In a bid to tackle the cost of living crisis, the Chancellor has announced a £15bn package of support with one-off payments for pensioners and lowest income earners, and doubled the £200 energy bill support
The measures will see one-off payments of £650 for low income earners, £300 for pensioners and a further £150 for disabled people.
Stressing that the energy crisis was affecting the majority of people in the country, he also changed the £200 loan for electricity bills, doubling it to £400 and removing the requirement to pay it back.
Chancellor Rishi Sunak said: ‘To help with the cost of living we are going to provide significant targeted help to those with the lowest incomes, pensioners and the disabled. We will send directly to eight million of lowest income households a one-off payment of £650. The DWP will make the payment in two lump sums, in July and later in the year, and HMRC will make payments to those on tax credits.
‘There is no need for people to fill out complicated forms or bureaucracy – we will send the payment straight into their bank accounts.’
The package also includes support for pensioners and disabled people.
‘From the autumn, we will send over eight million pensioner households who receive the winter fuel payment – an extra, one-off pensioner cost of living payment of £300,’ the Chancellor said.
‘Disabled people also face extra costs in their day-to-day lives – like having energy-intensive equipment around the home or workplace.
‘So, to help the six million people who receive non-means tested disability benefits, we will send them, from September an extra, one-off disability cost of living payment, worth £150.
‘Many disabled people will also receive the payment of £650 I have already announced, taking their total cost of living payments to £800.
‘The most vulnerable will receive support of £1,250.’
The Chancellor also confirmed that benefit payments will rise in line with the September 2022 CPI figure for payments starting in April 2023. In addition, the triple lock will apply to state pensions.
Recognising the extent of the cost of living crisis, the £200 loan for electricity users becomes a grant, and the amount will be doubled to £400 from October.
‘The plan was to provide all households with £200 to help with bills, which was repayable. This support is now unambiguously a grant and the support will be doubled to £400 and not a penny to repay,’ he said.
Energy suppliers will deliver this support to households with a domestic electricity meter over six months from October. Direct debit and credit customers will have the money credited to their account, while customers with pre-payment meters will have the money applied to their meter or paid via a voucher.
This support will apply directly for households in England, Scotland, and Wales. It is GB-wide and there will be equivalent support for people in Northern Ireland.
‘We are raising emergency funds to help millions of the most vulnerable families who are struggling right now,’ the Chancellor said. ‘And all households will benefit from universal support for energy bills of £400 – with not a penny to repay.
‘In total, the measures I’ve announced today provide support worth £15bn.
‘Combined with the plans we’ve already announced…that means we are supporting families with the cost of living to the tune of £37bn or 1.5% of GDP. That’s higher or similar to countries like France, Germany, and Italy.’
Robert Pullen, a partner at Blick Rothenberg, said: ‘After weeks of denials, delay and dithering, the government finally announced a spate of cost-of-living support measures today, ranging from giveaways of £650 per household to converting the previously announced discount on energy bills from a loan to a grant.
‘The total cost of all the measures announced this year is now estimated by HM Treasury to be £37bn, which is equal to the total income tax paid through self-assessment tax returns for 2021/22.
‘Rishi also appears to have learnt from the calamitous administration problems created with previous measures, as we are told the process and paperwork will be far simpler.
‘However, the devil is in the detail and it is possible that many other individuals could miss out on support entirely or receive very little.
‘Whether Rishi will announce further support, or changes to the tax system more widely such as a speculated reduction in the income tax rate or increases to the long frozen basic rate band, which is being severely eroded by inflation, remains to be seen.’
Nigel Morris, employment tax director at MHA, said: ‘While the government has lived up to their promise of evolving their response to the cost of living crisis, as demonstrated by a windfall tax on energy companies and the UK’s energy bill grant doubling to £400, a more rapid rethink on taxes and businesses incentives is urgently required to prevent an impending recession.
‘Reducing the standard National Insurance contribution (NIC) rate back to 12% and lowering the income tax rate from 20% to 19%, even if only temporarily, would provide some much-needed relief for businesses and families across the UK. As demonstrated by the temporary VAT cut from 17.5% to 15% to tackle the 2008 financial crisis, short-term solutions can be highly effective to introduce vital relief and should be considered in the current climate.’
With the cost of living crisis, businesses need to focus on retaining staff and factoring pay increases into overall profitability, explains Stuart Clark, managing director of accountancy firm Russell & Russell
These are hard times all round. Particularly for the generations who have never experienced the inflationary chaos late last century, when interest rates hit 17% and mortgage payments soaked up the bulk of salaries.
That said, it is bad enough now, despite median pay awards to January standing at 3%, their highest for a decade. Employees are being attacked on all fronts, with soaring home energy bills, skyrocketing petrol prices, and startling increases in food – up 13% on average over the past year – and public transport costs.
It is inevitable in this series of financial blows that many employees will turn to their employers to help them weather the storm. And employers who are keen to keep their teams intact will be asking themselves: how can I further increase rewards without damaging the business?
The answer, as in so many otherwise intractable business scenarios, is to know the numbers, analyse them and use them as a clearly signposted pathway towards well-informed decisions.
The first step in considering remuneration policy is to discern what percentage salaries are of the direct cost of sales, and what the effect on the business would be if that percentage were to go up.
Take, for example, a business with a £3m turnover, gross profit of 30% and a net profit of 10% (£300,000).
An across-the-board increase in direct costs of 6.25% – which may consist of increased wages (and the increased employer contributions on this increased salary) and the increased employer National Insurance contributions (NIC) (up 1.25% this year) as well as any other direct material increases – would mean that the firm would have to increase sales by over £500,000 (ie, over 17% to £3.5m) in order to maintain the same levels of net profit (£300,000).
Or it could increase prices by 4%.
On paper it’s a no-brainer. Yes, a hike in prices might lose some custom, but clients are much more accepting of small increases in the current climate – and, with an 8% increase the firm could even afford to lose some customers and still make the same, or more, net profit. More money for less work.
The trouble is that many companies and organisations don’t look at the situation in this light and assume that they can realistically cover the costs of wage increases by the simple expedient of going out and winning more business. That is an unnecessarily hard hill to climb.
Businesses with strong teams and productive individual workers will obviously want to strain every sinew to retain them. Apart from the disruption inherent in frequent staff turnover, the recruitment costs to replace them are significant, with research suggesting an average of £11,000 per employee.
But there are other ways to encourage loyalty and good staff retention rates, such as offering interest-free loans – up to £10,000 is permitted at the moment – to be offset against future wages. This can help employees with, for instance, expensive season travel ticket costs.
Employee Assistance Programmes can also help to make people feel valued and wanted by supporting them with advice on areas such as financial planning and debt management, and perhaps counselling for staff who are struggling to make ends meet. In these trying times, many firms are also offering mental health support.
Bonus schemes are a double-edged sword. While they may be initially welcomed by employees, experience suggests that some staff may quickly feel entitled to them and expect the extra payment simply for doing their job – and become disincentivised if the bonus is withdrawn.
The simplest solution to staff satisfaction is to strive wherever possible to pay the market rate and, if practicable, something over and above.
And, while remaining sensitive to the inflation-fuelled trials that employees face, as well as the 1.25% increase in employers’ NICs, it is not unreasonable for employers to make the case in the workplace that they, too, are under the cosh from unprecedented increases in materials costs, business rates, living wage demands, premises and transport costs, and other margin-eroding pressures.
Responsible employees will take this into account and may be persuaded to exercise restraint if offered a more structured and advanced personal development plan, or a healthier work-life balance. A 2018 study said that 92% of employees felt benefits have a positive impact on overall job satisfaction.
None of these issues are going away anytime soon. UK inflation is at a 30-year high of 9% and may yet go higher.
But employers who are asking themselves if they can afford to lend a helping hand through wage increases should perhaps, more pertinently, be asking themselves if they can afford not to.
n a speech to the Confederation of British Industry (CBI) the Chancellor has promised tax cuts for businesses in the Autumn Budget
The promise, made at the CBI’s annual dinner, was made with the aim to boost investment ahead of the increase in corporation tax from 19% to 25% from April 2023 for company profits over £250,000.
Speaking at The Brewery in Central London the Chancellor stated that in order to get the tax cuts, businesses needed to ‘invest more, train more and innovate more’ as these were areas which Sunak highlighted as the UK’s ‘weaknesses. He added that this was ‘at the centre’ of his economic outlook.
The Chancellor said: ‘In the Autumn Budget we will cut your taxes to encourage you to do all those things. That is the path to higher productivity, higher living standards, and a more prosperous and secure future.’
Sunak mentioned the temporary 50% cut to business rates during the pandemic however added that ‘of course, there’s more to do’. The Chancellor used the speech to thank the CBI for their support during the Covid-19 pandemic and to reassure the CBI of the government’s pro-business history, stating ‘never, ever doubt we are on your side’.
In the Budget last year Sunak said he would increase the UK’s corporation tax from 19% to 25%, which aims to raise around £17bn annually. Small companies will continue to pay the lower 19% rate.
At the same time, the Chancellor also introduced a temporary ‘super-deduction’ for two years which offered a 130% relief on the purchase of equipment which is equivalent to 25p off a company’s tax bill. The move was done to encourage businesses to invest sooner.
The CBI has previously warned about the impact of ending the scheme, stating that capital investment will fall in 2023 as corporation tax rises at the same time. It stated that this will ‘likely send business investment as a share of gross domestic product to the lowest level in the G7’.
In response to the Chancellor’s speech, CBI president Lord Karan Bilimoria also spoke and urged the government to ‘act immediately’ on the cost of living crisis, stating that he is worried by the current trajectory as it will bring businesses ‘the highest tax burden in 70 years’ and ‘will stifle our recovery and growth’.
Bilimoria also urged the Chancellor to help companies to invest by introducing a permanent successor scheme to the super deduction, which he described as a ‘stroke of genius by the Chancellor’ and ‘of the utmost importance’.
He also called on the government to extend a recovery loan scheme to help businesses access finance and eventually create a long-term replacement, and bring forward a UK digital strategy.
The Chancellor closed his speech by stating that the government’s ‘firm plan is to reduce and reform’ business taxes but that businesses needed to their bit too.
Sunak said: ‘I believe our most exciting companies are still to be founded, our most talented people are still to be taught, and our best ideas are still to be discovered.’
The UK’s consumer prices index (CPI) shows inflation reached 9%, up from 7% in March 2022
The rate is the highest level seen in the last 40 years with the consumer prices index rising by 9.0% in the 12 months to April 2022. The recent 2% rise was also the sharpest monthly increase since 1980.
The Office for National Statistics (ONS) stated that the 54% increase in the energy price cap in April, which took the average annual gas and electricity bill close to £2,000, was the main reason for the jump in the consumer prices index.
Higher fuel and food prices, driven by the Ukraine war, also pushed up the cost of living up, with inflation expected to continue to rise this year. The ONS also noted that the end of the temporary cut in VAT for hospitality venues, from 12.5% back to the original 20%, has also contributed to the rise.
In his official response to the figures, the Chancellor Rishi Sunak said: ‘Countries around the world are dealing with rising inflation. Today’s inflation numbers are driven by the energy price cap rise in April, which in turn is driven by higher global energy prices.
‘We cannot protect people completely from these global challenges but are providing significant support where we can and stand ready to take further action.
‘We’re saving the average worker £330 a year through reducing National Insurance contributions (NIC), changing Universal Credit to save over a million families around £1,000 a year, and providing millions of families with £350 each this year to help with their energy bills.’
There has been increased criticism of the government over their ‘lack of action’ to combat the rise of inflation as those who will be hit hardest are lower to middle-income households.
Analysis from the Resolution Foundation found that inflation actually sits at around 10.2% for the poorest tenth of households with the richest tenth having an inflation rate of around 8.7%.
The foundation stated that this is since lower-income households spend a greater share of their family budgets on energy bills where prices are rising sharply.
Azets stated that the current level of inflation is to hit businesses hard as reduced discretionary spending is likely to increase intensely as finances are squeezed.
Donald Boyd, head of growth, Azets, said: ‘My message to businesses is to be brave and have upfront conversations with customers to increase prices to absorb rising costs however, any price rise is far less forgiving in the B2C sector, where retail and hospitality in particular will be first impacted.
‘Whilst it is of little comfort to SMEs and the public, much of the inflationary pressures are resulting from higher household energy prices and fuel costs rather than anything fundamentally unsound in the economy. It may be a case of holding our nerve until inflation peaks at around 10% or above before starting to fall next year.’
The Bank of England (BoE) warned earlier this month that inflation is to leave the UK on the ‘brink of recession’ with expectations that it will peak at over 10% later this year with the further expected rise in the Ofgem’s energy tariff in October.
In a Treasury Committee meeting on Monday, the Bank of England’s chief Andrew Bailey said that the bank was ‘helpless’ when it came to rising inflation as 80% of it was caused by factors that it could not control.
In the UK, inflation spiked from 9.2% in September 1973 to 12.9% in March 1974. Inflation peaked at 24.2% in 1975 and unemployment also climbed sharply.
The knock-on effects of this included the government being forced to ration electricity, frequent power cuts, and an enforced three-day working week.
Bank of England (BoE) chief Andrew Bailey defended his performance before MPs, stating that there was nothing else the Bank could have done to prevent inflation from rising to double digits
In a Treasury Committee meeting yesterday, when asked whether there was anything the Bank could have done to have shaped monetary policy differently over the last year, Bailey responded saying, ‘I don’t think we could’.
Defending Threadneedle Street before an announcement tomorrow of the sharpest annual increase in interest rates for four decades, Bailey told the Committee that while he was unhappy about the level of price rises, 80% of the inflation target overshoot was caused by factors outside the Bank’s control.
The war in Ukraine, Brexit, and the Covid-19 pandemic, in particular China’s zero-Covid policy, were the three main issues highlighted by the Bank as being the cause of the spiralling rise in inflation rates with the Ukraine war being described as the ‘big one’ due to the cutting off of energy supplies from Russia.
Bailey raised his concerns about food prices stating, ‘What I’m going to sound, I guess, rather apocalyptic about is food’ adding that Ukraine’s inability to export its crops was a ‘major worry for this country’ with Ukraine being one of the biggest producers of grains including wheat, and sunflower oil.
Bailey said: ‘A sequence of shocks like this, which have come really one after another with no gaps between them, is almost unprecedented. I do see comments based on hindsight, but we have to take [monetary policy] decisions based on the facts and evidence at the time.’
The panel did clarify that monetary policy ‘can have an effect’ but there is ‘nothing policy can do about external factors’, adding that ‘interest rates can help to ensure inflation does not become embedded once these initial shocks fade’.
Bailey said: ‘It is a very, very difficult place to be. To forecast 10% inflation and to say there is not a lot we can do about it is an extremely difficult place to be. This is a bad situation to be in.’
Sir Dave Ramsden, deputy governor of the Bank of England added that Brexit was not the only thing fuelling inflation as the EU, UK and the US are all experiencing similar levels, stating that ‘it was hard to disentangle the effect of global supply constraints and Brexit on inflation’.
However, Bailey added that the Bank had not changed its view that Brexit ‘would have a negative effect on trade’ and that ‘it would take a long time for the economy to adjust that, although it eventually would’.
Member of the Bank of England’s Monetary Policy Committee (MPC) Michael Saunders added that Brexit has become ‘less of a source of uncertainty’ since the Covid-19 pandemic which is why the Bank focused more on Covid-19 recently.
Bailey also acknowledged that the Monetary Policy Committee had changed its view about the UK labour market stating that it now believes it is ‘very tight’ which is something that it could not predict until after the government’s Covid-19 furlough scheme ended.
When asked whether rates should have been put up last year at times of labour shortages after the furlough scheme ended, Bailey added that it ‘had been a key question at the time’, however it was ‘unclear what the impact of the end of the furlough scheme would have been’ and ‘whether the people who used it would have been reabsorbed in the jobs market’.
Saunders then added that ‘even if the Bank had raised rates more aggressively last year, it’s unlikely that would have brought inflation back down to the target of 2%’.
Bailey’s appearance at the Treasury Committee has come following the aftermath of growing criticism of the Bank’s performance.
However, Bailey stated that no government minister had approached him over monetary policy or the Bank’s independence amidst all the briefings and media coverage over recent weeks.
Bailey stated that ‘the most important thing we can do is to get inflation back to target without unnecessary disruption to the economy’ and implied that the Bank would not shy away from generating a recession to do that if it was necessary.
Bailey added: ‘This is the biggest test of the monetary policy framework in 25 years. There is no question about that, we have to get [inflation] back to target and that is clear.’
The Bank of England has raised the interest rate by 0.25% to 1%, marking the highest rate for 13 years
The rate has gone up by 0.25% from the current 0.75%, and is likely to continue to rise over the next 12 months. The Bank expects the base rate to increase to 2.5% by mid 2023, falling to 2% at the end of 2024.
The current 7% rate of inflation is creating an intensifying cost of living crisis with soaring electricity and gas prices. CPI inflation is expected to rise further over the remainder of the year, to just over 9% in 2022 Q2 and averaging slightly over 10% at its peak in 2022 Q4. However, the Bank then expects inflation to drop back to 2% in 2024.
‘Global inflationary pressures have intensified sharply following Russia’s invasion of Ukraine. This has led to a material deterioration in the outlook for world and UK growth,’ the Bank said.
These developments have exacerbated the combination of adverse supply shocks that the UK and other countries continue to face. Concerns about further supply chain disruption have also risen, both due to Russia’s invasion of Ukraine and to Covid-19 developments in China.
Martin Beck, chief economic adviser, EY Item Club said: ‘There is a bit of difference of view in our forecast and what banks are expecting. We do not think there will be a further rise this year, but banks expect 2% rate. What is currently an inflationary problem may prove to be deflationary in time.
‘There are plenty of examples of central banks tightening too fast in the past. We think they will take a more cautionary approach. The Bank can vary the interest rate but could also print money – quantitative easing. But when interest rate reaches 1% the Bank said it would start selling bonds back to the market, but quantitative tightening is not something the Bank has done before so they will want to take a cautious approach.’
Alpesh Paleja, CBI lead economist, said: ‘Another rise in interest rates is warranted, given the persistence of high inflation. However, the Monetary Policy Committee are walking an increasingly fine line.
‘Further action to curb price pressures needs to be weighed against the increasing need to protect growth, particularly in light of a historic cost-of-living crunch. Households are feeling it and so are businesses, with cost pressures across the board.
‘While monetary policy is the appropriate first line of defence in tackling inflation, government needs to take further action to shore up the broader resilience of the UK economy. In the near-term, higher inflation will hit poorer households hardest, so support measures for this group will need to be kept under review. Over the longer-term, securing greener energy supply and a relentless focus on raising potential growth will bolster our ability to withstand shocks and further price pressures.’
Paul Clifford, regional CEO at Azets, said: ‘This is the first time in 13 years that the UK base rate has been at 1% – many businesses and the 1m-plus householders on variable mortgage rates aren’t used to seeing a continuous rise in borrowing costs and the impact that has on budgets.
‘This is also the fourth rise in half a year, from 0.25% in December.
‘The interest rate rise, whilst still historically low, will now place additional repayment burdens on borrowers and have a knock-on impact on businesses as spending is reined in, with SMEs likely to be hit hardest.’
The Treasury has announced an efficiency drive to cut £5.5bn of ‘wasteful spending’ across government departments
The crackdown, which was requested by Prime Minister Boris Johnson, has seen a new ‘Efficiency and Value for Money Committee’ set up, which will be chaired by Chancellor Rishi Sunak and will aim to ensure that the 5% efficiency target set last year is met across the government and will also examine strategies to prevent fraud and error.
The announcement stated that the £5.5bn saved from this measure will be put straight back into public services such as the NHS. As part of the plan, the annual NHS efficiency target will be doubled to 2.2% which the Chancellor stated would free up around £4.75bn to fund the NHS over the next three years.
The crackdown will also see a review of government arm’s length bodies and quangos which will be expected to save at least £800m from their budgets.
The efficiency target will also aim to ensure that the funding settlement of £188.9bn a year by 2024-25 for the Department for Health and Social Care will also ‘deliver the best possible value for money’.
The increased efficiency target will also aim to ensure that the record funding settlement of £188.9bn a year is delivering the best possible value for money for the taxpayer and the money saved will be used to fund frontline NHS priorities.
The Treasury said that the savings will be made through a range of programmes which include the digitisation of diagnostic and frontline services, which has been shown to reduce cost per admission by up to 13%, better use of property, reduced reliance on consultants, and greater use of shared services.
The Treasury will also launch an innovation challenge to crowdsource ideas from civil servants on how government can reduce waste and improve public services, with winners selected this summer and the best ideas becoming government policy.
A similar challenge was run in 2015, which received 22,000 responses, of which 16 measures were implemented.
Chancellor Rishi Sunak said: ‘During these challenging times it’s vital that every single penny of taxpayers hard-earned cash is being spent well.
‘The current level of waste across government is simply not acceptable, which is why we’re doubling down on wasteful spending and launching an efficiency drive to make £5.5bn worth of savings. That money will then be pumped directly into the world class public services that the British people deserve.’
Last month, minister for Brexit opportunities and government efficiency Jacob Rees-Mogg MP outlined to The Times his plans to shrink the civil service by cutting more than 65,000 jobs, around one in seven civil servants by 2023-24.
In an interview, Mogg stated that he wanted to get the headcount ‘under control’ and asked whether the current civil service headcount was ‘providing value’ for the taxpayer.
Mogg then pledged to deliver former Cabinet Office minister Francis Maude’s legacy of reforming and cutting the size of the civil service. Under Lord Maude, the civil service shrank from around 470,000 full-time officials in 2010 to about 384,000 just before the 2016 EU referendum. The 2012 Civil Service Reform Plan aimed to reduce the headcount to 380,000.
However, this cut has almost been reversed with the civil service having around 472,700 full-time equivalent staff as of September last year, according to the Institute for Government’s most recent Whitehall Monitor report, which is mainly due to Brexit and the Covid-19 pandemic.
HMRC has confirmed that from 31 March 2022, new clients will need to use a revised version of form 64-8 to give authorisation for accountants or tax agents to deal directly with the tax authority
It is important to note that existing clients do not need to re-authorise their current relationship.
‘The new version of the agent authorisation form is designed to give our customers a better experience and improve data protection,’ HMRC said.
‘It allows customers to state which tax regime they want you to access. The form also includes new guidance for customers on how to fill in the form correctly and what data they are agreeing to share with you as their agent.’
A 64-8 form gives accountants and agents client permission to deal directly with HMRC on tax related issues, although correspondence is still sent to client companies. There will be a six-month transition period until the old form is withdrawn.
The Association of Taxation Technicians (ATT) advised businesses to start using the new form once it is available. ‘HMRC are also providing a generous transition period until the autumn during which time both the old and new form will be processed, but obviously a shift by agents to the newer form sooner rather than later in this period would be welcome. Once the final date has been determined, any old-style forms submitted after that date will be rejected,’ ATT said.
The form has been updated by HMRC to ensure it has more information necessary to be compliant with data protection rules under GDPR. Agents who prepare payrolls will also note that more information is now requested on the PAYE/CIS sections which, if completed, will give authorisation for online access to payroll or CIS records without the need for a separate FBI2 form.
HMRC plans to phase out the current 64-8 form from autumn 2022. After this date, HMR said: ‘We’ll only accept the new version of the 64-8 agent authorisation form and reject any authorisation requests sent using older versions of the form.’
The new agent authorisation form will be available online from 31 March 2022. Go to gov.uk and search ‘Tax agents and advisers: authorising your agent (64-8)’.
Boris Johnson and Rushi Sunak have pledged to go ahead with the upcoming 1.25% rise in national insurance for employees and employers from April, saying it is a progressive tax
In an article in the Sunday Times, the PM and the Chancellor said that the tax rise is essential as it will provide critical funding to address the NHS backlog.
‘We must clear the Covid backlogs, with our plan for health and social care – and now is the time to stick to that plan. We must go ahead with the health and care levy. It is the right plan,’ they said.
‘It is progressive in the sense that the burden falls most on those who can most afford it. Every single penny of that £39bn will go on these crucial objectives – including 9m more checks, scans and operations, and 50,000 more nurses, as well as boosting social care.’
Johnson and Sunak both stressed that they were in favour of a low tax environment but the pandemic has resulted in a number of tax rises, including the freezing of thresholds for annual allowances until 2026, which will drag more taxpayers into the higher rate of tax.
When the national insurance rise was first announced last September, the majority of Conservative MPs voted for the measure, and did not express any reservations.
Now a number of senior MPs have come out strongly against the rise which will hit employees and employers from April. There is growing concern that the rise, coupled with soaring prices, the energy crisis and high inflation, will hit most households and could stall post-covid recovery.
Business groups including the CBI and Federation of Small Businesses are also concerned that the rises will have a negative impact on business growth.
Federation of Small Businesses chair Mike Cherry said: ‘Rises in employers’ National Insurance will mean some employers having to reduce roles or hours, or curtailing pay rises for many workers, as the Office for Budget Responsibility’s (OBR) analysis shows. This is unfair and the government should change course.’
A CBI spokesperson said: ‘If the government goes ahead as planned then it is incumbent on them to use the March Budget to bring forward more ambitious plans to raise the longer term growth potential of the economy.’
The government has announced that those who test positive for Covid-19 in England can end their self-isolation after five full days if testing negative
From Monday 17 January, people who have tested positive for Covid-19 can end their isolation after five full days if they test negative on a lateral flow test on days five and six and do not have a temperature.
The new guidance for isolating states that the first test must be taken no earlier than day five of the self-isolation period, and the second must be taken the following day, two negative tests are needed on two consecutive days.
If an individual is positive on day five, then a negative test is required on day six and day seven to be released from isolation. This continues until the tenth day, which is the default end date for isolation.
The new guidance also advises that if leaving isolation earlier than 10 days then a face covering should be worn, contact with others in crowded or poorly ventilated spaces is avoided, work from home if they can do so and minimise contact with anyone who is at higher risk of severe illness if infected with Covid-19.
The rules have not changed for those who are identified as a close contact although the government is currently looking into updating this guidance.
The government state that it is crucial that people follow this guidance properly to ensure that they are not still infectious when they leave isolation.
Sajid Javid, health and social care secretary said: ‘These two tests are critical to these balanced and proportionate plans and I’d urge everyone to take advantage of the capacity we’ve built up in tests so we can restore more freedom to this country, whilst we are keeping everyone safe.’
Prime Minister Boris Johnson confirmed on Monday that reducing the isolation period would help ease the disruption of staff shortages amid the current wave of infections driven by the Omicron variant.
Many business bodies, including a number of cabinet ministers, called on the government to follow the steps of the US who cut its isolation period to five days from 10 last month.
The Confederation of British Industry (CBI) has praised the government for the change, stating that it will provide an immediate benefit for businesses in England.
Matthew Fell, chief policy director, CBI UK said: ‘Firms are under the cosh dealing with mounting staff absences from self-isolation, so this move should have an almost immediate benefit.
‘Businesses have been urging a reduction in the self-isolation period, providing health experts confirm it is safe, as a pragmatic change that will help keep the economy open as we adapt to live with the virus.’
The Federation for Small Businesses (FSB) also praised the decision stating that it was a ‘relief to see policy makers embrace our recommendation’.
Mike Cherry, national chairman, FSB said, ‘Over the last month we have made the case that, if it can be done safely, shortening the isolation period would make a huge difference to the hundreds of thousands of small businesses that currently have staff off work.
‘Mass isolation of two million people has hit the workforce just at the moment when firms are trying to bounce back from yet another disrupted festive season.’
The body now called on the government to ‘make good on past promises and deliver a world leading test-and-trace infrastructure’ with the group also calling on the government to relaunch the workplace testing initiative which closed last summer.