the Lib Dem leadership was shifting its position.

Senior Conservative John Redwood, who was concerned about working with the Lib Dems, credits their change of heart with allowing coalition to get off the ground in the first place.

He told the BBC: "I argued the case immediately after the election that we should try for Conservative minority government, with the Liberal Democrats allowing us support in motions of confidence and to get through the main parts of the budget, because I didn't think at that point that the Liberal Democrats would buy into the kind of Budget we were recommending.

"When I discovered that the Liberal Democrats were coming around to the view that we needed a tougher and tighter Budget, then it was was clear you could go further than just having a minority government."

'Peas in a pod'
So, even from day one, in the light-filled Downing Street garden, the message was less sunny.

Like Labour, the coalition believed major reductions in public spending would be necessary to deal with the public finances.

But the pace and scope of cuts would be faster and deeper - the coalition's ambition is to eradicate the deficit completely by the end of this parliament. Coalition ministers presented a united front on the need to act now, and act boldly.

Indeed, when it comes to those seated around the cabinet table or in junior government roles, the two parties have gelled surprisingly well.

One cabinet minister, describing the body language between Clegg and Cameron, told me they were like "peas in a pod".

It probably helps that there are 23 Lib Dem ministers - including nearly half of the parliamentary party - scattered around various government departments, with the deliberate intention of embedding the party in the administration.

But for all that many of the Lib Dems and Tories with government jobs appear to be thriving, in recent weeks there has been a tacit admission that they have not done as well as they might have in selling their core message to the public, many of whom are nervous about the impact of the squeeze on spending.

Lib Dem anxiety

There has been anxiety over the Academies Bill, a flagship Conservative policy, that will reform education in England.

There has been nervousness about the scale of the reforms to the NHS in England - a plan that was not in the coalition deal thrashed out in the aftermath of the election.

It should be noted some of the other tensions in government are traditional disagreements between departments, not coalition clashes - differences between the Treasury and the MoD over who pays for Trident for example.

But, equally, it is true to say that anxiety about the coalition runs deeper among Liberal Democrats than it does among Conservatives.

Many harbour a fear about losing their identity; being swallowed up by the party that outnumbers them at a rate of more than five to one in the Commons.

Their dip in the opinion polls does not do much to bolster Lib Dem confidence either.

Internal discomfort
Former leader Sir Menzies Campbell has warned Nick Clegg about entering into any kind of electoral pact or deal with the Conservatives, as some have suggested could be the answer and which would see the Lib Dem candidates not fielding candidates against Tories in areas where they could not win, and vice versa.

Sir Menzies said it should be a matter for local parties, not the leadership, to decide: "He might issue an exhortation but he could not issue an instruction.

"Every Liberal Democrat leader will tell you that [backbenchers] find the carrot a much more attractive instrument than the stick."

As the two parties move from their first 100 days shackled together in coalition towards the party conference season, there will be an inevitable focus on relationships inside the parties.

Both David Cameron and Nick Clegg are understood to be having to spend more time than ever before cajoling and soothing egos, keeping their MPs and activists on board, using the "carrot" to the best of their ability.

But that internal discomfort could well be dwarfed by the public's reaction when the cuts announced in the Budget and October's spending review begin to bite.
The speed at which Chancellor George Osborne wants to balance the nation's books is just one source of nerves for Lib Dem MPs - particularly among those who remain on the back benches, without a government position.



Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Clegg rejects MPs' call for AV referendum date change

Posted on www.bbc.co.uk/news/uk-politics

Deputy Prime Minister Nick Clegg has rebuffed calls backed by 44 Tory MPs for the date of the referendum on voting reform to be moved.
Elections for the Welsh Assembly, the Scottish Parliament, the Northern Ireland Assembly and some English councils are all also due for 5 May.

The MPs fear differing turnout across the UK and overshadowing of the debate.

Mr Clegg said it was "disrespectful" to suggest voters "could not make two different decisions at the same time".

He said everyone in Scotland, Wales and Northern Ireland, plus 80% of people in England were already due to vote on 5 May 2011, so it would save them having two trips and cut costs by £17m.

But senior Tory backbencher Edward Leigh told Mr Clegg as he took deputy prime minister's questions, that the referendum should be on a different date so there could be a "proper debate" about the issue.

Earlier a Downing Street source had called reports of a revolt against electoral reform "a little exaggerated".

ormer cabinet ministers Peter Lilley, John Redwood and Sir Malcolm Rifkind have signed a Commons motion of complaint about the referendum date.

Also among the signatories to the document, tabled by Tory MP and former defence spokesman Bernard Jenkin, is former shadow home secretary David Davis.

'Odd result'
Mr Jenkin suggested ministers had room to change the date as it was not part of the coalition agreement itself.

"Therefore it is of less status than, for example, a point of principle," he told BBC Radio 4's World at One.

The choice of date, he said, should not be determined by the cost of staging the referendum but on whether it would provide a "true and fair test of public opinion".

Holding it on 5 May could lead to an "odd result" because of wide variations in turnout in different parts of the country, he added.

"One has the suspicion that Nick Clegg wants it on this date to disguise the fact that, out there, there is an awful lot of apathy about changing the voting system."

Under the post-election agreement reached by the Conservatives and Liberal Democrats, the coalition is committed to hold a referendum on adopting the "alternative vote" (AV) system.

This allows voters to rank candidates in their constituency in order of preference.

Anyone getting more than 50% of first-choice votes in the first round is elected, otherwise the candidate with the fewest votes is eliminated and their backers' second choices allocated to those remaining. This process continues until a winner emerges.

Prime Minister David Cameron, who opposes getting rid of the current "first-past-the-post" system, will campaign against such a change. His deputy, the Lib Dem leader Nick Clegg, will push for the reform.

It is feared the issue will cause inter-party strife.

The motion submitted by the 44 Tory MPs argues that referendums on issues of national importance should be held "in isolation", as turnout would be "artificially inflated" in parts of the country where elections are being held.

It urges the Electoral Commission - which has said a referendum is "deliverable" on 5 May but there are some "risks" attached to the date - to make the final ruling.

My personal view is that opponents are worried about a higher vote in favour. Perish the thought!

Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Millions more to wait until 68 for pension Read more: http://www.thisismoney.co.uk/pensions/article.html?in_article_id=509490&in_page_id=6&ito=1565#i

thisismoney.co.uk correspondent James Chapman posts:

More workers will have to wait until they are 68 to claim their state pension as the Government speeds up plans to raise the retirement age.

In an interview with the Daily Mail today, Work and Pensions Secretary Iain Duncan Smith says the move will save billions of pounds.
Labour set out plans to increase the retirement age to 66 by 2024 and 68 by 2046 to reflect growing life expectancy.

Before the election, the Tories suggested that it should rise to 66 sooner - by 2016.

But Mr Duncan Smith said workers would have to accept even quicker increases as Britain tightens its belt. The Government's timetable suggests that the retirement age is likely to reach 68 by 2038, meaning millions more - those born after 1970 - will be forced to wait for their pension.

This would, however, ensure that the state pension is more generous.

'We have to make the argument for it sooner,' he said. 'The truth is deferment of one year will add 1% to GDP (national output) and it will add up to 10% on your pension pot.

'The current plan to raise it to 68... we think could be accelerated. It seems silly to wait.'

Mr Duncan Smith also revealed that the Government is aiming to get 1.5m off incapacity benefit, more than half the 2.6m total claimants.

It is the first time that ministers have set a target for the number they want to get into employment or back-to-work schemes. Tough measures including testing 10,000 claimants a week have already been introduced to weed out cheats.

More than half of those assessed have been taken off higher-rate benefits because they are considered capable of doing some work.

'Every single one of them will be properly assessed for their level of incapacity,' Mr Duncan Smith said. 'We've started the job already. Those who can work will be given all the support to make sure they do just that. I intend to remove 1.5m off incapacity benefits.

'We will do everything to help people back in to work - retraining, help with interview - but in the end we expect people who can work to take the jobs that are offered them. If they don't their benefits will be incrementally cut.'

Mr Duncan Smith has suggested the age at which people can claim the state pension could be 'indexed' to increasing life expectancy, a reform pioneered in Denmark.

After the Second World War, the state pension age was set at 65 for men, at a time when life expectancy for a man was 66.4 years and for a woman 72.5 years.

By last year, life expectancy had risen to 77 years for a man and 82 years for a woman in England - but the pension age has remained the same. The latest estimates suggest that by 2056, the life expectancy for a man and woman living in England will be 84 and 89 years respectively.

The Labour government passed a Pensions Act in 2007 which means that for those born after April 6, 1959, the state pension age will increase from 65 to 68 between 2024 and 2046.

The Tories said in the general election campaign that they would increase the state pension age to 66 for men by 2016 and for women by 2020, faster than Labour planned, to help plug the massive black hole in the public finances. The Government has now launched a review to determine details of the policy.

The coalition also insists that workers should no longer be forced to retire at 65. People would not be forced to work beyond that age, but they would have the option and could even stay on into their 70s or 80s.

But business leaders have attacked the idea of an end to the statutory retirement age, insisting companies need some sort of 'cut-off point' when older workers must retire. There are concerns that companies would be forced to sack 'bed-blocking' older workers if they insisted on staying on year after year.

Paul Kenny, general secretary of the GMB union, said: 'The Government knows that manual workers in the industrial regions of the UK do not enjoy anything like the same life expectancy as professionals or other classes of employee.

'To force someone who has done a lifetime of toil on building sites, farms or in factories to work until they are 66 is completel y unacceptable.'

But James Elles, a Tory Euro MP, said: 'Should life expectancy be expected to reach 85 for men by 2050, should we not be planning for the pension age to be closer to 75?'

Mr Duncan Smith's plans for pension reform are one of a host of cost-cutting measures being submitted to the Treasury by Government departments as the coalition battles to rein in the unprecedented £149bn budget deficit left behind by Labour.



Something has to be done. People living longer and the baby boomers beginning to retire from February 2011 in increasing numbers. It only makes sense to work longer. This has been a ticking time bomb which successive governments have chosen to ignore! What do you think?

Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Double delight as Cheltenham firm wins two Queen's awards

As posted on SouthWaestBusiness.co.uk

A CHELTENHAM firm which has become a world leader in the production of tractor units for towing aircraft was presented with two Queen's Awards for Enterprise last week.

Douglas Equipment at Arle achieved the unusual double, taking Queen's Awards for both innovation and international trade.

Last week the county's Lord Lieutenant Sir Henry Elwes was welcomed to the firm by chief executive officer David Weil and managing director Lee Brewis before being given a guided tour and meeting some of the 120 employees.

Sir Henry was shown the Douglas RAM Handler, which secured the Queen's Award for Innovation.

Developed for the Royal Navy and subsequently marketed to other navies, it has cut the aircraft deck handling time from seven minutes to just 50 seconds. More than 80 per cent of the company's products are now exported worldwide.


Other products seen in production were from the 'DC' (Douglas Conventional) range of aircraft towing vehicles and the 'TBL' (towbarless) fleet, which connect with the nose wheel of aircraft and have capacity to pull up to 600 tonnes.

Sir Henry was told that the ultimate destinations for these orders included Vietnam, Egypt, China, Korea, the UAE and an eight machine order for the Italian airline, Alitalia.

Douglas Equipment was presented with the Queen's Award for International Trade in recognition of substantial growth in overseas earnings and outstanding commercial success. Major overseas markets for Douglas include Europe, Scandinavia, North America, Middle East, North Africa, Russia, Asia, China, Far East and Australasia.

These markets are accessed by direct sales activity, a network of overseas agents, and through military attaches at embassy level.

Presenting the Queen's Awards Sir Henry Elwes said: "Once again the ingenuity and commitment of the Gloucestershire workforce has been demonstrated by Douglas Equipment, whose longstanding success is clearly evident."

Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Ministers Are Told to Plan for 40% Spending Cuts

Reported on Bloomburg Businessweek By Eddie Buckle.

July 5 (Bloomberg) -- U.K. government departments have been told to plan for spending cuts of as much as 40 percent as Chancellor of the Exchequer George Osborne seeks to narrow a record budget deficit.

The Treasury has ordered most ministers to draw up scenarios for spending reductions of both 25 percent, the average figure specified by Osborne in last month’s budget, and 40 percent over four years, Transport Secretary Philip Hammond said on BBC 1 television’s “Andrew Marr Show” yesterday.

Prime Minister David Cameron’s coalition of Conservatives and Liberal Democrats is proposing expenditure cuts and tax increases totaling 113 billion pounds ($172 billion) to slash a deficit of 11 percent of economic output. Osborne is due to set budgets for each department in a spending review in October once ministers have made their own proposals.

“What we’re not going to do is slice 25 percent off every department,” Hammond said. While no department will have to reduce spending by the full 40 percent, “some departments may see cuts a bit higher than 25 percent,” he said.

Education Secretary Michael Gove will today announce a reduction of as much as 3.5 million pounds in the schools budget, the Guardian newspaper reported. That will mean freezing plans to rebuild about 700 schools, the newspaper said.

Education, Defense

Under the Treasury plans, Gove and Defense Secretary Liam Fox have both been asked to prepare proposals for budget cuts of 10 percent and 20 percent. The only departments exempted are health and international development.

“We are determined to tackle the record budget deficit in order to keep rates lower for longer, protect jobs, and maintain the quality of essential public services,” the Treasury said in an e-mailed statement. “These planning assumptions are not final settlements.”

The opposition Labour Party’s home-affairs spokesman, Alan Johnson, told the BBC that the idea such large-scale spending cuts could be made without harming services such as policing was “fantasy land.”

Ministers agreed to draw up the plans when the Cabinet met in Bradford, northern England, last week, the Treasury said.

Business Secretary Vince Cable’s department will have to set out how it can reduce its spending to as little as 11.5 billion pounds by 2015 from 19.2 billion pounds in the current fiscal year. Gove’s officials will need to draw up a blueprint to cut the education budget to 40.7 billion pounds from 50.9 billion pounds.

Job Losses

The Institute for Fiscal Studies, a London-based independent research group, said the cuts to public spending would be the deepest since World War II and some departments would face reductions of a third. There will be 610,000 jobs cut in the public sector over the next five years as the spending squeeze is implemented, the government’s new Office for Budget Responsibility said last week.

Ministers will meet civil-service union officials today to discuss possible changes to the compensation terms for those who lose their jobs, the BBC reported.

“They want to bring redundancy arrangements into line with the private sector but not do anything about pay,” Mark Serwotka, the general secretary of the Public and Commercial Services union, told BBC Radio 4 this morning. “There’s no argument for any cuts in public services at all at the moment.”

Hammond said that as far as his own department was concerned, “we will not have so much money to spend” on road and rail projects. “We will have to look at our priorities,” he said.

“It is crystal clear that modernization and upgrade works will be axed,” Bob Crow, the general secretary of the Rail, Maritime and Transport union, said in an e-mailed statement. “With cuts of up to 40 percent in the transport budget we are looking at thousands of job losses amongst the staff who operate and maintain services with dire consequences for passenger safety as corners are cut.”


Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

PM and goal-line technology firms dispute Fifa claims

By Daniel Emery
Technology reporter, BBC News

The prime minister has backed calls for video and goal-line technology (GLT) to be used in football matches.

David Cameron's call echoes that made by makers of ball-tracking systems, along with a number of managers.

"I'm a keen follower of cricket and tennis and I think the third umpire has been a great thing... that's something football could now have a look at," said Mr Cameron.

Fifa has consistently refused to entertain the idea of using GLT.

Manufacturers of ball-tracking systems say England's disallowed World Cup goal just emphasised an ongoing problem with the sport.

Hawk-Eye and Cairos, which make rival GLT systems, say Fifa needs to rethink its current position.

"We are using technology that is 100% accurate and adds fairness to the game," Christian Holzer of Cairos told BBC News.

"Technology should not enter into the game. It was a clear statement made by the majority of the IFAB (International Football Association Board)," said Fifa general secretary Jerome Valcke in March.

But not everyone agrees. There have been calls from players, managers and coaches for a number of years, prompted by a series of controversial refereeing decisions.

British based Hawk-Eye, which uses a camera detection system, and German firm Cairos, which utilises chip technology inside the ball, both say that new technology would assist referees and make their job easier.

"The decision was unfair to the English team. Had it gone 2-2 at half-time, it would have been a very different match," said Mr Holzer.

The issue of GLT has dogged Fifa for more than a decade.

The rules of football are determined by IFAB, which consists of eight voting members. England, Scotland, Wales and Northern Ireland each have one vote, with "the rest of the world" (ie the Fifa executive) holding the remaining four.

Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Landlords warned not to disguise property profits

Buy-to-let landlords have been warned not to disguise their profits from the taxman after selling their properties.

Accountancy firm UHY Hacker Young says tax officials are increasingly trawling through Land Registry records to check the accuracy of tax returns.

If a property is not a seller's main residence then capital gains tax (CGT) may be payable on the profit.

Hacker Young said special investigators were raising £10,800 for each special enquiry, up by 79% in two years.

The amount of money raised from each investigation rose despite the fact that the number of special enquires actually fell - down by 31% from 9,900 in 2007-08 to 6,800 in 2009-10.

"This is a massive increase in capital gains tax from enquiry work, particularly as the [total] amount of CGT payable has collapsed as asset values slumped during the recession," said Roy Maugham, tax partner at UHY Hacker Young.

"It shows just how aggressive HM Revenue & Customs [HMRC] is becoming in tackling tax evasion in this area."

Bigger effort
The increased cash being found by the tax authorities was revealed by Freedom of Information Act requests lodged with HMRC by Hacker Young.

They reveal that in 2007-08 the special investigation teams of the Revenue raised £60m in extra CGT while two years later they raised £74m - an increase of 23%.

The work was conducted by teams of special investigators set up in the past three years in the regional offices of HMRC.

Their establishment has come alongside the Revenue's widely publicised campaign to uncover people who are hiding taxable income in offshore bank accounts.

"We risk assess returns using a variety of methods, as well as cross-matching database information, both our own and external," said an HMRC spokesman.

"Enquiries into the disposal of second homes is just one area we look at," he added.

Buy-to-let
CGT is payable on the sale of most assets, not just property.

But Roy Maugham explained that in his firm's experience, a few buy-to-let landlords seemed prone to flouting the rules.

"It is something we are seeing, especially where they do not use an accountant," he said.

"There are quite a number of people who won't have reported it [the sale of their property] in the first place.

"They think they can get away with it," he added.

About 130,000 people paid capital gains tax in 2008-09.

The rules
The profit made on selling a property is liable to CGT unless it is someone's main home at the time of the sale, or was their main home at any time in the three years before.

Sellers also have an annual tax-free allowance of £10,100 to set against any CGT bill.

Even if there is still CGT to pay, a landlord can reduce the bill by offsetting:

the cost of buying the premises, such as stamp duty, legal and surveyor's fees
the cost of selling the property, such as legal or estate agent's fees
the cost of any enhancements at any time in the period of ownership, such as a loft extension or garage or conservatory.
Roy Maugham said it appeared that HMRC investigators were increasingly challenging "enhancement" claims on tax forms because they were really for things like painting and decorating.

Such items do not qualify for tax exemption as they are not capital expenditures.

"The landlords sometimes feel they have had the costs but can't prove it, because they haven't kept the necessary paperwork," Maugham said.

"Many HMRC investigations lead to disagreements over whether some costs are repair costs or enhancement to the property.

"HMRC often challenges the records for expenditure going back 20 years or more," he warned.

Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Ministers ask public sector staff to suggest savings

Voice your opinion

Six million nurses, police officers and other public sector workers have been asked to suggest options for cuts as Budget debate has intensified.

David Cameron and Nick Clegg contacted staff to ask them to find "fair" cuts, a move condemned by unions.

Meanwhile senior Lib Dem Simon Hughes warned coalition colleagues against making cuts to benefits for pensioners.

But he backed away from earlier suggestions that he might seek to change the Budget to make it "fairer".

Mr Hughes, the party's deputy leader, said there would be "trouble" if the government sought to "unpick" aspects of the coalition agreement between the Conservatives and Lib Dems - such as guarantees to protect the winter fuel allowance.

And Labour leadership contender Ed Balls told the BBC's Question Time programme, to be broadcast later on Thursday, this was the "most unpleasant Budget for a very long time".

Labour say proposed 25% average cuts in departmental budgets, which will be determined in an spending review in October, are reckless and will hurt vital services.

As part of the spending review process, ministers are asking public sector workers to suggest services they believe are non-essential, how services can be better targeted or provided more effectively by private and voluntary groups.

'Serious' ideas
Deputy PM Nick Clegg said the coalition government was "prepared to look at any innovative idea, however bold, however radical, however off the wall it might seem to people" if it could save money in a way that was fair and protected "frontline services".

He said that all "serious" ideas would be passed on to officials for consideration and that workers would be invited to discuss their suggestions face-to-face with civil servants.

In their letter, Mr Cameron and Mr Clegg say they want workers "to help us find those savings so we can cut public spending in a way which is fair and responsible".

But Mr Kenny, general secretary of the GMB union, said: "Cameron and Clegg have a damned cheek in asking public sector workers to co-operate in sacking thousands of them. It is an utter outrage."

He said unions were "perfectly capable of speaking up on their behalf" and would be resisting "savage cuts in public services".

'Big differences'
Meanwhile research by the respected economic think tank the Institute for Fiscal Studies which said "progressive" reforms in the Budget had largely been announced by the previous Labour government and the new tax and benefit changes were "regressive overall".

But Mr Clegg said that excluded measures that were being introduced. He told BBC Radio 4's Today programme: "The top earners make a much bigger contribution than anybody else."

He said "very exceptional measures" were being taken to instil "fairness" into the Budget - pointing to the raising of the income tax personal allowance, which is estimated to take 800,000 low paid people out of income tax altogether, and a £150 increase in child tax credits for 1m low income families.

"These are big measurable differences which will help people who are on low pay."

Critics have questioned whether cuts of the scale outlined in the Budget are achievable.

Chancellor George Osborne is already coming under pressure to find more savings from the welfare budget, in addition to the £11bn earmarked in his Budget statement, to minimise the impact on budgets for the police and schools.

Mr Clegg said the number of people on disability benefit had tripled and added: "I think there are some areas of welfare where it is totally right to ask ourselves whether we can spend money more effectively to help people most in need."

Fairness agenda
Amid talk of Lib Dem dissent over the Budget, Simon Hughes - the most senior Lib Dem MP who is not a member of the government - said he backed the Budget but suggested he might seek to table amendments to make it "fairer".

Speaking in Parliament, he warned ministers against any further cuts which would breach the coalition agreement between the two parties.

"There cannot be any unpicking of items in that deal," he said. "Otherwise the whole thing risks falling apart.

Although there was "no suggestion" this was the case, he added: "The deal has to be that we go down the committed road we have signed up to... And if there is any suggestion that it changes there clearly would be trouble."

Mr Hughes later issued a "clarifying" statement, saying that he had "no plans" to try and amend the Budget while stressing the public spending review must be "driven by fairness".

'Economic madness'
The BBC's Deputy Political Editor James Landale said Mr Hughes' comments were a warning that although Lib Dem MPs were on board at the moment, their support could not be taken for granted.

Shadow Business Secretary Vince Cable said the coalition would "stick together" in the face of criticism over the Budget. He said the cuts were "tough and unpleasant" but defended them.

"We have a economic emergency," he told the BBC's Question Time. "It is very, very serious. It has had a massive impact on the public finances which have to be sorted out."

Labour say the cuts are based on an ideological desire to reduce the scope of the state, rather than sound economic reasons, and have challenged uneasy Lib Dem MPs to vote against it.

"Cutting spending now, and this deeply, while raising taxes will lead to more unemployment, slower growth and higher borrowing," Ed Balls said.

"It is back to the 1930s, back to Thatcherism for the 1980s and I can't understand why progressive Liberal Democrats can go along with this economic and social madness."

We asked those of you working in the public sector for suggestions on how to cut costs. Please find a selection of your comments below.

Voice your opinion

I am a midwife working on the front line in clinical practice and one of the biggest costs is the rise in recent years of caesarean sections and the implications of this. There are the costs of extra time and staff and longer stays in hospital. As for the structure of the NHS itself, it is extremely heavy with hierarchical management and has far too many layers in most areas. I don't wish anyone to lose their jobs especially in the economic crisis that continues to face us all, but the general structure of the NHS does need reviewing. Whilst I may not agree with all that the government is suggesting, I do respect them for sticking to their guns and doing what is extremely difficult and unpopular. All working within the NHS are equally responsible in reducing costs and wastage where possible.

Jackie Reszko, Deeping St Nicholas

So let's get this right - they're cutting my pay for two years, taking away a pension I have paid 11% of my wages into for 26 years, cutting 25% of my employers' budget and now they want me to tell them which colleagues I recommend they sack?!

Mike , Nottingham

I work in the NHS and the amount of waste that I see is criminal. There are also plenty of perfectly decent people working here who, for all they do, are frankly a waste of taxpayers' money. There is too much pointless form filling. Trying to get anything done is like wading through treacle. This has mostly come about under the last government. If the NHS was run properly, it could probably have its budget slashed without affecting frontline services. I'm pretty sure the organisation could manage perfectly well without me!

Andrew, Lancashire

It is very, very wrong in my opinion for the government to ask public sector workers where they think cuts should happen. Not only does this reek of deferral of government responsibility - as it is they who should decide where the cuts will occur since they have been charged by the people of the country to do so - but it is like asking someone what they would like to have amputated, an arm or a leg? Very, very wrong.

Roy , UK

I have worked across a number of public sector bodies as a senior interim manager and it strikes me that there is incredible amount of money wasted operating the procurement process. Quite often the internal cost of operating the procurement process is far higher than the cost of the items procured. Items and services that are procured often cost more than buying off the shelf and also take significantly longer to procure wasting both time and money. Often the end product that is procured doesn't meet the actual business requirement of the organisation ending up with the procured item/service not being used. I can list examples of all of these elements that run into many millions of pounds, that I have seen within multiple public sector organisations.

Allan Hinchliffe, Chelmsford

As an NHS employee, I would say that communication needs to be improved first and foremost, closely followed by greater scrutiny of the decisions made about contracting out third parties for services. We see departments and the "higher ups" making decisions independently, which don't always knit together very well and lead to problems. The wrong equipment is bought, or it's fitted in the wrong place, or an IT department is moved into a refurbished office before the network points are set up and lose a day of productivity. More care needs to be taken about the prices paid to contractors and the backhanders and nepotism that is no doubt involved. These decisions should be audited with sound justification for the decisions made. I'd like to see more stuff done in-house - the NHS is big enough after all.

Laura , Birmingham

I am an ICT teacher in a community secondary school. I find it staggering how much money is wasted on LEA Advisors - basically former teachers who now work for the LEA and go into schools to advise teachers and organise local meetings. They get paid a hell of a lot and also get the same holidays as teachers. Considering what I get paid and the amount of money spent on my training, surely I can now be expected to be able to decide what to teach and how to teach it without these advisors? Every single local authority has these advisors and there are quite a few of them, including some that specialise just in Assessment for Learning or Behaviour. They spend their days popping into schools offering their advice and if no one wants it they basically sit about for a few hours drinking tea and having a chat. The subject advisors get to spend their time creating resources and teaching materials, reading about new initiatives and preparing themselves for a return to teaching, which they are all after doing and hope for a position higher than they were in before. It's an absolute joke. If we have them, why on earth do we now have Advanced Skills teachers and Excellent Teachers?

Vikki Dodd, Chorley, Lancashire

I work in a local doctor's surgery and the amount of drugs that are requested but not needed by people who do not pay for these items, usually on a repeat prescription, is unbelievable. I know some elderly people, instead of checking what they need, just tick all the boxes and end up stockpiling these drugs. It goes on all over the country, wasting thousands of pounds. I would suggest a nominal amount per item for everyone right across the board. This would mean low paid and part time workers, who actually pay into the system, do not have to pay so much and it would be fairer for all.

Brenda Jameson, Sunderland, Tyne and Wear

I work for a company that supplies the government. The amount of waste on stupid things like food, drinks, entertaining, travel and hotels is scandalous. But if they all made an effort to treat government resources as they do their own money, looking for the best travel deal for example, they would save billions overnight. And what about sourcing hospital food locally? In Nottingham, it saved the NHS Trust £6m a year - think of the savings if that were replicated nationally?

Anon, UK

As a low paid council worker who has already taken an 8.5% pay cut this year due to "job evaluation", placing my salary on just £14,500 PA, my view is that councils are top heavy with management, all earning far more than they are worth. Councils should be looking at cutting back on the number of management jobs instead of frontline staff, many of whom like myself work hard and are on very low salaries.

Graham , Ayrshire

I work in an office for the NHS and we have several people undertaking a professional qualification that is costing £10,000+ per person. Whilst the person is attending college and not in the office, they are paid. Other staff at the same level do not get these benefits as it is not offered to everyone, and now those staff who have not been given the opportunity are being redeployed. If you ask me, people shouldn't be paid for the days they are not in work - why should the rest of us suffer so they can get ahead?

Anon, Merseyside

As a police officer, I have made financial sacrifices to pay 11% into my pension, increased the size of my mortgage and put in place all manner of savings plans to ensure that, on retirement, I can clear my mortgage and assist both my children with further education. This has been financial prudence, yet the government now want me to sacrifice that for a worldwide banking crisis that happened due to the USA sub-prime mortgage fiasco. It beggars belief and is simply unfair.

Tony Abigail, Norwich

Voice your opinion

Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Home owners given new protection by FSA

New rules to protect struggling mortgage holders have been outlined by the Financial Services Authority (FSA).

The rules seek to help people who have fallen behind on their mortgage payments, with the FSA saying they must be treated fairly by lenders.

The FSA also wants to ensure all mortgage advisers have been approved as "fit and propoer" persons.

It has also announced new rules for staff and firms operating in the "sale and rent back" market.

Keeping records
Under the new rules for treatment of borrowers in arrears, the FSA is insisting that:

firms must not apply a monthly charge where a repayment agreement for arrears is already in place
any payments made by customers must be first allocated to clearing the missed monthly payments, rather than to arrears charges which can be repaid later
repossessions should always be the last resort.
In addition, firms will be obliged to record all telephone calls with customers in arrears and keep them for three years.

'Vital' changes
There are also tighter controls governing "sale and rent back" arrangements, whereby a borrower who cannot keep up repayments opts to sell their home, but stay in it as a tenant.

From 30 June, the measures the FSA are introducing will include:

a ban on high-pressure sales techniques
a 14-day cooling off period for customers to allow them to take more time over the decision
a ban on cold-calling and dropping leaflets through letter boxes
security of tenure for customers of at least five years
Lesley Titcomb, the FSA director responsible for the mortgage sector, said sale and rent back was often used by people in a hurry to stay in their homes.

"With cases of vulnerable homeowners evicted from their homes after 6-12 months after selling to unscrupulous sale and rent back companies, tighter rules were vital," she said.

The Housing Minister, Grant Shapps, said he was reveiwing his department's support schemes for home buyers in difficulty. Meanwhile, he said, the new rules should provide reassurance: "These tougher rules from the FSA will mean fairer treatment for struggling homeowners, and will ensure that lenders must exhaust every possible option to help before taking repossession action."

'Clean game'
The consumer rights lobby group, Citizens Advice, which has received more than 100,000 enquires about lending arrears over the past year, welcomed the FSA's changes, but said a closer eye should be cast over charges levied by some companies on customers in arrears.

It says some clients of its Wiltshire bureau had reported charges of £115 for each month they were in arrears with their mortgage with a sub-prime lender.

Citizens Advice head of consumer policy, Sue Edwards, said: "Citizens Advice Bureaux regularly report cases where large fees have been levied for various arrears procedures, which have simply added to the clients' problems. In many of these cases, it is not clear to either the client or their adviser how the firm has calculated the cost."

The Council of Mortgage Lenders (CML), whose members account for 94% of all mortgage lenders in the UK, said 46,000 homes were repossessed last year, the highest number since 1995.

It picked out the requirement for an adviser to be an "approved person" as an unnecessary additional cost on lenders.

But, the CML's director general Michael Coogan conceded that overall the FSA's changes were helpful.

"While we may feel somewhat harshly treated in relation to the treatment of lenders under the approved persons regime, we do recognise that the FSA is trying to make sure there is a clean game," he said.


Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

How to make your shopping list VAT-free

Despite descenting comments condemning the 2.5% hike in Vat as regressive I've always thought the opposite, believing it a fairer alternative to hiking basic rate Tax and/or National Insurance rates as the less well off can avoid paying it on necessities.

This submission by Rosie Murray-West and Kara Gammell on Telegraph.co.uk seems to support that view:

If you're worried about the impact of the increase in value added tax (VAT) to 20pc in this Budget, you're not alone. According to shopping comparison website mySupermarket.co.uk, the tax will add an annual average of £33 to each supermarket shopper's basket when it comes in on January 4. For many families reliant on convenience foods, the cost will be far higher.
That's before you even start looking at the extra costs of petrol, clothes, cars, whitegoods and services. Fortunately for the shopping-savvy, there are ways you can beat the tax rise. That's because VAT is a tax of complications and anomalies, and it's possible to cut it out of a substantial part of your shopping basket.

More than 40pc of shoppers will change their spending habits in response to an increase in VAT, according to research by accounting and business services group RSM Tenon.
If you know what is and is not subject to VAT, then you'll be able to adjust your shopping accordingly.
VAT law is supposed to split your supermarket shop between two categories; essential foods, which are zero-rated so that you don't pay any tax, and luxury foods that will be subject to a 20pc tax.
However, because of the difficulty of deciding what constitutes a luxury item, it's possible to buy very similar products at 20pc less than others because they are VAT-free.
Daniel Lyons, VAT partner at accountancy firm Deloitte, said that VAT law was "like French irregular verbs" because there are so many exceptions.
"It used to look fairly sensible 30 years ago, but economics have changed and new products have come on the market," he said.
Jonny Steel, spokesman for mySupermarket.co.uk, said: "There are some strange discrepancies between the types of foods that qualify for VAT, making it hard to predict where the increase will hit shoppers most."
Top tips for those wanting to avoid the tax rise include buying wheat-based snacks or tortilla chips instead of potato crisps, as well as buying ''freshly baked food'' from supermarket bakeries while it is still warm, rather than ''takeaway hot food'' from the takeaway counter, as this will attract VAT.
When buying gingerbread men, check how much chocolate they have on them – any more than a few dots for the eyes and you will be paying VAT.
Perhaps the most important thing to remember concerns nuts and dried fruit. If you buy them in the baking aisle, you're probably not paying any tax, but if you buy them from the snack aisle you'll be paying the full 20pc VAT. Given that you're probably paying a mark-up for packaging anyway, it makes sense to buy them in bigger bags.
VAT SHOPPING LIST
- Takeaway hot food £1.09
- Cereal bars £1.98
- Partly or wholly chocolate-covered shortbread £1.59
- Crystallised ginger £2.04
- Raisins packaged for snacks 70p
- Squash £1.09
- Potato crisps £1.69
- Ready-made popcorn £2.60
- Prawn crackers made from cereals £1.48
- Shelled roasted or salted nuts £1.15 for 100g
- Ice cream and ice lollies £3.99
- Chocolate-coated biscuits £1.25
- Gingerbread men with chocolate decorations 99p
TOTAL: £21.64
NON-VAT SHOPPING LIST
- Freshly baked food £1
- Flapjacks 73p
- Millionaires Shortbread (with caramel layer) £1.19
- Ginger in syrup £1.85
- Raisins packaged for baking 18p
- Milkshake and flavoured milk drinks 85p
- Crisps made of other vegetables and wheat-based snacks such as tortilla chips 89p
- Microwave popcorn £1.99
- Prawn crackers made from tapioca £1.62
- Roasted or salted nuts still in shells or packaged for home baking 65p for £100g
- Frozen ready meals and baked Alaska £2.97
- Chocolate chip biscuits 49p
- Gingerbread men with a few dots of chocolate for eyes 65p

Given the recent reports on the harmful affects of trans fats I would support Vat being applied to such foods. Again there would be a choice to avoid Vat and be fitter too!

This Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Hike in VAT will hit consumers at the tills, in pubs and at the pump

James Thompson writes for Independent:

The government forecasts that the rise in VAT to 20 per cent will fill the Treasury coffers with an additional £13.5bn in the final year of this Parliament in 20015 – making it the biggest driver of revenues unveiled yesterday.


But the rise will hit consumers every single day from 4 January next year whether they are buying clothing, going to the pub, filling up their car, eating at a fast-food restaurant or booking holiday accommodation in the UK. In short, this regressive tax, which takes no account of a person's ability to pay, will hit those on the lowest income the hardest.

In real terms, the VAT rise will add 2.1 per cent to the price of everyday goods, leading to an extra 2.5p on a litre of petrol, 12p on a packet of cigarettes and an average of 7p on a pint of lager, according to Kelkoo, the price comparison website.

The only good news for hard-pressed UK consumers is that the Chancellor wrong-footed some forecasts by keeping items classed as "essential", including food, children's clothing, newspapers and magazines, exempt from VAT.

George Osborne said: "The years of debt and spending make this [VAT rise] unavoidable." The Treasury has forecast that the rise in VAT will generate additional revenues of £12.1bn in its first full year of implementation in 2011/12, but this would rise to £13.45bn in 2014/15.

But Harriet Harman, the acting leader of the Labour Party, said that rise in VAT "punished the poorest the most", saying it would leave pensioners, for example, with less money to spend. The Government hopes that by delaying the increase in VAT till January, it will minimise the impact on consumer spending at a time when the recovery is fragile. But economists fear that the rise in VAT could trigger a sharp rise in inflation and therefore higher interest rates, which could lead to a "double-dip" recession.

Simon Newark, a VAT partner at the accountancy firm UHY Hacker Young, said: "A VAT hike could push up prices on the high street by around 2 per cent, which would have a very significant impact on inflation. Higher inflation could trigger interest-rate rises, risking the spectre of the double-dip recession."

The impact on consumer spending of the rise in VAT will be most marked on big-ticket items, such as TVs and washing machines. According to the price comparison website Kelkoo, the price of a Lady Gaga CD will only rise from £8.95 to £9.14 in January, but it would add £63.79 to a sofa from DFS priced at £2,995.

Yesterday's survey by Kelkoo also found that after the change in VAT, 43 per cent of Britons will spend less once the new rate takes hold. Of those surveyed, the biggest group at 30 per cent said they would cut back on dining out. Following closely behind, 28 per cent said they would reduce their spending on home entertainment, such as music, DVDs and video games, and 26 per cent plan to trim their expenditure on travel, holidays and hotels.

Based on a survey of 2,000 people and their spending plans with VAT at 20 per cent, consumers will spend £324 per person less on retail goods from £1,836 to £1,511, said Kelkoo.

Stephen Robertson, director general of the British Retail Consortium, said: "We didn't want a VAT increase. It'll hit jobs, consumer spending, the pace of recovery and add to inflation, but we accept the Government has no easy options."

In May, the BRC warned that increasing VAT to 20 per cent would cost 163,000 jobs and reduce consumer spending by £3.6bn over four years. While opinion among retailers was divided about how much spending the recent rise in VAT sucked forward, many shoppers did snap up big ticket purchases before it went back up to 17.5 per cent on 1 January 2010.

The accountancy firm Deloitte said that the average worker earning £24,000 will pay an extra £183-a-year as a result of the VAT rise.

The rise in VAT will also hit motorists at the pump. The Automobile Association said with fuel duty going up 1p a litre in October and another 0.76p a litre on 1 January, the hike in VAT adds £117.98 to the annual cost of fuel for a family with two petrol cars, based on today's prices.

For pub goers, the Campaign for Real Ale said the VAT increase would add 10p on to a pint of beer and would increase the rate of pub closures from the current level of 39 a week in the struggling sector.

But in a rare piece of goods news for the nation's drinkers, the Chancellor did not unveil an increase in beer tax in yesterday's Budget.

Brigid Simmonds, the British Beer and Pub Association's chief executive said: "We applaud the Government's decision to freeze beer tax and deliver on its promise made in the coalition agreement to not penalise pubs, responsible drinkers and important local industries."

ZERO AND REDUCED-RATE VAT

0%: Books, children's clothing and footwear, lottery tickets, maps, magazines, and food. (Some food and drink items, such as snacks and alcoholic drinks, are standard VAT-rated.)


5%: Children's car seats, gas or electricity for domestic usage, energy-saving materials, smoking cessation products, contraceptives and women's sanitary towels.

Case Study: 'This will have a huge effect on some firms'

Tom Harvey, 33, of the Lake District, runs Clocktower Electrics with his parents in Cumbria. They employ four other members of staff, selling washing machines and domestic appliances, with a turnover of £300,000.


"The VAT rise was what we expected. For retailers selling non-necessity items or with extremely low margins, it could have a huge impact. Some businesses will have to look at their business models and see whether they work now they need to incorporate this higher level of tax. But for us, I don't think the VAT rise will make too much of a difference. We might see a bit of a boost in sales beforehand and people might start buying appliances at the cheaper end of the scale. But if your washing machine is broken, it needs replacing; it's not something you can put off. I don't think an extra £10 on a £500 washer is going to make any difference to people. So I think raising the VAT is a sensible way of balancing the books.

"I'm happy to see a reduction in corporation tax in the budget – it will be very beneficial to small companies like ours and can only be a good thing. "Small businesses" to the government can mean around 200 employees, not five. Enterprise schemes and so on are snapped up by the bigger companies and it can feel like small and medium sized businesses are ignored.

"I believe in conservative values both at home and as a business owner. I have always voted Conservative and will continue to do so unless they make a big mistake. I think the Government put forward a strong budget."



Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Budget: Osborne to lift tax allowances to help low paid

The rate at which people start paying tax will rise by £1,000 in the Budget but ministers face likely criticism over tax rises and cuts elsewhere.

Nearly 900,000 people earning less than a £7,475 will pay no tax under plans set to be announced by Chancellor George Osborne on Tuesday.

Mr Osborne will say his deficit-cutting package will be "tough but fair" and that the better-off will pay more.

But Labour say the poorest will be hit and cuts are ideologically driven.

They say the economy is too weak to withstand such a spending squeeze and the move could push the UK back into recession.

Mr Osborne will deliver his and the coalition government's first Budget at 1230 BST (1130 GMT), fulfilling the Conservatives' pre-election pledge to hold a Budget within 50 days of coming to office.

Mr Osborne has said the Budget will set out "tough" but necessary plans to bring down borrowing over the next four years and how this will be divided up between spending cuts and tax rises.

The package of austerity measures is widely expected to be toughest for generations.

The government says borrowing levels inherited from Labour - which are set to total £155bn this year - are unsustainable and delaying action will damage market confidence in the UK and store up worse financial problems for the future.

Tax allowances

The chancellor is expected to announce a number of revenue-raising measures, including a levy on bank profits, an increase in capital gains tax and rises in cigarette and alcohol duties while a change in aviation tax is also expected.

But opposition, unions and employer groups have all expressed concerns about the steps being planned amid continuing speculation of a rise in VAT and a freeze on public sector pay beyond the one-year already planned in 2011-2012.

A Labour Party spokesperson said: "The real test for the Budget is what it means for jobs and growth.

"Of course no-one's going to object to an increased personal allowance.

"But if it's paid for by a VAT rise the Tories said they wouldn't implement, and that the Liberals campaigned against, the public will rightly feel short changed."

The BBC's Political Editor Nick Robinson said the government's plans to raise personal tax allowances will take an estimated 880,000 people out of the tax system and also give millions of basic rate taxpayers a tax cut of £200 per year.

The plan is the first step towards a key Lib Dem coalition demand of taking all those earning less than £10,000 out of tax.

The chancellor must find £3.5bn to pay for the giveaway - which will be clawed back from top rate taxpayers - and Labour are likely to argue that it is irresponsible in the current climate.

But Nick Robinson said it will be clear from the chancellor's statement that overall people in all income groups will pay more as a result of other tax rises, spending and benefit cuts and limits to public sector pay and pensions.

However, he has said it is "far from certain" that VAT will rise from its current 17.5%.

'Fiscal bombshell'

In an e-mail to Lib Dem members on Monday evening, Deputy Prime Minister Nick Clegg said the budget deficit amounted to a "fiscal bombshell" that had to be dealt with.

"Without action on the deficit, we will carry on racking up unaffordable debts our children will have to pay off," he said.

"We will carry on spending more money on debt interest than we do on our schools.

"And we will undermine the economic growth needed to create jobs and opportunities for all of us. There is nothing fair, liberal or progressive about any of that."

He rejected claims that the Liberal Democrats had "sold out" after they campaigned during the election against early spending cuts due to the fragility of the economic recovery.

"We have always argued that cuts would be necessary, but the timing should be based on economic circumstances, not political dogma," he said. "The economic situation today means that time has come."

'Hardest thing'

Mr Clegg said the economic situation in Europe had deteriorated in recent months while Labour had exacerbated the situation by making a large number of unfunded spending promises in its last few months.

"So cuts must come," he added. "We have taken the difficult decisions with care, and with fairness at their heart. You will see the stamp of our Liberal Democrat values in tomorrow's Budget. But nonetheless, it will be controversial.

"This is one of the hardest things we will ever have to do, but I assure you, the alternative is worse: rising debts, higher interest rates, less growth and fewer opportunities."

Other measures widely forecast to be included in the Budget include a cut in the headline rate of corporation tax, a two-year freeze in council tax and the scrapping of Labour's planned 1% rise in national insurance contributions paid by employers.

Unions have said any tax rises must fall predominately on the better off while business groups have called for radical reform of public services to avoid across-the-board tax increases.

"This needs to be a bold and ambitious Budget, with a credible pathway for restoring sound public finances and a convincing narrative for growth," the CBI's deputy director general John Cridland said.

Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Budget 2010: Britain on 'road to ruin' without cuts

Britain is "on the road to ruin" unless action is taken in the Budget on Tuesday to cut the deficit, Chancellor George Osborne has told the BBC.

Mr Osborne said the coalition had inherited "a truly awful financial situation" and he would set out a four-year plan to deal with it.

Tough action was "unavoidable" but he aimed to provide "prosperity for all".

He also announced ex-Labour minister John Hutton would head a commission into public sector pensions.

Mr Osborne told the BBC's Andrew Marr Show that Mr Hutton's involvement would mean the commission into future pensions would be independent and have cross-party input.

'Decisive action'
The chancellor refused to give more details of the coming Budget, although the BBC understands it will include Conservative election proposals to ease National Insurance for new businesses.

It is expected the employers' threshold for NI will rise slightly - by £21 and Universities Minister David Willetts confirmed on the BBC's Politics Show there would be measures to boost firms outside of the South East of England.

This is expected to take the form of a three-year scheme to exempt start-up firms elsewhere in the UK from paying NI for the first 10 people employed.

Mr Osborne did not comment when asked about that suggestion, but did confirm there would be a levy on banks and an increase in non-business capital gains tax.

Asked about the "badness" of the Budget, he said: "I don't see it as badness, I see it as decisive action to deal with Britain's record budget deficit.

"We sit here as the country in Europe with the largest budget deficit of any major economy at a time when markets and investors and business are looking around the world at countries that can't control their debts.

"And so we've got to deal with that. In that sense it's an unavoidable budget, but what I'm determined to do is to make sure that the measures are tough but they're also fair and that we're all in this together and that, as a country, we take the steps necessary to actually provide the prosperity for the future."

But amid continuing speculation about large scale spending cuts, Labour leadership hopeful Ed Balls warned that the government was on course to "repeat the mistakes of the 1930s".

He said the cuts and tax rises set to be announced in Tuesday's Budget - which he expected to include VAT increases - showed the "unfairness" of the Conservative-Liberal Democrat government's policies.

Fellow Labour leadership contender Andy Burnham said the Lib Dems had "sold their souls" for jobs in government.

Shadow chancellor Alistair Darling said the Conservatives were "using the current circumstances" as an excuse to make "ideologically driven" cuts they had planned anyway and were "using" the Lib Dems "as cover".

While Mr Osborne declined to set out more detail of what would be in Tuesday's Budget, Prime Minister David Cameron has already suggested public sector pay and pensions will have to be restrained.

He said the budget deficit could not be dealt with by "just hitting either the rich or the welfare scrounger" and the Budget would be when "the rubber really hits the road".

Senior Tories and Lib Dems signed off the Budget on Friday with Mr Cameron, Chancellor George Osborne, Deputy Prime Minister Nick Clegg and Chief Secretary to the Treasury Danny Alexander all present.

Forecaster's warning
The involvement of so many high level figures from the two parties is being seen as an attempt to show the coalition is fully on board with the decisions to be announced in Mr Osborne's first Budget, on Tuesday.

One area of possible unhappiness among Lib Dems might be raising VAT - deputy leader Simon Hughes said "all" Lib Dems have been against it "because it's what's called a regressive tax, everyone pays it irrespective of the wealth you have".

Asked if it would be acceptable for the Budget to include an increase VAT, he said: "It won't be the most desirable outcome."

There have been suggestions some state benefits could be frozen and a survey by ComRes for the Independent on Sunday found 53% of the public backed stripping child benefit from wealthier families - including 47% of Labour voters - with 42% opposed to the idea.

But the government's poverty adviser, Labour MP Frank Field, said he was opposed to means-testing child benefit, which costs taxpayers about £11bn a year.

Meanwhile, the influential economic forecaster the Ernst and Young Item Club, which uses the Treasury's own models to make its predictions, said £48bn worth of spending cuts and tax rises were needed to eradicate the part of the deficit which would not melt away with economic recovery.

Mr Osborne confirmed that Capital Gains Tax would rise in the Budget, despite a free market think tank, the Adam Smith Institute, warning it could actually cost the government as much as £2.48bn in lost revenues.

It argues that higher tax rates will discourage individuals from selling assets, denying the government the CGT they would gain from the sale.Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Tesco FD warns against VAT rise

Laurie McIlwee urges coalition to hold off raising VAT to 20% because it would dent the "fragile" economy

Written by David Jetuah and posted on Accountancy Age.

The FD of supermarket giant Tesco has called for the government to freeze VAT at 17.5% because the expected rise to 20% would damage the "fragile" economy.

Laurie McIlwee issued the warning as Tesco unveiled disappointing first-quarter results in a presentation to the City.

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"The recovery is happening but it's fragile and therefore the
balance is important," said Laurie McIlwee, Tesco's finance director.

"VAT is going to be part of the austerity package but it is a question of when
you do it. The best thing would be to wait a bit."

However, advisers have said the increase would be an obvious revenue-raising move for a government because it would generate about £12bn of revenue.

Putting VAT on food would be "nonsensical", McIlwee added.

Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

The Cost of Retirement

Landmark reform of the UK pensions system aims to deliver increased financial security for an ageing population. But what impact will it have on small businesses?

We are living longer than ever before. By 2050, the number of people over 100 years old is expected to increase from 9,000 today to 160,000. However, there will only be two tax-paying workers for every pensioner, as opposed to the current ratio of four. To address this, the government has set about making radical changes to the existing pension system to deliver greater financial security for a rapidly ageing population.
In undertaking a landmark reform of the UK pensions system, it has completed a lengthy programme of national consultations, which culminated in the introduction of the Pensions Act 2008. From October 2012, employers across the country will be bliged to automatically enrol their staff into a pension scheme.
"It is in black and white: from 2012, employers across the country will, by law, be required to provide and contribute to pensions for their staff," says Mike Cherry, the FSB's pensions spokesman.
With employer contributions set at three per cent (employees will contribute four per cent, the government one per cent), the reforms are expected to add a significant amount to wage bills.
Evidence collected by the FSB shows that currently the majority of small employers 87 per cent of micro businesses, for example - do not operate occupational pension schemes at all. So, this reform not only represents a significant financial burden, it will also involve a lot of administration.
A simple, low-cost pension scheme, NEST (National Employment Savings Trust), will be launched in 2011 meet the needs of low to medium earners and their 'employers. It will be one of the schemes employers can use to fulfil their duties under the reforms.
While the FSB is in full support of moves to confront the pensions crisis, it is also concerned that the systems in place are overly complicated and is working hard to make them as simple as possible.

The message is clear: the reforms are coming, they will affect every business that employs people, so make sure you are prepared.
"First of all factor in the costs of these reforms into your long-term projections," says Cherry. "Read up on what exactly is required and also start to think about which provider to go with - there won't be a default pension scheme rolled out across the board - it's up to employers to make an informed decision."
"The legislation has gone through Parliament," says Cherry. "All our efforts are now being put into making sure that the operational side of these reforms is simple and straightforward."
Source: The Magazine of the Federation of Small Businesses FIRST VOICE OF BUSINESS
FSB

PENSION REFORMS: THE BASICS
~ Employees between
22 years old and state pension age earning more than £5,035 must be automatically enrolled.
~ Enrolment will be phased in over a period of time, starting with large employers, then medium and then small.
~ Employer contribution levels will be phased in gradually, starting at one per cent, then two per cent, .and finally three per cent. The jobholder's contribution will be
phased in during the same period.
~ Employers will be able to choose the pension scheme(s) they want
to use, provided the scheme(s) meet certain quality criteria.
~ The Pensions Regulator will be writing to all employers one year, and again three months, in advance of their automatic enrolment start date, detailing how to comply.

For more information about the pensions reforms, visit Department for Work and Pensions




Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk

Is government consultation a bad thing?

I'll bet you in every pub, office, taxi rank, mothers' meeting... there will be a discussion on how they could run the country better than the government. The new government has invited the nation to comment on its plans and yet by my calculation less that 5,500 have posted a comment.

I understand the deadline is at the end of 10 June 2010 so if you have an opinion and I know you do get posting!

Here's my posts. Feel free to comment but make sure you also comment on the government's site too.

I don’t have a problem with DNA being stored in fact I believe everyone’s DNA should be collected and stored at birth. The only persons who should fear this are those who perpetrate criminal activity. This would act as a deterrent and help the police trace criminals sooner reducing the change of creating more victims.

I take a similar view with CCTV. Regulation may be necessary but I’d hate to see this lead to a reduction in the numbers; rather the contrary.

I believe criminals forfeit their human rights when they commit crimes so the rights of victims should take priority over their rights.

I support the changes proposed to the voting system but would prefer to see a Single Transferable Vote (STV) system introduced or at least an Alternative Vote (AV) plus system.

I believe the British Constitution should be taught is schools. With a better understanding of how the different levels of government work from the parish council to Europe and the role of the monarchy and the second chamber, how ever that evolves, which I’m also in favour of, many more might engage with politics and turn out and vote! This appears even more essential as the government roles out greater consultation with the electorate.

Why not introduce a single benefit payable to everyone, and reduce it in a similar way that tax credits diminish as income rises, and do away with all the different means tested benefits employed by both central and local governments. Of course there should be safeguards for vulnerable persons. Those that remain unemployed after say 6 months should have the benefit reduced month by month increasing the incentive to get back to work.

I believe the introduction of tax credits is a good thing and was reasonably efficient when it came into being by using existing vehicles of PAYE and Self Assessment. It was the ending of the use of those vehicles that led to the overpayments and the employment of yet more civil servants.

Civil servants pay rises in the good times so why not reduce in the bad times? Very many of those that pay the taxes and the community charge have suffered. Some have taken lower wages, some are now unemployed or taken on lower paid work and some have gone bust. Reducing civil servants and local authority pay by at least 5% just has to be done. This should be an average 5% with the top earners losing the most and lower paid a lot less.

I love the idea that local communities could share in renewable energy schemes. Maybe it will reduce the numbers NIMBYs!

I noted on Working Lunch they covered a very interesting system which basically involved a firm who installed solar panels for free http://news.bbc.co.uk/1/hi/programmes/working_lunch/default.stm maybe there should be more schemes like this. Could this method be used to increase the use of geothermal heat pumps? I can’t believe how expensive they are to install.

I welcome transparency. I and I would say the whole Nation is fed up of spin; aka dam lies. We deserve to trust that what a politician tells us is the true and not a distortion! This is especially so if the government is genuinely indenting to consult as they have done here. How else can we make reasoned opinions?

Newsnight once broadcast a piece suggesting that it should be a criminal offence to say anything during an election which turned out to be a fabrication! I hope and trust that the new government would encourages a new era setting that culture aside for ne that is open and honest and we the nation can believe and trust!


Posted by Joe Martin providing business services for small businesses and the self employed. Find me at joemartin.co.uk