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What's happening in the world of accountancy today

News in brief

Author: ICAEW Insights

Published: 21 Mar 2022

23 March 2022: UK debt interest payments hit record high in February; BAME car insurance customers may receive ‘ethnicity penalty’; Brexit sees Britons face high EU bank charges.

Rising inflation caused government interest payments to hit a record £8.2bn high last month. The highest amount for a February since records began in April 1997 and up £1bn on last year. The payments are pegged to the Retail Prices Index measure of inflation – which reached 7.8% in January. Surging food, energy and fuel prices have pushed costs up for households, while rising inflation means the government is paying more in interest payments on its debt. Public sector debt, excluding public sector banks, remains at a level not seen since the early 1960s, the BBC reported.

An estimated 754,000 Black, Asian, and Minority Ethnic (BAME) people may be facing an ‘ethnicity penalty’ on car insurance in England. A year-long Citizens Advice investigation found they each pay at least £280 more a year than white people, and up to £950 in some locations. In some areas “the difference in price was more than 100%,” but common risk factors such as crime rates and deprivation levels could not account for this, the charity said. In some cases, insurance in predominantly white areas with high crime rates was still cheaper than nearby predominantly BAME areas with lower crime rates. The industry body says insurers “never” use ethnicity as a factor when setting prices, the Guardian reported.

European banks are predicted to introduce high charges for Britons due to Brexit. This is because the SEPA rule that EU-wide charges cannot be higher than costs for domestic transfers no longer applies to Britain, despite the UK retaining the ability to use the SEPA infrastructure. French bank Crédit Agricole has already introduced a €5 charge for withdrawals made with UK-issued credit and debit cards and an €18 flat fee on any bank transfers coming from Britain, City A.M reported. The European Commission in January confirmed that the UK will also be part of ETIAS from late 2022, meaning Britons must pre-register their details before any trip, pay a €7 levy, and be limited to a 90-day stay in Europe. 

22 March 2022: Chancellor urged to up debt support for poor households; streaming could cost viewers £2,500 a year; new drive to save £5.5bn of wasteful government spending.

Debt charity StepChange is calling on the chancellor to use this week's Spring Statement to do more to help poorer households. It wants Rishi Sunak to increase welfare benefits by at least 7% in April and provide more funding for local councils to support people with vouchers, grants or discretionary payments to cover essential bills. The charity is also calling for the Warm Home Discount to be expanded and for energy companies to stop recovering debt from people who cannot afford to pay their bills. Of 1,676 adults surveyed by YouGov, 42% will struggle to pay rising energy bills and council tax in the coming months, the BBC reported.

The combined cost of film and broadcast streaming services in the UK has increased by almost a quarter in the last three years. It is now £2,500 a year, up from £2,040 in 2019, the Guardian reported. This includes the average monthly price of a broadband and phone package. To watch all the most popular paid services, such as Amazon, Netflix, Disney+ and Sky, now costs consumers an average of £200 a month. The rise is due to competition among services driving up the prices – some by more than a third – and inflation causing packages to rise around 10%. 

A new efficiency drive to cut £5.5bn of wasteful government spending has been announced by the Chancellor. Rishi Sunak will chair the new Efficiency and Value for Money Committee, which will ensure the 5% efficiency target set at the 2021 Spending Review is met across Whitehall and scrutinise strategies to prevent fraud and error. All the savings made will directly fund vital public services. As part of the crackdown, the annual NHS efficiency target will be doubled to 2.2% – freeing up £4.75bn to fund NHS priority areas over the next three years. Additionally, government arm’s length bodies will be expected to save at least £800m from their budgets. 

21 March 2022: warning of Ukraine donation scams; NAO measures British Steel pension scheme losses; DfT condemns P&O sackings and service suspension.

Fraudsters are pretending to be victims of the Ukraine crisis in order to steal money. Three types of scams have been reported so far, the BBC reported. The first is false charity donation websites and the second is con artists posing as victims and appealing for money on social media and forums. The third is people posing as Ukraine business workers who need to move money out the country into UK bank accounts, but drain volunteer accounts after obtaining their details. 

Thousands of steelworkers were the victims of pension regulation failures that left some with losses of up to £489,000. In 2017, many members of the British Steel pension scheme were persuaded to transfer their retirement savings by advisers who then pocketed huge fees. A report by the National Audit Office has found that many have still not been compensated fully, the Guardian reported. This has prompted accusations that the Financial Conduct Authority, responsible for regulating these firms, was “asleep at the wheel”.

P&O Ferries has sparked outrage after sacking 800 staff with plans to replace them with cheaper agency workers. Staff were told in a video call on Thursday they were being made redundant, “your final day of employment is today" and were escorted off their ships. P&O has suspended ferries on the Dover to Calais, Larne to Cairnryan, Dublin to Liverpool and Hull to Rotterdam routes while it sources the new workers. It says it made a £100m loss year on year and the move was required, but the RMT union is threatening legal action and the Depament for Transport has condemned the firing.

18 March 2022: UK suspends tax co-operation with Russia and Belarus; £1.7bn UK-Turkey clean transport deal made; UK-US dialogues to boost trade relations; US central bank raises interest rates.

The UK is suspending the exchange and sharing of all tax information with Russia and Belarus. This was done with Russia under the Convention on Mutual Administrative Assistance in Tax Matters and Russia and Belarus under bilateral Double Tax Agreements. Its aim was to generate a global collaboration to address tax compliance risks. Suspending these exchanges will ensure the UK is not supplying Putin’s regime with information that could lead to an increased tax benefit or yield for Russia.

The UK and Turkey have agreed a clean transport deal worth £1.7bn. This is the UK’s biggest-ever sustainable, civil infrastructure deal. UK Export Finance will guarantee a €2.1bn loan to fund construction of a 503km high speed electric railway in Turkey to decarbonise travel, with major contracts awarded to British and Turkish businesses. The deal helps Turkey finance large climate-friendly projects and meet its COP26 commitments, while nine-figure contracts are set to be awarded to UK rail suppliers as a condition of UK support. 

The UK and US have announced a new series of transatlantic dialogues. These are aimed at deepening trade and investment ties and boosting their £200bn relationship. The joint events will bring together US and UK government ministers, senior officials, trade unions, businesses and civil society to discuss a strategic direction through which the countries can achieve this. The first dialogue will take place 21-22 March in Baltimore, Maryland, and the second in the UK later in spring. 

The US Federal Reserve is raising interest rates for the first time since 2018. This is an attempt to bring fast-rising prices under control, as price inflation hit a 40-year high of 7.9% last month, the BBC reported. The US central bank said it was lifting its benchmark rate by 0.25% to 0.5% and that it expects this will rise to almost 2% by the end of the year. It will also wind down other stimulus, including large purchases of Treasury securities and other assets that it had launched to stabilise markets at the beginning of the pandemic.

17 March 2022: CMA publishes environmental sustainability advice; 99% of bodies opt in for national auditor appointment scheme; HSBC shuts another 69 branches. 

The Competition and Markets Authority has published advice on how competition and consumer laws can help meet the UK's environmental goals. This includes clarifying the law on providing environmental information to shoppers. It also outlined plans for a Sustainability Taskforce to lead its efforts towards the UK’s transition to a low carbon economy. This will develop formal guidance, lead discussions with government, industry and partner organisations and continually review the case for legislative change. 

The Public Sector Audit Appointments Limited (PSAA) has announced 470 of 475 eligible English local government bodies opted in to its national scheme for local auditor appointments. This will cover audits for financial years 2023/24 to 2027/28. The PSAA is required to appoint an auditor to all local authorities, police bodies and other local bodies that opt in. It will finalise appointments by the end of the year. Audit firms must submit selection questionnaires for the procurement by 18 March. More details are on the PSAA website.

HSBC is to shut a further 69 branches, on top of the 82 it axed last year. The decision is in response to an increasing preference for mobile and online banking following the pandemic, the Guardian reported. Fewer than half of HSBC customers now actively use the branch network, it says, with average footfall dropping more than 50% since 2017. It now has only 441 branches, of which 96 offer the full range of its services. Consumer organisation Which? says this is “alarming” as millions of people are not yet ready or able to go fully digital.

16 March 2022: IFRS participants wanted for goodwill measurement research; Putin changes law to keep leased jets; R&D gets record £39.8bn budget for 2022/25. 

The UK Endorsement Board is researching the impact of potential changes to the subsequent measurement of goodwill under the International Financial Reporting Standards (IFRS). It invites UK-based IFRS preparers, auditors, investors and academics to participate in the field-testing phase of the research during March and April 2022. The project will provide UK-specific information to the International Accounting Standards Board during redeliberation on its ‘Business Combinations: Disclosures, Goodwill and Impairment’ discussion paper. 

Russia has implemented a new law making it harder for foreign aircraft leasing companies to repossess their planes. Russian airlines have 515 jets leased from abroad worth about $10bn (£7.7bn) and foreign owners have until 28 March to get them back before sanctions kick in, the BBC reported. The new law will allow foreign jets to be registered in Russia, meaning they are not returned to their owners when the leases are terminated and instead used to fly domestic routes across the country. Many will lose value to their lessors if they stay in Russia, as they will not be insured under international standards or serviced properly due to a lack of available parts. 

The government has announced plans for a £39.8bn research and development (R&D) budget for 2022/25 – its largest ever. The funding will be allocated across the Department for Business, Energy and Industrial Strategy’s partner organisations, helping deliver its Innovation Strategy ambitions. These include increasing total R&D investment to 2.4% of GDP by 2027. UK Research & Innovation will receive over £25bn of the funding across the next three years, while £6.8bn is allocated for EU programmes. 

15 March 2022: Sunak urges firms to stop investing in Russia; health a focus in ONS’ latest cost of living measure; legal action taken against Russia over MH17 shooting.

Chancellor Rishi Sunak is encouraging firms to move away from investing in Russia. He says there is no argument for new investment in the Russian economy from UK firms and welcomes commitments already made by companies and investors to divest away from Russian assets. “I want to make it crystal clear that the government supports further signals of intent,” Sunak said. “We must collectively go further in our mission to inflict maximum economic pain - and to stop further bloodshed.” Businesses are urged to “think very carefully” about any investment that would in any way support Putin’s regime, even if winding down their positions must be a long-term process. 

High demand for sports bras, vegetarian meat alternatives, pet collars and anti-bacterial wipes means they are now being used to calculate the change in the cost of living in the UK. Men's suits, doughnuts and encyclopaedias have been removed from the Office for National Statistics’ list of more than 700 goods. This reveals how homeworking shifted people’s dress, snack and work habits during lockdowns, as well as driving an increase in pet ownership and focus on health, the BBC reported. Coal has also been removed, ahead of the planned domestic coal sales ban for 2023. In total, 19 items were added and 15 removed.

Australia and the Netherlands have launched legal proceedings against Russia over the shooting down of Malaysia Airlines flight MH17. The two countries are seeking compensation and an apology from the Russian Federation through the International Civil Aviation Organization (ICAO). The disaster saw 298 people, including 38 Australians, killed when it was shot down over Ukraine in 2014, the Guardian reported. Russia denied involvement, despite the findings of an international investigation, and unilaterally withdrew from negotiations in October 2020. The new legal action could compel it to take part in negotiations, and even result in penalisation by the ICAO, a United Nations-linked organisation. 

14 March 2022: £84m rail investment for Manchester and the North; Ukraine invasion brings UK economic uncertainty; Heathrow to hire 12,000 staff for summer boom. 

The government has invested £84m to cut delays and improve the reliability of trains in Greater Manchester and North England. Works will deliver trackside upgrades, platform extensions for longer trains and bigger depots across the region. The funding begins a decade’s worth of investment that will transform rail in the North. All of these improvements are in addition to the £96bn Integrated Rail Plan being applied in the area. 

Russia's invasion of Ukraine means significant uncertainty for the UK economy, chancellor Rishi Sunak has warned. This is despite UK growth bouncing back 0.8% in January and the effects of the Omicron variant easing. While consumer-facing services are still 6.8% below pre-pandemic levels, the economy was on course to maintain its return to normal. However, it is under added pressure from the increasing cost of living and energy squeeze. Now, the economic consequences of the Ukraine invasion are pushing both inflation and growth in the wrong direction, and it risks derailing the supply of critical commodities to many sectors, the BBC reported

Heathrow is to hire 12,000 staff to handle an expected summer holiday boom. The UK’s busiest airport expects passenger numbers to hit 85% of pre-pandemic levels. This is despite February’s passenger numbers being only 2.8 million – almost half pre-pandemic levels and 15% below Heathrow’s own forecast. It credited this to recovery being “overshadowed by war and COVID-19 uncertainty” but added the staff were needed as even at just 85% the airport would feel busier due to additional pre-departure checks and re-opened terminals.