Tag Archives: retail price index

Inflation rise will increase the agony for those on benefits

This is what ‘money’ looks like. Enjoy the sight because you’ll probably be seeing increasingly less of it in reality from now on.

How many different ways can the Coalition find to shoot itself in the foot?

Today, inflation is the cause of the embarrassment. Just one month after it dropped to its lowest level in three years, the pace of price rises leapt up by half a percentage point, which is well above expectations.

And what’s the reason for this unexpected turnaround? Why, it’s because of the sharp rise in university tuition fees!

They rose by 19.1 per cent after the cap on charges was lifted by the government to £9,000 from £3,375.

In response, the Consumer Price Index rose from 2.2 per cent to 2.7, while the Retail Price Index went from 2.6 to 3.2 per cent.

What does it mean for you?

Well, it’s still September’s rise that is the important one, because it is those figures that part-time Chancellor Gideon George Osborne uses to work out the rise in benefits, starting next April. He’ll announce the amounts in December, but he’ll be guided by the September CPI rate.

These include Jobseekers’ Allowance, Income Support, disability benefits, maternity benefits, Incapacity Benefit, Child Tax Credit, Working Tax Credit and Child Benefit.

With inflation rising again, those on benefits are likely to suffer an even greater squeeze on their wallets than is already expected – remember, the bedroom tax and the ‘Pickles Poll Tax’ are both being imposed on us in April 2013.

Energy bill increases, water bill increases, food price rises, and the increase in fuel duty that members of the Coalition dutifully and brainlessly supported only yesterday will add to the agony for the many.

Mr 0 has already announced an intention to squeeze Jobseekers’ Allowance, as he is keen for those in work to see greater reward than those on the dole. Notice that he doesn’t say anything about whether that reward will be adequate to their needs. The living wage is not a factor in this Chancellor’s thinking!

Even last month, when inflation fell, TUC general secretary Brendan Barber warned that real wage drops mean families have been getting poorer every month for the last three years.

It’s not all bad, though!

Pensions – which are drawn by those who are most likely to vote (and most likely to vote Conservative) – are protected by a government guarantee, and will therefore rise by 2.5 per cent.

How cynical.

Osborne-created tax loophole diddles the UK out of hundreds of millions

A tax avoidance loophole specially created by George Osborne, the UK Chancellor, last year means that water companies have played the system to reduce their tax bills to a trickle.

Some people just don’t know when it’s time to do the right thing.

Look at the three water companies that are paying practically no tax on their huge profits, while yanking up prices every year according to the retail price index and enjoying a monopoly in their areas – according to today’s report in The Observer.

Thames Water avoids tax by offsetting the interest payments on its debts against its tax liability and delaying it by claiming allowances on capital project spending. The company is seeking government support for a £4.1bn project to build a new “super sewer” under the Thames.

Anglian lent £1,609.1m to a subsidiary company in the Cayman Islands tax haven in 2002. This year it was able to pay £478.1m in equity dividends to investors, including its subsidiary in the tax haven.

Yorkshire Water also increased the debt on its books recently, which offsets tax payments.

In other words, all three were able to exploit a new tax loophole, created by George Osborne last year – that’s right, the Chancellor who is supposedly trying to stop tax avoidance has actually been creating more ways for big business to achieve it – to pay as little tax as possible.

In my article last Monday, I highlighted changes to the tax laws, brought in by Gideon, I mean Mr 0, that mean companies in the UK pay nothing at all on money made by their foreign branches and may claim the expense of funding those foreign branches against tax paid in the UK. That is exactly what Anglian and Yorkshire are doing, according to the Observer report.

Without knowing where the Thames debt is based, it’s hard to say for certain whether it falls into this category of tax avoidance.

Thames made an operating profit of £650 million last year, and Anglia’s was £492, while Yorkshire’s was £303 million. With Corporation Tax at 26 per cent (they should all pay the higher rate), this means the Treasury failed to collect nearly £376 million from the three companies.

The amount lost to the Treasury from these three companies alone would pay off three-quarters of what the government hopes to take away from people currently on council tax benefit, when local authorities implement their new council tax relief schemes – the ‘Pickles Poll Tax’ – in accordance with Eric Pickles’ Localism Act, next April.

Both Thames and Anglian told The Observer their tax was merely being deferred, and they would have to pay it in full at a later date. Yorkshire declined to comment.

My problem with this is that the UK is in deficit difficulties NOW. We need everybody’s tax money NOW. Not later. By exploiting a loophole in the tax system that the Chancellor irresponsibly created, they – AND HE – are extending the problem.

The absence of any significant tax bills means Thames and Anglian were able to pay out dividends totalling £1.5881 billion. I don’t have the figures for Yorkshire. Ask yourself how many of those shareholders have tax avoidance schemes of their own.

Meanwhile, those of us on PAYE have to pay the full amounts of our tax bills – and our utility bills – no matter what harm they do to our household finances. There can be no deferrals for the working-class citizen!

And what help do our bloated water companies give us?

A drop in the ocean.