economic #aGENda 23.02

Our regular roundup of financial news from the last two weeks that's driving the economy

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Gulf between 3.1% state pension rise in April and inflation is widest since the triple lock was introduced over a decade ago

Retirees in Britain face the worst disparity in their state pension payments when set against inflation since the triple lock was introduced over a decade ago.

In April, state pension payments will rise by 3.1%, and be based on Consumer Price Index figure from last September. But earlier in the month, new official figures revealed that inflation was running at 5.5% in the year to January.

Pensioners would currently see a real term loss of 2.4% in the amount of state pension income they receive from the Government, and the problem could worsen with forecasts of inflation peaking at around 7.25% in April.

The basic state pension will rise by £4.25 to £141.85 per week, or around £7,370 a year, in April. The full flat rate will rise by £5.55 to £185.15 per week, or around £9,630 a year.

Since the triple lock was launched in 2010, there have only been 22 months when inflation stood above the uprating of the state pension for the previous April and five of those months were in 2021.

The previous biggest disparity was 0.6% back in November 2017, when inflation ran higher than the state pension uprating for 11 months, but only on average creating a disparity of 0.4% over the period.

New taxes rake in £50bn for HMRC ahead of National Insurance rise

New levies imposed on businesses over the last decade have raked in more than £50bn for the Treasury, as the UK’s tax burden rises to its highest level since the 1950s.

The bank levy, apprenticeship levy, soft drinks tax and a range of other charges have all contributed to the public purse. It comes as National Insurance is set to rise in April, adding 1.25 percentage points to the tax levied on employers and on their workers’ pay packets.

These new taxes have proven themselves to be a successful way to bring in billions of pounds in a relatively short space of time.

The new National Insurance surcharge is sure to be a success from a public purse perspective, but will add considerable financial and compliance stresses to both businesses and individuals. The extra National Insurance fee, which will be known as the health and social care levy from 2023-24, is set to raise around £17bn per year, outweighing even the largest of the previous new taxes.

Asking prices for UK homes show record rise

The Bank of England is set to increase interest rates for the third time in a row later this month in a bid to curb rampant inflation.

Households are facing the biggest squeeze on their finances in a generation. Home buyers however are undeterred.

Asking prices for homes coming on to the market in Britain rose by a record 2.3% in February, according to the property website Rightmove. The listing site said it was the biggest monthly increase in the 20 years it has kept records and meant the average advertised cost of a home was up by £7,785, to £348,804.

Over the past 12 months, asking prices have gone up by 9.5%. While the number of new property listings increased by 11% during the month, the number of people looking to buy a property rose by 16%. This new record means that average asking prices have now risen by nearly £40,000 in the two years since the pandemic started, compared to just over £9,000 in the previous two years.

The figures show a widening gap between the number of buyers and sellers that property experts say will maintain house price inflation this year well above annual salary increases.

First-time buyers are expected to lose out in the race to buy the few properties on the market. Wealthier buyers, many of whom have saved large deposits during the pandemic, are among those caught by the “fear of missing out”, which could continue to drive prices higher over the coming months.

UK beats global stocks in early 2022

Despite current market turbulence, UK stocks have widely outperformed global equities this year, in a sign that investors are hunting for bargains as they exit higher-growth businesses whose appeal has been tarnished by expectations of interest rate rises.

A broad MSCI index tracking UK companies has added 3.6% in dollar terms since the end of 2021. That gain puts British stocks more than 9 percentage points ahead of the broader MSCI World index, which has fallen almost 6% over the same period.

If current trends were to continue through to December, this would mark the first year since 2011 that UK equities have beaten the rest of the world.

London’s blue-chip benchmark share index, the FTSE 100, has a heavy concentration of industries that have been unpopular investments over the past decade, such as global banks, miners and energy producers — from HSBC to oil major BP.

At the same time, the gauge lacks technology companies to rival US heavyweights such as Alphabet, Amazon and Apple, and has trailed other leading equity indices in the years that followed the 2016 Brexit referendum.

Last year, for example, Wall Street’s S&P 500 index gained 27%, while the FTSE 100 gauge added just 14%. But those trends have reversed in recent weeks as global investors have begun to unwind positions in riskier assets expected to grow at a rapid clip years into the future in favour of cheaper stocks represented in UK markets.

HMRC’s NFT seizure ‘a warning’ to investors and tax cheats

The UK tax authorities have confirmed their first ever seizure of a non-fungible token (NFT) following a probe into an alleged £1.4million VAT fraud.

Her Majesty's Revenue & Customs (HMRC) said it had confiscated three NFTs, along with £5,000 in other crypto-assets, and arrested three people as part of a fraud investigation concerning around 250 sham companies.

It claims the three suspects, who have not been publicly named, used a variety of 'sophisticated methods' to try and conceal their identities, such as false invoices, pre-paid unregistered mobile phones and virtual private networks.

NFTs are tokens representing the ownership of a digital asset, which could be an artwork, an image, music, or even a tweet that have their own unique signature and cannot be exchanged for another asset of the same type.

But there has been increasing worries that these digital tokens, as well as cryptocurrencies, are being used by criminals to hide their illicit financial gains. Nick Sharp, the Deputy Director of Economic Crime at the HMRC, said: 'Our first seizure of a Non-Fungible Token serves as a warning to anyone who thinks they can use crypto-assets to hide money from HMRC.