Should Rishi Sunak's wife pay tax on overseas income? What is a Non-Domicile (non-dom)? A non-dom is a UK resident, in this example, Rishi Sunak’s wife, who declares their domicile (permanent home) outside the UK. They can choose this by providing evidence about where they were born, their future intentions, where they intend to be buried, and other lifestyle choices. If you are able to claim this status, you must pay tax on your own earnings originating from the UK, but you do not need to pay tax on foreign income. In Akshata Murty’s case, she does not legally need to pay tax on her income from India, as she is claiming this country as her domicile. This law allows her to save millions of pounds in tax on dividends from her father’s IT firm in India, Infosys, in which she owns a share of £700m. It has been estimated that she would have saved £2.1 million per year in taxes through her non-dom status. However, there is controversy and people are not happy, due to Mr. Sunak’s family benefiting while the cost of living is rising rapidly. In addition, National Insurance is rising, and so as of April 2022, anybody earning more than £9,880 a year will pay 1.25p more. On a larger scale, someone on £50,000 w ill pay £197 more. He has also recently increased tax rates, which has caused a lot of uproar. Another major reason for controversy is because as Chancellor of the Exchequer, Rishi Sunak has Governance over the UK’s Fiscal affairs, including the non-dom policy. Due to this, he has control over his wife’s financial arrangements which has created opposition as it enables loopholes to be created to avoid tax. As she is the wife of the Chancellor of the Exchequer, Akshata Murty should be beyond reproach as she has a moral duty to pay her taxes, as her husband is responsible for setting the country’s taxes. In addition to this, the reason why her taxes are so high is because she earns so much and has enough capital to do so. Following the controversy, Akshata Murty has declared she will pay UK taxes on her overseas income. She has stated, “It has become clear that many do not feel it is compatible with my husband's role as chancellor. I do not wish my tax status to be a distraction for my husband or to affect my family." She has also stated that she will pay UK tax on all her worldwide income, including dividends and capital gains, even though it is not legally required for her to do so. On another note, as Akshata Murty will retain her Indian citizenship and her non-dom status, so she does not have to pay inheritance tax, which could potentially be up to £280m.
By Darma
Why discounters could save us? Inflation is at the highest rate recorded since the Consumer Price Index came into force in January 1997, at a staggering 7%, a rate of increase last seen in 1992. Furthermore, the Bank of England anticipates that inflation is likely to approach 10% as the country continues to be at full capacity, given that demand ramped up quickly post Covid-19 and supply failed to keep up. In addition to this, the tragic war in Ukraine and resultant sanctions on Russia have hiked up food prices, with Ukraine being a leading wheat exporter and Russia a critical gas exporter. This in turn has caused prices to surge by a shocking 81% from $70 to $127 per barrel during March and April. Consequently, this adds pressure on all UK consumers, where those in the lower income decile face a regressive effect. This is owing to utility, petrol and grocery bills consisting of a higher proportion of their average spend, relative to a higher income consumer.
A controversial government response Minister George Eustice has been pilloried for trivialising this cost of living crisis by suggesting in May 2022 that consumers purchase cheaper ‘value’ products from supermarkets such as Tesco and Asda. However, this begs the question as to whether he should have been pilloried – was this in fact a practical, if unfeeling, suggestion? This article will argue that he should indeed be criticised, though not for his insensitivity, but for having made the wrong suggestion – he should have recommended that consumers instead visit discounters such as Lidl and Aldi, where with the same budget, they can purchase higher quality groceries.
How can discounters’ products be such good value? Structural organisational decisions compound to help these discounters maintain a lower average cost and hence achieve productive efficiency, and translate this into a lower price for shoppers whilst keeping product quality standards high. One such reason is that they rent cheaper properties on the outskirts of town; for instance, in nearby High Wycombe, the Aldi in quiet Baker Street and Lidl on quiet Richardson Street are both a far cry from the buzz of the more expensive Eden Centre, as the discounters depend on customers seeking them out given their reputation for very low prices. Moreover, these discounters save money by ignoring aesthetics and costly shelving, keeping their stores functional with products kept on the floor in their original bulk containers. Customer service is also very limited, and consumers are prepared to queue for longer. Meanwhile, workers in Aldi are trained to be practical and perform numerous tasks with high capability, as there are a sparse 4 employees per shift vs much higher numbers in stores such as Tesco and Sainsbury’s. The smaller number of staff are actually paid higher wages than average, resulting in high staff loyalty, but their restricted numbers still make both Lidl and Aldi’s operating costs significantly lower. The discounters choose to offer approximately 5000-10,000 products rather than the usual 25,00040,000 products which supermarkets such as Tesco and Sainsbury’s sell. As a result, the discounters can attain economies of scale from bulk-buying and from the large volumes purchased. Full lorry loads are therefore efficiently sent to the warehouses of the discounters. The remarkable high quality of these products is specified by the discounters to the manufacturers by insisting on rigorous quality and sensory testing. Given these efficiencies, a keen price per product is negotiated by the discounter with the manufacturer which is then passed onto the consumer. Aldi’s Beef Lasagna, for instance, retails at £3.30 per kg including 20% beef. This compares to Tesco lasagna at £4.00 per kg with 16% beef and Asda lasagna at £4.40 per kg with 21% beef.
By Matilda
Interest Rates Rise as Inflation Rockets What happened and why? On 5th May the Bank of England raised the base rate from 0.75% to 1%, its highest level since 2009 and the fourth consecutive increase since December. The reason for this 0.25% rise in interest rates is due to inflation; in March the rate of annual inflation in Britain reached 9%, the biggest such increase in 30 years. This hike in prices has been caused mainly by supply shocks in Russia and Ukraine leading to increasing energy prices. The cost of heating oil, used by around 3% of Britons to heat their homes in winter, soared by 44% in March compared to February. This was due to sanctions against Russia preventing the world’s second largest exporter of oil from selling to other countries, which increased the price of the commodity to others. Another factor for an increasing general price level was a surge in oil prices, as motorists paid around 30% more to fill up at the pumps in March than they did in the corresponding month in 2021. Lastly, a shortage of workers in fields and factories and lessened specific commodities contributed towards inflation. Over 70% of sunflower oil comes from Russia and Ukraine, making food 6% more expensive than the previous year. By raising interest rates, this will help reduce the severity of inflation as more overseas investors will save in our country due to rewards for saving being higher. Appreciation of the exchange rate will follow, therefore reducing the price of imported goods and in turn reducing costs of production and the general price level.
The effects of these issues will knock a disastrous £20 million off Boohoo’s earnings and the online retailer is now only
anticipated
to
grow
12-14%
compared to a previously forecasted 2025% growth rate this financial year. Moreover, the US is a key growth area for Boohoo where they are looking to expand, so decreased demand in that market is a huge blow to the company. As shopping patterns begin to return back to normal with the reopening of high street rivals such as River Island and H&M, Boohoo sales growth has slowed significantly especially over the summer quarter.
How does this affect me? 1/12th of the UK will experience an increase in their monthly mortgage repayments if they don’t have fixed mortgages. When compared to pre-December 2021, tracker mortgage customers could be paying about £90 more a month and variable mortgage holders about £57 more. Bank of England interest rates also influence the interest charged on things like credit cards, bank loans and car loans, hence lenders could decide to increase these fees now that interest rates have risen. Retirees will most likely experience a fall in the real value of their pension income, at least in the short term, as the state pension rose by just 3.1% in April, in line with September’s inflation rate. With people having to spend more money on necessities, this year will see the largest fall in household disposable income since 2011, and the second largest since records began in 1964. In this case there is a regressive effect on the economy as the lower income families, who tend to spend the biggest share of their budgets on household energy bills, face the greatest pain. The effect on high income families is significantly lower for the reason that they will have greater amounts of money in their savings helping them out in these situations. The poorest 10% of British households will endure an inflation rate 3.5% higher than that experienced by the richest decile.
By Lakshya
Film Review – The Big Short The Big Short is about a few finance experts betting against the banks when they discover instability in the supposedly stable housing market. They then explore the corruption and flaws that took place in the banking system.
Firstly, I would 10/10 recommend this movie to anyone as I really enjoyed it. Even if you don’t really understand macroeconomics, bonds or the role of banks, this fast-paced film uses great analogies to explain the situation in the late 2000’s. For example, there was a scene where the chef Anthony Bourdain explained something complicated using seafood which really helped me keep up with the events.
This film really portrays the dark, shady, and greedy side of Wall Street. There was a lot of lying and coverups just to make profits and bonuses. Watching this film, it felt like society was completely disregarded by Wall Street and the banks just to make profit. This was a prime example of how greed in the short run caused more damage in the long run, as many people lost property and jobs. However, it was surreal to see how investors made hundreds of millions of dollars from such a great recession by betting against something as ‘stable’ as the housing market.
In conclusion, The Big Short was an entertaining and accurate film that depicted the Great Recession in the United States in 2008. It was very comedic at times and starred well-known actors like Ryan Gosling, Steve Carell, Christian Bale and Brad Pitt. Overall, I strongly recommend that everyone watch it as it will show you just how severe things were back then.
By Rishil
Is Netflix Losing its Crown? Netflix’s market value has seen a $50 billion loss as well as its share price diminishing 35% after the company revealed a massive decline in its subscribers. To add to this blow, industry experts warned millions more were likely to quit the service over the next few months due to the cost-of-living crisis, the potential introduction of a clamp down on password sharing and an overall lack of innovation and poor-quality content. In April 2022, Netflix stated its overall number of subscribers had dropped by 200,000 in the first three months of the year, falling well short of its target and being the company’s lowest growth year since 2015. So why is Netflix deteriorating? One of the main reasons for Netflix’s loss in subscribers is due to the economy’s current cost of living crisis where prices are up 7%. This has led to households seriously having to prioritise where and on what they spend their disposable income. Netflix is not a necessity item with many consumers describing it as a ‘frivolity’. This along with their decision to increase their prices during an already difficult time, it is easy to see why households are abandoning the service completely or switching their premium plans down to standard as other bills take precedence. Netflix arrived in the UK in 2012 and since then has dominated the industry for almost a decade. However, over the last few years they have gained a considerable number of rivals including Amazon Prime, Disney+ and HBO all of which are investing hundreds of millions of dollars into competing with Netflix. Many consumers are switching to these competitors as they feel Netflix’s quality has decreased recently with many popular shows being removed unexpectedly as well as appealing teaser clips that do not live up to expectations leaving many consumers disappointed. Furthermore, many companies are taking their shows off Netflix to put them on their own streaming platforms leaving Netflix with a huge problem of how to fill the gaps. Therefore, is it so surprising the company is losing some edge in the market?
Furthermore, households had more time and money during the pandemic which meant the market for streaming services was thriving. This is evident in the fact that in the first three months of 2020, sixteen million people signed up to the company. However, as the economy begins to bounce back with many workers returning back to the office, less time is being devoted to watching these services. It is argued Netflix has run out of ways to grow its business especially after their huge expansion over lockdown.
Netflix is forecasted to lose even more subscribers after hinting at a potential clamp down in password sharing to help tackle the free-rider problem with over 100 million households watching for free. This could include new rules such as account holders having to pay to add user profiles for people outside their household as they believe this issue is hindering the company’s growth. They believe by increasing regulation on this people who are currently sharing will stop and become direct new customers. However, in economic reality, it is believed these people will simply just abandon the service completely. A survey in the US found that only 11% of users were sharing passwords, with 85% of people being fully paying subscribers and the 4% on free trials- therefore a password clamp down may have little impact on Netflix’s growth especially if these people decide to leave all together.
Overall, Netflix won’t be disappearing anytime soon as it is still the world’s largest streaming service provider, the issue more lies with how much it will grow in the future in terms of attracting new subscribers as they already have a vast base of around 221 million. Saying this, Netflix is looking into more innovative methods such as producing more of its own content, something that has been very successful in the past with shows such as The Crown, Bridgerton and Squid Game being global hits. Additionally, to help lure customers back to the company, Netflix has proposed a new cheaper package with the catch being that users have to sit through adverts. Industry experts point out that rivals such as HBO and Hulu have been able to maintain strong profits through offering an ad-supported service therefore they hope Netflix receives the same positive outcome.
By Eleanor
How Will Future Technologies Affect Productivity? Technology has allowed us to be more productive with our time. It is believed that with collaborative technology, it is possible to be 30% more productive than without it. In the future, technology is supposed to help further increase that number.
Driving requires a lot of concentration over a long period of time. With driverless cars, it allows people to be the “passenger” and be more productive as they can save a lot of time taken by driving. It also means that the roads will be safer with the programmed cars at the wheel.
Artificial Intelligence (AI) will help improve productivity. In the time to come, AI is set to optimize the manufacturing process with some companies already using these technologies. Amazon bought Kiva Systems in 2012 for around $800 million. Over the years it has developed 200,000 robotic vehicles that work in Amazon’s warehouses. The robots allow Amazon to hold 50% more stock and to retrieve that stock 3 times faster.
Environmental sustainability is another big problem for the government. Fuel cells can be used as an alternative to petrol for cars and other appliances that require power. This is clean and does no harm to the environment. The effects of using this technology may not be seen immediately, but it will have a big effect on productivity and health in the future.
HS2 is a high-speed railway that will help connect towns from London to northern England. This project has been heavily invested in by the government and is projected to cost £96 billion in total. It will help people outside of London get higher incomes as they would be able to travel into London to get more job opportunities. This investment will also help improve the efficiency of how resources are allocated, which all together will drastically improve productivity. The hope is that it will help with regional balance and spread money across the UK instead of the money being concentrated in London, which in the long term will have a big impact on productivity for the UK.
By Steven
Breaking News: Chelsea FC is up for Sale Who is Roman Abramovich? Born in 1966 in Saratov, Russia, a major port city in the southwestern corner of Russia, Abramovich is a Russian billionaire, most well-known for his role as owner of Premier League club Chelsea. Abramovich has gained his wealth through various investments and is known for his ability to buy and sell both businesses and various assets for profit. According to Forbes in 2019, Abramovich's net worth was approximately $12.9 billion. The 55-year-old has made friends in high places during his career, most well-known for his friendships with former Russian president Boris Yeltsin and current president Vladimir Putin.
When did Roman Abramovich buy Chelsea? Roman Abramovich first took ownership of Chelsea FC in June of 2003. Through a 100 percent ownership stake in U.K. based holding company Fordstam Limited, Abramovich purchased the club from Ken Bates, who in turn went on to buy Leeds United. Since his takeover, Chelsea has won 18 trophies, including two Champions League titles, five Premier League championships, and most recently the 2022 Club World Cup, but it has come at a serious cost to the club. Chelsea was in £1.5bn of debt to Abramovich, however, he has decided to write off the debt that Chelsea owes him as a gesture of goodwill, after confirming he was going to sell the Blues.
Why is Roman Abramovich selling Chelsea? The reason Roman Abramovich wants to sell Chelsea is because he is facing the threat of being sanctioned by the UK government due to the invasion of Ukraine by Russia. If this was to happen, potentially all his assets in the UK could be frozen and he would lose control of the club. He's already trying to sell £200m worth of property in central London, and his most valuable UK asset is Chelsea, so it makes sense he would try to sell the club as quickly as possible.
How are Chelsea affected by sanctions on Abramovich? The sanctions against Chelsea are no different to those against Abramovich’s other assets, for example, if a yacht is frozen, it cannot be used or sold, and the owner cannot benefit from its ownership. With a football club, the same has to be the case. However, a ‘special license’ has been granted to Chelsea. This allows the club to pay players and staff, settle outstanding transfer fees, spend up to £500,000 on staging matches and receive payments (which are then frozen). The club cannot spend more than £20,000 on away travel for matches, and club merchandise cannot be sold, nor can new tickets for matches be sold. The uncertainty of the impact of the asset freeze arises from daily running costs. Chelsea has a wage bill in the tens of millions of pounds per month. Without any income via television payments, additional ticket sales and merchandise, how long will the club be able to afford these payments? Will it even be able to complete the season?
Who is most likely to buy the club from Abramovich? As it stands there are 3 consortiums that are fighting to purchase Chelsea after nearly 2 decades under Roman Abramovich. Broughton’s coalition is the only one that is British led, and reports have suggested that Serena Williams and Lewis Hamilton, two of the sporting worlds most decorated stars have backed a takeover bid spearheaded by Sir Martin Broughton. The club is expected to sell for over $3.27 billion though the sale and current management of the club has been complicated by the sanctions levied against Abramovich by the British government for his reported ties to Russian President Vladimir Putin.
By Bruno
McColl’s Jobs at Risk After lenders declined a last-minute offer from Morrisons, the convenience chain McColl’s confirmed it had gone bust and will appoint administrators, putting 16,000 jobs and 1,100 stores at risk. The offer from the supermarket giant was refused as a result of lenders being ‘unsatisfied that any discussions would reach an outcome acceptable to them’, despite a Morrisons spokesperson claiming that the chain ‘put forward a proposal that would have avoided the announcement of administration, kept the vast majority of jobs and stores safe, as well as fully protecting pensioners and lenders.’ However, as reported by Sky News, the EG group, petrol forecourts owned by the Blackburn Billionaire Issa Brothers, is favourite to buy McColl’s out from administration, saving all outlets and employment across the country (but not their pension scheme). In doing so, EG group would take on over £100m of debt, as well as choosing to raise the pay for workers to just over £10 per hour. It is also understood that Morrisons is still interested in the takeover, due to the businesses being major partners, with hundreds of the McColl’s convenience stores operating under the Morrisons Daily brand. McColl’s hopes that in appointing administrators from PricewaterhouseCoopers (PwC) it will help to ‘implement a sale of the business to a third-party purchaser as soon as possible.’ The trustees of the convenience store’s pension scheme urge the buyers of the business to take on the system, which will undergo automatic assessment from the pensions lifeboat once in administration. This means under the Pension Protection Fund; the members of the scheme would receive up to 90% of their promised benefits. As quoted by the trustees, ‘breaking the link between the scheme and the sponsor company would present a serious breach of the pension promises made to staff who have served the business loyally over many years,’ which is why they are eager to encourage a full takeover. However, as reported by The Guardian, pensions expert John Ralfe believes it to be unlikely that any potential buyers of McColl’s will take on the extra problem of the pensions, as it amounts to more than £15 million of debt.
Despite seeming sudden, McColl’s has been facing financial struggles in the past few years, mostly as a result of supply chain issues and inflation, which caused prices to soar. With the shares in the company being suspended on the London Stock Exchange and with plans still very unclear, no one can be quite sure what the future will hold for McColl’s convenience stores.
By Lois