In my new book ‘Reimagining the role of the Private Client Professional – post lockdown’ (which you can buy here) I talk about the rich being ‘clobbered’ to pay for the immense debt incurred by Coronavirus – this is certainly the view of Andrew McKenna former head of Compliance and Offshore at HMRC who talks to me on Episode 20 of How to Keep your Money.
Although the full impact of the Coronavirus has still to be analysed the first figures released are shocking. Tax receipts fell by £29 billion to April 2020. The Government received £35 billion up to April 2020, down 42% from £61 billion to April last year.
VAT receipts fell by 107% as shops, restaurants and bars closed and that will only increase as later months are added to this figure. Furthermore, there has been a fall in stamp duty by almost half (43%) with estate agents shut and no viewings permitted.
It is estimated that the Government will be out of pocket by £300 billion following coronavirus. Rishi Sunak is on record as saying that the UK will face the most ‘severe recession the likes of which we have not seen’
So, to cheer myself up - last Saturday I went shopping in Oxford Street – not that I particularly like shopping – but it was exciting to be allowed back into the shops for clothes –not just food – it felt weird. I went to Marks & Spencer, there were amazing discounts– everywhere. I bought a pair of ‘jeggings’ for £7.50 reduced by 50%, a top for £9.50 and some ‘strappy sandals’ for £21. – Bargains and beautiful!
The retailers have got it right; with warehouses full of merchandise, many people still frightened about public spaces and out of the habit of shopping – retailers know that they need to stimulate interest with fabulous ‘sales’ and ‘beautiful bargains.’
The Government should follow the example set by the retailers. It must first restore confidence – get people back to work and back to spending; oil the wheels of the economy.
Germany, to my mind, has got it right.
This month it announced an Eu20 billion temporary VAT reduction from 1st July to 31st December. The rate will be reduced during this period from 19% to 16%.
This is clever. It is for a limited period only and over the Christmas period which will encourage Germans to spend and to make expensive purchases before the end of the year when the rates go back up. This is what is needed to kick start the economy.
Germany has throughout this pandemic shown to be an efficient, effective and experienced government under Angela Merkel.
The figures speak for themselves. The Germans were 6 times less likely to die from the pandemic than the British. In total Britain had 306,210 confirmed cases of Covid 19 and 42,927 people died, whereas in Germany it had only 190,862 confirmed cases and only 8,895 people died.
In summary, out of 100,000 Britain had 64,27 deaths whereas in Germany the figure is 10.73 according to the John Hopkins University.
Despite our love of the NHS the UK spends only $4,000 per head two thirds of that spent in Germany.
The UK had only 4,000 intensive care beds at the outbreak of Coronavirus, whereas Germany had 28,000. Germany started out doing 160,000 tests a week which rose to 360,000 by mid-May, the UK planned to build its own app which was to be tested on the Isle of Weight but it did not work and had to be scrapped.
Germany has shown it cares for its residents and the UK government needs to do the same. Why should tax residents stay living in a country which does not care for them? Why stay living in a country when its track record on keeping its residents safe is so poor?
The UK Government needs to be clever –use carrots – not big sticks.
Raising the rate of tax is a big stick; tax reliefs are carrots. - Post lockdown people will have proved to themselves they can work from anywhere and will be less concerned about moving out of the country – especially a country which does not care for its residents.
The Government should also give incentives to its entrepreneurs to increase production and get people spending again. It should reverse the reduction of entrepreneurs’ relief back up to £10 million to incentivise entrepreneurs to increase business so that it is worth £10 million before they sell than sell out at £1million. It also needs to incentivise wealthy families to live in the UK and spend in our shops and restaurants.
In my new book ‘Reimagining the role of the Private Client Professional – post lockdown’ which you can buy here, I set out some ideas of how to change the tax laws so that wealthy foreigners can come to the UK – with their money –invest their funds in the UK and give a boost to our financial services industry.
I also go into some detail about how private client professionals should operate a Culture of Care –which I believe the Government should also do, to encourage private client professionals to show some empathy and guidance as they work for their clients
This week’s podcast professional, Zoe Cousens of Castellet Consulting operates a Culture of Care naturally. In her podcast this week she talks about providing financial education to women who may have been recently divorced or widowed, and employees who often spend up to three hours a week sorting out financial problems; time which could be saved with some education on how to budget and put in place a financial plan. To hear more click here
In the meantime if you would like to buy my book ‘Reimagining the role of the Private Client Professional – post lockdown’ simply click here, and if you would like to know more about becoming a podcast professional and join Caroline’s Club simply contact deborah@garnhamfos.com