Coalition’s Fiscal Squeeze Will Push UK Into Recession 
A respected think tank has warned that the UK will fall into another recession this year, if the government continues to “deliberately” damage the economy with its fiscal squeeze.

The National Institute of Economic and Social Research (NIESR) have slashed its outlook for the economy and predicts that it’ll contract by 0.1 percent this year. This news comes as another blow to the government, following official figures released last week which already show that the UK contracted in the final quarter of 2011.

NIESR have said that a return to recession will be driven by squeezed families cutting back further, tight credit conditions and businesses’ reluctance to invest amid uncertainty in both the domestic and foreign markets.

Simon Kirby, from NIESR has warned that it’s obvious that the economy is in poor shape and the degree to which this persists is uncertain.

The think tank is now urging the government to loosen its fiscal stance and shore up faltering demand. NIESR argue that the government could easily afford to invest enough money into the economy to avert a recession this year, without denting its credibility in financial markets or doing any long-term damage to the public finances.


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IFS Call For Tax Cuts 
Influential forecaster, the Institute for Fiscal Studies (IFS) have told the Chancellor, George Osborne, that he should consider emergency tax cuts in the budget, if the UK is to avoid a second recession.

With the Chancellor delivering the budget on March 21st 2012, he has been put under pressure by all sides of Westminster and the IFS to make tax cuts.

The IFS have suggested that National Insurance or VAT could be cut by up to £20 billion, by George Osborne, as the economy looks set to deteriorate ahead of a feared Eurozone break-up.

However, despite calling for emergency tax cuts, the IFS have admitted that such a move would only deliver a small boost, and any bigger packages proposed by the Chancellor could potentially undermine investor confidence and do further harm.

An economist at the IFS has said that any proposal for tax cuts need to be timely, temporary and targeted, suggesting that a “temporary cut to VAT has the largest immediate impact.”

It’s reported that, if the rate of VAT was reduced from 20 percent back to 17.5 percent, it would cost around £12 billion a year; whilst a temporary cut to National Insurance contributions for employers would cost around £4.5 billion per year, if reduced by one percent.

Despite the pressure from Westminster and the IFS, the Treasury has said that a tax cut was not affordable.


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Watchdog Could Have Overturned Huge Tax Bills 
A report has revealed that tens of thousands of tax demands are never investigated by an impartial judge, despite there being an Adjudicator’s Office set up to investigate any complaints about the taxman and its mistakes.

The report accuses HMRC of denying a fair hearing for taxpayers who dispute bills, as they fail to highlight their right to have their complaint heard by the adjudicator; claims which are backed up by the reports findings.

From an investigate, the report found that since September 2010 158,598 people have complained about unfair tax demands, yet only 40,827 appeals have been upheld and 117,771 rejected.

It also found that up to April last year, 716 claims had been taken to the independent adjudicator’s office, whilst 83,700 has been rejected – suggesting that only 1 in every 120 complains thrown out is judged independently; yet 1 in 4 which are independently adjudicated are upheld.

Experts say people making complaints to HMRC are unaware they can have their case reviewed by an independent referee; with one expert saying: “There’s a serious lack of information for individuals. A lot of people don’t know what the Adjudicator does or how it works.

“It’s woefully inadequate to have it mentioned at the bottom of the letter in a paragraph. There needs to be a much greater clarification about it from HMRC.”

It’s reported that the information given to those whose appeals are turned down includes only a website address for the Adjudicator, not a telephone or postal address.

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UK Refuse to Join Fiscal Compact 
Twenty-five of the twenty-seven EU member states have agreed to join a fiscal treaty to enforce budget discipline; with only the UK and Czech Republic refusing to sign-up.

Along with refusing to sign up to the fiscal treaty, Prime Minister David Cameron has warned that his government will act if the treaty threatens UK interests; whilst he has also claimed he still has legal concerns about the use of EU institutions in enforcing the fiscal treaty.

Mr Cameron, who recently used his veto to opt out of the treaty, claiming the UK needed to keep its authority over financial issues in the City of London, said: “It's good that the new treaty is absolutely explicit and clear that it cannot encroach on the competences of the EU.

“They must not take measures that in any way undermine the EU single market. We'll be watching like a hawk.”

The French President, Nicolas Sarkozy said that the Czech Republic cited “constitutional reasons” for their refusal, whilst analysts believe that the Czech Republic President, Vaclav Klaus, a Euro sceptic may be reluctant to sign the treaty, despite stating they are committed to joining the Euro.

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Chancellor Told to Cut Corporation Tax 
A leading think tank has claimed that corporation tax should be halved in an effort to boost business and revive Britain’s economic growth.

The Centre for Policy Studies has urged the Prime Minister, David Cameron and the Chancellor, George Osborne, to cut corporation tax to as little as 10% because it’s the only source of a viable economic recovery.

During the budget last year, George Osborne pledged to cut the main rate of corporation tax to twenty-three percent from its current twenty-six percent by 2014; the lowest rate in the G7 group of leading economies.

However, a report by the think tank argues that the government needs to take a more drastic approach, reducing the corporation tax to twenty percent in this years budget.

The report states: “A cut in the rate to 20 per cent would be a quantum leap towards encouraging the enterprise economy which this country needs.

“It would be a wake-up call to business both domestic and international. It would also be a significant simplification of the tax system.”

The Centre for Policy Studies also says the tax cut is the only source of viable economic recovery since households and individuals are too indebted to expect consumers to lead a rescue of the economy.

Director of The Centre for Policy Studies, Tim Knox, said: “Profitable businesses are the only source of a viable economic recovery, the Chancellor should reduce the rate of corporation tax in the 2012 Budget — and also announce his intention to reduce it even further to 15 per cent or even 10 per cent once the appropriate anti-evasion measures are in place.

“The UK is facing the possibility of a double dip recession. Demand in the economy is weak. Business confidence is low. Politicians of all parties are looking for ways to encourage growth. Bold steps should be considered.”

The Treasury is expecting corporation tax to generate £43 billion in revenues this year, whilst the report estimates that reducing the tax to twenty percent would see the Treasury lose around £4 billion which would be offset by enhanced economic growth.

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