Poorest will be just 63p a month better off under Liz Truss national insurance cut

Britain’s poorest three million households will be as little as 63p a month better off under Liz Truss’s plans to cut national insurance contributions, while the richest will benefit by £150, according to economic analysis.

What a way to blow £30bn. – Owl

Matt Dathan www.thetimes.co.uk 

Kwasi Kwarteng, the chancellor, is expected to make good on the prime minister’s pledge to scrap the increase in national insurance contributions in a mini budget on Friday.

Reversing the 1.25 per cent rise, which was only implemented in April, will be among a range of measures intended to stimulate economic growth and is expected to take effect as early as November.

Tom Waters, a senior research economist at the IFS, said people earning more than £100,000 would benefit the most, adding that there were more progressive ways to cut taxes, such as raising the threshold at which workers pay the basic rate of income tax. Kwarteng is said to be more persuaded towards cutting income tax by 1p rather than raising the threshold, which would still benefit the middle classes more than those on the minimum wage.

The move would bring forward plans announced by the government earlier this year to cut 1p off income tax from 2024, while Goldman Sachs, the US investment bank, said it is expecting Kwarteng to go further by cutting 2p from basic rate income tax.

A final decision has not been taken, it is understood, while a reduction in the basic rate could be deferred until a formal budget, expected in November.

The chancellor is also expected to create 12 special investment zones across the UK that could offer workers a significant discount in employer national insurance contributions for staff employed within the zones. He will use Friday’s “fiscal event” to freeze corporation tax, with the total package of tax cuts expected to cost between £30 billion and £50 billion.

The Times revealed on Saturday that Kwarteng is reviewing fiscal rules that require debt to fall as a proportion of national income in 2024-25 in order to make way for the massive tax cuts.

There is also expected to be a package of deregulation to stimulate a “big bang 2.0”, which could include removing the cap on bankers’ bonuses, slashing environmental protections that have historically made it hard to build on certain types of land, and scrapping plans to prevent supermarkets advertising buy one get one free-type multibuy deals on junk food as part of the government’s obesity strategy.

However, analysis of Truss’s existing plans to cut NICs by the Institute for Fiscal Studies has revealed the extent to which the move will disproportionately benefit richer households compared to the poorest.

The richest tenth of households, who earn an average of £108,000, will save £1,800 on their annual tax bill, equivalent to £150 per month. In contrast, the poorest ten per cent of households, who on average earn £12,000, will save just £7.66 on their annual tax bill, which works out at just 63p per month or 14p per week.

Those in households with the average UK household income of £31,400 will save about £250 per year, or £20 per month. Households with an income of £55,000 will save about £700 per year, which is £58 per month, while households on £23,000 will benefit by about £73 per month, according to the IFS analysis.

Tom Waters, senior research economist at the IFS, said that while tax cuts would always benefit richer households over the poorest, there were fairer ways in which Truss could cut taxes.

He said: “Reversing the recent NICs rise would tend to benefit richer households more than poorer ones, even as a share of their income; the richest 10th, for example, would gain about £1,800 per year, or 1.7 per cent of their income, and the poorest tenth about £7 per year, less than 0.1 per cent of their income.

“That’s partly just a natural consequence of the existing tax system: those towards the bottom of the income distribution don’t pay much in direct taxes, and so it’s hard to cut taxes in a way that makes a big difference to them.

“That said, there are more progressive ways to cut tax — raising the income tax personal allowance, for example, which is currently due to be frozen in cash terms until March 2025. Tax cuts along these lines, including a NICs cut, would of course strengthen incentives for people to move into work.”

Tony Wilson, director of the Institute for Employment Studies, said the plans were a “tax giveaway to relatively high earners” and warned that they risked higher inflation. He said: “The worry that the Bank of England and Treasury officials will be that the move is more inflationary than a more targeted subsidy or tax cut at those on lower incomes. “Another £600 in the pocket of higher earners is likely to lead to more discretionary spending.

Wilson urged the Treasury to spend billions of pounds that was set aside but unused during the pandemic to stave off long-term unemployment, which never transpired, in order to attract tens of thousands of over-50s back into employment. Many over-50s left the labour market during or after the pandemic but are not counted as unemployed because they are not actively seeking work.

The Treasury only spent about £1.3 billion of the £2 billion set aside for the Kickstart programme, and the £1.3 billion it saved from the projected £2.7 billion it committed to the Restart programme – both designed to get people back into work.

He said: “There are other things we can do on policy to make our labour market work better and if we don’t get more people in the labour market, other decisions, such as tax cuts, will be counter-productive.

“One thing the government could do is reinvest the £10 billion set aside during the pandemic to stave off long-term unemployment that never transpired.”

No10 and the Treasury have said Friday’s “fiscal event” will be focussed on how to create economic growth. Kwarteng is “prepared to be bold” and “prepared to have the argument,” sources said, adding that the UK can “no longer carry on fighting over what’s left of the pie, which hasn’t been growing at all over the last few years”.

Their ambition is to “grow the pie for the prosperity of the country”. The mini budget is designed to deliver Truss’s pledges during the Conservative leadership election over the summer, with a full, formal budget planned for November, which will be accompanied by the usual forecasts by the Office for Budget Responsibility, the spending watchdog.

More on the South West Water “just add lemon” fine

Total Costs tot up to £300,000

From the Western Morning News

South West Water has been ordered to pay almost £300,000 in fines and costs for supplying unfit drinking water in Devon.

The Exeter-based company admitted one in charge in a prosecution brought by the Drinking Water Inspectorate.

South West Water apologised for what it described as an “isolated incident” in 2018 and said it was caused by a naturally occurring algal bloom on Exmoor’s Wistlandpound reservoir, in part due to a hot and dry summer.

The regulator told the court that between June 19 and August 21, 2018, South West Water supplied water that was “unfit for human consumption” at Bratton Fleming and Horedown, near Barnstaple.

Customers at the time reported that the water was discoloured and had an “earthy” or “mouldy” taste. South West Water said it was not harmful to health and told people to chill the water in the fridge or add a slice of lemon to improve the taste.

The company admitted the offence and was fined £233,333 at Plymouth Magistrate’s Court last Tuesday. It was also ordered to pay a victim services surcharge of £170, and costs of £60,320.73, bringing the total penalty to £293,823.73.

A spokesperson for South West Water said after the hearing: “We deeply apologise to our customers affected by this incident in 2018, which was caused by an algal bloom on the reservoir. We accept that unpalatable water, even when safe to drink, is absolutely unacceptable, and this was reflected in our guilty plea at the earliest opportunity. Since then, we have made a number of major investments of up to £1 million to the site to reduce the risks of such events occurring again.”

The company said the problem had not happened again due to the action it took afterwards. The issue was caused by what it called “naturally occurring scientific compounds [algal bloom]” at “unprecedented levels”, caused in part by “an unusually dry and hot summer”.

The water from the reservoir made it through to the local water treatment works and eventually to drinking water supplies. South West Water says it did not impact the safety of the water, but affected the taste and smell which led to customer complaints and an investigation by the Drinking Waters Inspectorate.

The company says that, since 2018, it has made “major interventions and investments in the site”, costing up to £1 million. The measures include installing a large reservoir mixing system in 2019, which it says helps to maintain water quality by keeping the water fully mixed and easier to treat.

The company says it continues to review its drinking water safety plans continuously to assess new risks and to prioritise investment.

The Wistlandpound reservoir has a capacity of 1,550 megalitres and water is taken for treatment to supply customers in Devon, including Ilfracombe and Barnstaple.

The Environment Agency downgraded the company to the lowest rating of one star for its environmental performance in July. Water companies have come under fire from campaigners over water quality in the rivers and seas, including the level of storm overflows of untreated sewage which are legally allowed to prevent flooding after exceptionally heavy downpours.

Another new COVID variant is spreading – here’s what we know about omicron BA.4.6

BA.4.6, a subvariant of the omicron COVID variant which has been quickly gaining traction in the US, is now confirmed to be spreading in the UK.

Manal Mohammed theconversation.com 

The latest briefing document on COVID variants from the UK Health Security Agency (UKHSA) noted that during the week beginning August 14, BA.4.6 accounted for 3.3% of samples in the UK. It has since grown to make up around 9% of sequenced cases.

Similarly, according to the Centers for Disease Control and Prevention, BA.4.6 now accounts for more than 9% of recent cases across the US. The variant has also been identified in several other countries around the world.

So what do we know about BA.4.6, and should we be worried? Let’s take a look at the information we have so far.

BA.4.6 is a descendant of the BA.4 variant of omicron. BA.4 was first detected in January 2022 in South Africa and has since spread around the world alongside the BA.5 variant.

It is not entirely clear how BA.4.6 has emerged, but it’s possible it could be a recombinant variant. Recombination happens when two different variants of SARS-CoV-2 (the virus that causes COVID-19) infect the same person, at the same time.

While BA.4.6 will be similar to BA.4 in many ways, it carries a mutation to the spike protein, a protein on the surface of the virus which allows it to enter our cells. This mutation, R346T, has been seen in other variants and is associated with immune evasion, meaning it helps the virus to escape antibodies acquired from vaccination and prior infection.

Severity, infectiousness and immune evasion

Fortunately, omicron infections generally cause less serious illness, and we’ve seen fewer deaths with omicron than with earlier variants. We would expect this to apply to BA.4.6 too. Indeed, there have been no reports yet that this variant is causing more severe symptoms.

But we also know that omicron subvariants tend to be more transmissible than previous variants. BA.4.6 appears to be even better at evading the immune system than BA.5, the currently dominant variant. Although this information is based on a preprint (a study that is yet to be peer-reviewed), other emerging data supports this.

According to the UKHSA’s briefing, early estimates suggest BA.4.6 has a 6.55% relative fitness advantage over BA.5 in England. This indicates that BA.4.6 replicates more quickly in the early stages of infection and has a higher growth rate than BA.5.

The relative fitness advantage of BA.4.6 is considerably smaller than that of BA.5 over BA.2, which was 45% to 55%.

The University of Oxford has reported that people who had received three doses of Pfizer’s original COVID vaccine produce fewer antibodies in response to BA.4.6 than to BA.4 or BA.5. This is worrying because it suggests that COVID vaccines might be less effective against BA.4.6.

The capacity of BA.4.6 to evade immunity may however be addressed to a degree by the new bivalent boosters, which target omicron specifically, alongside the original strain of SARS-CoV-2. Time will tell.

Meanwhile, one preprint study shows that BA.4.6 evades protection from Evusheld, an antibody therapy designed to protect people who are immunocompromised and don’t respond as well to COVID vaccines.

Vaccination is key

The emergence of BA.4.6 and other new variants is concerning. It shows the virus is still very much with us, and is mutating to find new ways to overcome our immune response from vaccination and previous infections.

We know people who have had COVID previously can contract the virus again, and this has been particularly true of omicron. In some cases, subsequent episodes can be worse.

But vaccination continues to offer good protection against severe disease, and is still the best weapon we have to fight COVID. The recent approval of bivalent boosters is good news. Beyond this, developing multivalent coronavirus vaccines that target multiple variants could provide even more durable protection.

A recent study showed that a multivalent coronavirus vaccine administered through the nose elicited a strong immune response against the original strain of SARS-CoV-2, as well as two variants of concern, in mouse models.

Close monitoring of new variants including BA.4.6 is pressing, as they could lead to the next wave of COVID pandemic. For the public, it will pay to stay cautious, and comply with any public health measures in place to prevent the spread of what remains a very contagious virus.

Individuals taxed according to postcode – Truss plans low regulation “investment zones”

Liz Truss is planning to levy lower tax rates and strip out regulations in certain parts of the country picked by the government.

Readers, you need to get your heads around the implications of this extension to the “freeports” that Boris Johnson announced.

As with freeports these low tax, low regulation investment zones will probably end up relocating, rather than creating, economic activity and jobs. They are unlikely to lead to the sort of growth transformation the Truss Government needs by the election due in January 2025. It’s a beggar my neighbour strategy.

The rules surrounding these zones will be open to “gaming”. They are likely, therefore, to be accompanied by some significant unintended consequences. The ability of the affluent in society to “relocate” by outbidding local people on a whim, is an example. The rise in second homes we see locally is driven by a desire to have a holiday home in more scenic parts of the country. Seeking residency in an area to reduce personal tax liability might provide a similarly strong motive for a second/alternative residence.

If these zones are a natural extension of freeports, consider this.

Dartmoor and the South Hams are already included in the Plymouth freeport area, so obviously would be included in any “Plymouth Investment Zone”.

Is Liz Truss going to replicate the Northern Ireland border issue all over the country as we move in and out of each “investment zone”, between the “low tax regimes” and “high tax regimes”? Sounds divisive to Owl.

Liz Truss to cut taxes in certain parts of the country picked by the government

Jon Stone www.independent.co.uk

Liz Truss is planning to levy lower tax rates and strip out regulations in certain parts of the country picked by the government.

The prime minister is reportedly planning to badge the areas “investment zones” – and will claim that the approach could boost economic growth.

Businesses based in the handpicked regions will be able to ignore some environmental regulations and pay lower rates of tax.

And workers living there could pay personal income taxes and national insurance at reduced rates, the government-supporting Sun On Sunday newspaper reports.

Details of the plans are still said to be being worked out, but an announcement could come as early as chancellor Kwasi Kwarteng‘s emergency budget on Friday.

The plans to apply the tax cuts to particular areas of the country only may raise eyebrows because the government has previously come under fire for playing political favourites.

A previous policy, the Towns Fund, selected areas to benefit from a £1 billion pot of investment – but this was mostly funnelled into Tory areas.

An inquiry by parliament’s spending watchdog, the Public Accounts Committee, concluded last year that the selection process to benefit from the fund was “not impartial” and decisions were “politically motivated”.

39 of the 45 places to receive the first round of funding were represented by Tory MPs.

It is not clear which areas will benefit from the “investment zone” tax cuts or how they will be picked.

Mr Kwarteng, who was appointed by Ms Truss earlier this month, is set to use Friday’s emergency budget to reverse Rishi Sunak’s rises in corporation tax and national insurance contributions.

Other policies are expected to include lifting the cap on bankers bonuses, which limits payouts to twice a banker’s annual salary. The policy was intended to reduce the risk-taking associated with bonuses incentives, and so reduce the risk of another financial crisis.

12 places earmarked for this status

Andrew Sparrow www.theguardian.com carries a bit more detail:

Planning regulations will be relaxed in up to 12 places earmarked for this status, and taxes will be cut to incentivise investment.

The West Midlands, the Thames estuary, the Tees Valley, West Yorkshire and Norfolk are among the places where the new zones might be sited. According to the plans set out by Truss in the summer, in each area there will be a central region, where regulations and planning rules will be eased to encourage industrial, commercial and residential development, and a periphery where the planning rules will be streamlined for housing.