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"The market suggests the high gas prices will be here for the next 18 months to two years," O'Shea told the BBC, going on to explain that high demand for gas was in part being driven by society’s shift away from coal and oil. 

As we move towards net zero, gas is a big transition fuel,” O’Shea said. “And so as you turn off coal-fired power stations in other countries, there isn’t an abundance of gas that you can just turn on quickly.”

O’Shea’s warning comes after industry leaders attached the label of “flimsy sticking plaster” to a taxpayer-backed support package for energy-intensive businesses affected by surging gas prices

Business Secretary Kwasi Kwarteng is developing a plan for state loans to businesses threatened with closure over the winter, reportedly backed by Prime Minister Boris Johnson. This comes despite the Treasury denying the Government has any plans to take action. 

Business rates apply to most non-domestic properties, including restaurants, pubs, cinemas, theatres, music venues, hotels, and gyms. The 50% discount is a tax cut worth £1.78 billion, the largest single-year cut to business rates in 30 years, except for the emergency pandemic reliefs. 

In his Autumn Budget and Spending Review speech, the Chancellor of the Exchequer said that abolishing business rates altogether would be an irresponsible move, as they generate £25 billion for the economy. However, Sunak said that to make business rates fairer, they will be re-evaluated every three years.   

Properties that are eligible for the discount will receive up to 50% off their bill, subject to a cap of £110,000 per business. This is more than double the relief announced pre-pandemic for the 2020-21 financial year.

Turning to Twitter, Sunak said the move was “a tax cut worth almost £1.7bn and with Small Business Rates Relief over 90% of all these businesses will see a discount of at least 50%. Taken together, today we cut business rates by £7bn.”

"We’re taking steps to ease the burden of business rates and boost our high streets [...] Without action, millions of businesses would see their tax bills going up next year because of inflation,” Sunak continued, “So I’ve decided that next year’s planned increase in the multiplier will be cancelled. That’s a tax cut for business worth £4.6bn over the next five years."

The Institute For Fiscal Studies (IFS) said Sunak was on track to lift the UK’s tax burden to the highest sustained level seen during peacetime as he prepares to unveil a package of tax increases at this month’s budget and spending review. The introduction of any tax hike will go against the Conservative manifesto for the December 2019 election, which stated: “We will not raise the rate of income tax, VAT or National Insurance.”

The tax raid would help fund an expansion in the UK to the highest level of government spending since the 1980s. However, the IFS said several government departments would still face budget cuts. It warned that continually squeezed areas, such as prisons, further education, and local government could see their budgets shrink by more than £2 billion next year.

These budgets were cut substantially in the 2010s, and a further round of cuts would be difficult to reconcile with the government’s stated objectives – particularly around ‘levelling up’,” the IFS said.

The IFS also accused the government of effectively “smuggling in” tax rises under the cover of the pandemic and as living costs increase amid the ongoing energy crisis

£10 billion has been raised to go towards net-zero projects such as renewable energy, electric vehicles, pollution prevention and control, and green building infrastructure. It is estimated that investors have placed over £90 billion in orders for the 0.875% green gilt, with JPMorgan, Barclays, BNP Paribas, Citi, Deutsche Bank, and HSBC acting as bookrunners. 

According to the UK Treasury, the green gilt is the largest inaugural green issuance by any sovereign and has attracted the largest-ever order book for a sovereign green transaction. 

The gilts — also known as government bonds — are sold to institutional investors, proving a fixed rate of return until their expiry. The UK’s first green gilt is a 12-year bond that will mature by the end of July 2033. 

The rapidly expanding green finance sector is "vital in helping us to tackle the environmental challenges we face,” Chancellor of the Exchequer Rishi Sunak said. “The launch of our first green bond is a signal that the UK continues to be a world leader in this area.”

"This funding will be used to finance vital green government projects across the country, including things like clean transportation, renewable energy and preserving our natural environment. In helping us to build back better and greener, it will also help to create jobs as we transition to net-zero."

Following on from the government’s initial green gilt issuance, a second is set to launch next month ahead of the COP26 Climate Summit In Glasgow. The overall aim is to raise a minimum of £15 billion for green projects

The Prime Minister is expected to reveal a rise in National Insurance that will see approximately 25 million people pay extra tax. In return, he will promise to introduce a cap to the amount an individual will ever pay in social care costs  a figure that will likely come in at between £60,000 to £80,000 and will vouch to better protect individuals from having to sell their homes to pay off care bills. However, how large the tax rise should be is yet to be decided.

According to the Telegraph, the government is currently favouring a 1% rise in National Insurance, although there are talks about a higher figure, possibly up to 1.25%. 

The introduction of any tax increase is likely to be seen as a breach of the Conservative manifesto for the December 2019 election, which promised there would be no increases to the rate of National Insurance: We will not raise the rate of income tax, VAT or National Insurance”, the manifesto reads.

The social care package will involve two moves. Firstly, it will introduce new measures to ease the impact of the UK’s social care crisis. Secondly, it will provide extra funding for the NHS to tackle soaring waiting lists. In England, 5.5 million people are currently waiting for NHS hospital treatment and it is feared that this figure could increase to 13 million in the coming months. The government says that the increased funds from a tax hike would help clear the NHS backlog built up during the pandemic. 

Eight people have already been arrested as a result of the investigations by HMRC into fraudulent misuse of the government’s covid-19 business support schemes. The arrests include a man from the West Midlands suspected of furlough fraud of almost half a million pounds. HMRC’s other investigations relate to the furlough programme, the “eat out to help out” scheme, and the self-employment income support scheme (SEISS). BLM uncovered the information as part of a freedom of information request. BLM has said that, moving forward, many more investigations could take place. 

 Data obtained by the Financial Times shows that 28,444 reports of possible furlough fraud were received by HMRC at the start of this month. However, not all of these reports will be investigated. 

Since March 2020, the Treasury has paid up to 80% of furloughed workers’ wages up to a limit of £2,000 per month. The scheme has helped approximately 11.5 million employees so far. However, the furlough scheme, as well as the Kickstart scheme, are currently set to end on 30 September. However, the scheme has been extended in the past.

HMRC has said it expects to recover around £1 billion of mistakenly or fraudulently claimed money over the next two years.

On Thursday, the UK government announced revisions to its green travel list. From 4 am on June 30, Malta, Madeira, several UK Overseas territories, the Balearic Islands, and Caribbean Islands will be added to the government’s green list. No quarantine period is required for travellers returning to the UK from these destinations.

Following on from the announcement by the UK government, stocks in Europe rose. In London, the FTSE 100 (^FTSE) increased 0.2%. In France, the CAC (^FCHI) rose by 0.1%. In Germany, the DAX (^GDAXI) was flat.

Grant Shapps UK transport secretary, said that the government was planning to abandon quarantine for fully vaccinated travellers from amber list countries, but not until later in the summer months. The change will occur in gradual phases. Mr Shapps has thanked the UK’s successful vaccination programme for enabling the gradual reopening of foreign travel from and to the UK.

Members of trade bodies, academia, and NGOs will make up the task force, known as the Green Technical Advisory Group (GTAG). The GTAF will be responsible for overseeing the government’s delivery of a “Green Taxonomy”. This common framework will offer comprehensible standards that lay out when a financial product or investment can be classed as environmentally sustainable. 

In recent years, green financial products have surged in demand, but this has also given rise to greenwashing within the financial sector. There are concerns that some green financial products fail to deliver their promises of environmental sustainability. These concerns are only exacerbated further by increased cases of allegedly green investment funds that are later found to support carbon-intensive businesses. 

 The government’s proposed Green Taxonomy aims to stamp out greenwashing within the sector while simultaneously making it easier for consumers and investors to understand the impact that a particular company or product is having on the environment. 

Ian Bradbury, CTO for Financial Services at Fujitsu UK & Ireland commented: “As financial organisations strive to provide great customer experiences, the emphasis must also be on how they align their services with customers’ ethical and social beliefs. What’s more, it’s an opportunity to position the business as a trusted pillar of society; empty promises on CSR are no longer enough. This is something Natwest recently demonstrated with its ‘green mortgage’, offering individuals who purchase an energy efficient property a preferential interest rate on their home loan.”

“Undoubtedly, environmental concerns resonate with large proportions of consumers who continue to champion climate change. IBM recently found that 90% of consumers feel that the COVID-19 pandemic affected their views on environmental sustainability. Now, the financial services industry needs to take these concerns as a serious priority,”  Bradbury said.

Written by Mark Cresswell, CEO of LzLabs

At the beginning of March, the UK government announced its Digital Strategy, a section of which detailed its design to spark competition in the FinTech industry. FinTech has seen a rapid evolution of products to support more agile and accessible financial solutions for both business and the consumer. Enabled by ubiquitous global internet connectivity and smart phone advancements, the speed and efficiency of a wide variety of financial solutions can be improved dramatically.

 

The blight of the big banks

The challenge for many, when enhancing digital financial services, is that the longer established portion of the financial industry, much like the global public sector, remains awash with legacy systems born during the first FinTech revolution of the 1960s and 1970s. These systems continue to support business models built well before the internet, and when consumer banking was provided by branches and ATMs. It’s estimated that over 70% of global transactions are processed by mainframe applications running on COBOL code, often written over half a century ago. While these core banking systems continue to provide reliable back-end processing, they can be extremely limiting in today’s modern, globally connected world. Furthermore, these systems are highly dependent on a workforce whose culture, education and reference points are changing, as the baby boomer generation (1946-1964) marches inexorably towards retirement. As the technical and business knowledge of these systems decline, the global financial community needs to take advantage of the power and flexibility of modern computing solutions.

This transition can be painful, both technologically and financially, if organisations aren’t careful. Managing the transition to modern platforms, more adept at supporting FinTech solutions at a more effective price should be done in an evolutionary way. Modernisation is a continuum, but procrastination is no answer. Hope is not a strategy. Solutions are available that can reduce the cost of continuing to execute these reliable back-end systems, minimising the financial impact and risk of the effort. For many financial institutions, the reluctance to modernise is based on cost and risk concerns. In such a highly-regulated industry, risk must be managed. And few financial institutions, whether prodded by the UK government or not can spend vast sums of money to completely replace these systems.

 

Incentivise IT modernisation

Born-on-the-web FinTech companies benefit from regulation including the recent Competition & Markets Authority (CMA) directive, and the EU’s planned MiFID II - If the UK government really wants to drive the FinTech industry to invest in systems that can “support those who struggle to access financial services”, they should incentivise IT modernisation projects within the financial industry. Investment in digital platforms that can support greater ease of access are often held hostage to the high cost of continuing to operate legacy systems on expensive and often proprietary platforms. These costs limit financial institutions’ ability to continue to grow their FinTech investments that would broaden the options available to a broader UK constituency. The problem is not a lack of FinTech solutions, but rather a continued dependency on legacy systems and their restrictive cost models that are highly limiting to investment in modern solutions. The financial industry HAS invested in FinTech solutions, but the broader growth envisaged by the UK government’s digital strategy can only be achieved if these institutions can free themselves from the bondage of legacy system’s costs and limitations.

 

The Challenges of Legacy Modernisation

Legacy modernisation projects have been started and stopped in all industries for the last two decades. Some succeeded. Some did not. Several challenges must be overcome to ensure successful modernisation projects. First, the project needs to be justified on sound financial and business principles. Cost reduction alone is sometimes enough, but often better business justifications are warranted. Second, the technical challenges of modernisation encompass a number of issues. Most IT modernisation projects today impact the underlying infrastructure on which the legacy applications have been implemented. These changes affect the application technology, operating environment, often the data base management system (DBMS) underpinning the application and a wide variety of operational practices that have been honed over the decades that these systems have been executing. Risks can be managed utilising a variety of modernisation practices that have been available for a number of years. Overcoming political, cultural and generational resistance to change is another matter. For the UK government’s digital strategy to be successful in the financial industry, they should focus efforts on combatting these challenges.

 

 

 

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