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TBA’s latest news – 5th of February 2024
Government signals rethink in tax-free shopping for tourists
The Office for Budget Responsibility (OBR) is set to conduct a review into the costs and benefits of re-introducing tax-free shopping for tourists, after it was ended in 2020 during Rishi Sunak’s tenure as chancellor. The Treasury had estimated that the scheme cost the government £2 billion in revenue.
A reintroduction of the scheme could have a significant impact on businesses and retailers, with the previous decision to end the scheme being criticised for making the tourism market uncompetitive. Analysis from the Centre for Economics and Business Research (CEBR) suggests that the end of the scheme would lead to a £10.7 billion annual loss for the UK, and a reduction of up to 2 million visitors per year.
Some observers have also attributed the sharp decline in Swiss watch stocks as linked to the scheme’s cancellation, as many luxury retailers such as Rolex and Omega have a large commercial footprint in the UK. Retailers have argued that the end of the tax-free scheme has meant that tourists are more likely to spend their shopping budget in competitor destinations such as Paris or Milan, rather than London.
Scottish government to raise minimum alcohol price by 30%
In an attempt to control alcohol-related deaths and hospitalisations, the Scottish government has signalled that it will raise the minimum price of alcoholic drinks by 30%. In early May, the minimum unit price for alcohol will increase from 50p to 65p.
Public Health Scotland stated that since implementing minimum unit pricing, there has been a 13.5% reduction in alcohol-related deaths. However, in the past 3 years, Scotland has also seen a 25% increase in deaths, and the number of people using alcohol treatment services has decreased by 40%.
The 65 pence minimum price has received widespread support from health campaigners who have long advocated for an increase in the minimum price, both to keep pace with inflation and ensure continued control over the sale of cheap alcohol.
Under the new tax rates, the minimum price for a standard bottle of whisky in Scotland will increase from £14 to £18.20, vodka will rise to £16.90, and the minimum price for a four-pack of lager will be raised to £4.58.
UK State Pension age may need to rise to 71
Research into the impact of increased life expectancy and declining birth rates on the national pension system reveals that the retirement age may need to be raised to 71.
Between May 2026 and March 2028, the retirement age in the UK will be raised from 66 to 67. It is anticipated that from 2044 onwards, this age will again increase to 68. However, the research findings suggest that the age may in fact need to be raised to 71.
Les Mayhew, the associate head of global research at the International Longevity Centre suggested that ‘in the UK, state pension age would need to be 70 or 71 compared with 66 now, to maintain the status quo of the number of workers per state pensioner’. He has previously provided advice to the government during his time as a civil servant, pointing out that by the age of 70, only 50% of adults in England and Wales are capable of continuing to work. Due to a decrease in the working population and an increase in the non-economically active population, the tax base for pensions is affected.
According to data from the Office for Budget Responsibility, government pension benefits will cost £136 billion in 2023-24, with £124 billion allocated to the state pension. Jonathan Cribb, associate director and head of retirement at the Institute for Fiscal Studies, expressed that while he does not oppose raising the retirement age, doing so without considering other cost-saving measures was not ‘realistic or equitable’.
Cribb argues that raising the retirement age would have a disproportionate effect on lower-income individuals, as a shorter average lifespan correspondingly results in shorter access to the state pension system. He pointed out that while state pensions and pension benefits are estimated to increase by £45 billion by 2050, the expected increase in public finances from health and social security will be £105 billion. The real issue revolves around the NHS and social care.
The Intergenerational Foundation agrees on the necessity of raising the retirement age but questions who should bear the cost. Their research found that young people often lack the financial assets that their parents and grandparents have, and therefore are highly likely to have inadequate post-retirement income. Co-founder Angus Hanton suggests that the pension age should be based on life expectancy and occupation, supporting the imposition of wealth taxes to fund retirement costs, whilst also reducing income tax and national insurance.
‘Boiler tax’ to be scrapped after manufacturers raise prices
The UK Government is set to abolish the so-called ‘boiler tax’, which had resulted in increased prices for new gas boilers by manufacturers who failed to meet deadlines for installing eco-friendly heat pumps in homes. This signals a further relaxation in green policy initiatives, following the relaxation of the UK’s net-zero policy in postponing the ban on petrol and diesel cars.
The tax was part of the government’s clean heat strategy, which aimed to accelerate the phase-out of traditional boilersand install 600,000 heat pumps annually by 2028.
Starting from April, manufacturers of gas boilers would have faced quotas relative to the heat pumps installed compared to their gas or oil boiler installations. Companies are required to match or replace 4% of their boiler sales with heat pumps, or else face a fine of £3,000 for each heat pump not installed.
The Guardian reported last year that lobbyists from the boiler industry had attempted to delay this new policy. The reporting also mentioned that the newly appointed Minister of State for Energy, Claire Coutinho, intended to cancel this policy initiative after reaching unfavourable conclusions for consumers.
A government source told The Sunday Times that ‘boiler manufacturers have saddled families with indefensible price hikes – this is not right…we’re looking again at the policy, and expect manufacturers to do the right thing and remove their price hikes immediately’.
To meet the new targets, manufacturers began raising prices last year. In September of this year, Worcester Bosch, the UK’s largest manufacturer, told The Times that its prices had increased by up to £300 because the heat pump market in the UK had not reached a sufficient scale, meaning the company would inevitably face fines.
BP faced with green commitment pressures
British Petroleum is set to release a series of financial performance reports this week, with market expectations anticipating a half-year reduction in profits compared to the same period last year.
Despite recently emerging from a recent misconduct scandal with a new leadership team, concerns persist over its future strategy. There is growing pressure for the leadership board to abandon its green commitments and intensify its investments in fossil fuel production.
It has been revealed that last week, Bluebell Capital Partners, a small London-based hedge fund, had written to BP, warning them against being fixated on a future of declining fossil fuel production.
This 30-page letter was sent shortly after the fund acquired a small stake in BP last October. Just a few weeks ago, the BP’s former CEO, Bernard Looney, unexpectedly resigned, casting a shadow of uncertainty over the company’s future, particularly as he had spearheaded BP’s green commitments.
