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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Nimesh Shah
Rachel Reeves’ plans to invest an additional £300mn in HM Revenue & Customs over the next five years will not even scratch the surface in tackling the gap between what the tax authority should collect and what it actually does. This comes on the back of severe criticism of HMRC by the government and the public accounts committee.
The criticism isn’t unfair in my view. HMRC customer service and standards are at an all-time low, with regular stories of shutting down phone lines and taxpayers being unable to access the right information. There is significant work for HMRC to do before we can have any confidence that the government will raise anywhere near the £1bn it is predicting.
HMRC has had around £1.4bn in additional government funding in the past three years, and I am not convinced that this represents good value for money for the taxpayer.
With the UK facing the highest tax burden in 50 years, there remains a major doubt at HMRC’s ability actually to focus its time and efforts on collecting the right amount of tax.
The government needs a proper strategy on tax and the future direction of HMRC — piecemeal investment and associated claims of generating vast sums of additional tax revenue are not the answer and I am totally unconvinced that the tax gap issue will be properly addressed.
The major issue remains the complexity of the UK’s tax system — the longest tax code in the world. I have some sympathy for HMRC in this regard, but throwing yet more money at the tax authority will not address the problem.
Nimesh Shah is chief executive of Blick Rothenberg
Christine Ross
The Spring Statement was trailed as not offering any major tax announcements and indeed it did not. It did, however, raise the question of where the chancellor will find a tax top-up for the autumn Budget, which she will surely need.
In the meantime, hidden away in the documents, which were published after today’s statement, is a small paragraph announcing what many have suspected for months: that the government intends to reform Isas.
These tax-efficient savings accounts have been hugely popular, especially for their simplicity in allowing savers to hold cash or stocks and shares up to a single annual limit of £20,000 with all returns being free of tax.
The document says that the government will look to “get the balance right between cash and equities”. Clearly, longer-term savings should reap greater rewards from stock market investment, but any form of savings is to be encouraged.
The fear is that new meddling will confuse and discourage some savers — the phrase “if it isn’t broken don’t fix it” comes to mind.
Christine Ross is client director at Handelsbanken Wealth & Asset Management
Simon Edelsten
Unfortunately, the chancellor’s finances are caught between an economy delivering sluggish tax receipts and steadily rising health and welfare costs. The national insurance rises and employment rights bill only now come into force and neither encourage UK businesses to be upbeat.
The main growth item in the Spring Statement is a boost in defence spending. This was anticipated and the share prices of the UK’s few major listed defence stocks have risen sharply — BAE Systems, Rolls-Royce and Babcock shares are all 30 to 40 per cent higher over the past few weeks.
These companies are globally competitive, but often have close ties with US defence companies which could be tricky in any Nato realignment.
However, a fourth UK defence stock, Qinetiq, which is central to the Aukus submarine deal (where Australia chose to move a submarine order from France to the UK) gave a profit warning last week. Its shares, which had risen from £4 to £5 have lost all their gains in the past 12 days. Investing in defence is only for the brave.
Simon Edelsten is a fund manager at Goshawk Asset Management, which owns shares in Rolls-Royce
