Today Andy Silvester chats to City A.M. reporters Leah Montebello and Jack Barnett.
Jack outlines the cost-of-living crunch that, some say, hasn’t been seen since the Second World War. He goes through the economic uncertainty that awaits in April, with tax, energy, and price hikes all coming into effect.
Leah boils down the Betting and Gaming Council’s concerns regarding the government’s White Paper review into the gambling sector, which they’re worried will be too intrusive and put gamblers off from having a flutter — potentially pushing them into the black market.
Episode transcript (auto-generated)
Andy Silvester 0:08 Good afternoon and welcome to the City View podcast me Andy Silvester, the editor at City I am in a minute I’ll be joined by Jack Barnett our economics and markets correspondents talk about a coming raft of tax and price hikes which will hit the British economy and indeed all of our pockets rather hard. An MLM, Montebello, whose aren’t gambling vice and all things fun correspondent talking about the upcoming white paper into the gambling sector. First, the headlines and they’re few and far between in the cities today to be completely frank. But taking most of the headlines is the capture of Bruin dolphin by the Royal Bank of Canada 1.2 billion pound deal seeing the almost 200 year old wealth manager moving into Canadian hands, RBC says part of the push to move into the UK, the deal will make RBC and the De Bruyne attached to it. Now, the UK is third largest asset manager. That’s the corporate headlines giant not a lot going on, because most people are probably spending most of today looking at the energy price hike that’s on its way. Tomorrow, tax hikes on their way next week and VAT hikes as well, it’s pretty much a perfect storm of ways to feel the pain in our pockets.Jack Barnett 1:17 Yeah, so I think, as everyone knew before, the first of April, that this month was going to be where everything kind of culminated both for households and for businesses. So on the household side, you’ve got the energy price cap hike coming into effect, which was announced back in February 50 to 54%. Uplift, it’s around about 700 pounds more, on top of the average annual household energy bill should be noted that in October is probably going to rise again. So, you know, obviously households got immediate pay now, but over the long term, it’s actually going to get a lot worse. And then both on the House side and the business side, you’ve obviously got this 1.25 percentage points National Insurance hike that’s coming into effect on the sixth of this month. And then on the business side, you’ve got a raft of VAT changes, which actually are going to deal quite significant globally to small businesses. So you know, you’ve got deferred, VAT bills are now going to have to be paid back which they were giving a bit of relief over, over the COVID period, the VAT rate for hospitality businesses going to return to its normal level after its temporarily cut 2.5% At the start of this month, and then a very sort of niche thing, one for the accountants out there is that VAT returns will now need to be compliant with the government’s making tax digital regime, which is basically just, you know, it’s it’s kind of like a way of just well, in theory, making VAT returns a bit easier and a bit more seamless. But what this all means is, obviously you’ve got a monetary cost for households in the form of the NGOs, you’ve got manage costs for businesses and for higher taxes. And you’ve also got this high administrative burden, which is just gonna divert resources away from, you know, doing more productive, productive, Andy Silvester 3:08 productive things for an economy that really needs people to do productive, valuable things. I mean, it does strike me as extraordinary still, to this day that there has been so little political pushback in the polls, as well as everything else on this raft of hikes coming in and the teeth of a cost living crisis, which was already being felt in the pocket by millions of people as a resolution Foundation report out tomorrow, which we can’t talk about the nature of embargoes, but it doesn’t make a great reading when it comes to people’s household finances for the year to come. Rishi Sunak doing an interview today saying that he’s pretty happy with everything that pretty happy with the decisions that have been made. It’s time to fix the public finances. That is the balancing act for everybody, right for the Bank of England for Treasury and various others is there is just a massive amount of uncertainty about what this month almost quite literally this month, April and these changes will do to the UK economic recovery. Yeah, and I think there’s a couple of, you know, it’s kind of two pronged theory, the first, which is that if this cost of being squeezed is going to be so severe in April and bear in mind, this is just when it’s just starting now it’s going to get it’s going to continue for further months. Now there’s the issue of aids like that hit spending quite hard. As house I start to pull back, you know, the hunker down, that is going to have severe implications for growth now on the public finances side, that reduces the government’s tax take, which then hits the the health of the public finances and reduces the resources they had that the government has to spend, which then means they either have to cut spending or they have to borrow more. Jack Barnett 4:49 You know, the API is obviously forecasting a hit to growth, not a massive hit to growth. So the qualifiers are shouldn’t shouldn’t be too bad, but I think you’re obviously right to point to the fact that the This is the you know, the trade off now is that we’ve already got this enormous debt stock. It’s difficult for the Chancellor to launch any more support measures for households without, you know, taking away from others or so also borrowing more at the same time. So, you know, you’re right. So that this is this is a balancing act now. And I think the main thing is that we’re all just kind of watching to see how the economy is actually going to respond to what is going to be the start of quite a severe cost of living squeeze over the next six months or so. Yeah, the likes of which we haven’t seen for more than 30 years, some people say for about 70 years since World War Two. Thanks, Jack, one place that the Treasury will presumably be looking for some tax revenues to fill the coffers will be in Britain’s world leading industries because they can’t possibly leave a good thing alone, can I? One of those areas is obviously gambling. And the UK remains a world leader when it comes to both having a flutter and indeed, owning the businesses that allow you to do so. And bring Liam Montebello here, our tech media, telecoms, gambling vice correspondent. Andy Silvester 6:00 Leah, you’ve been talking about in gaming council about the coming review into the sector. And their worries that this world leading sector could be reined in. Leah Montebello 6:10 Yeah, so so as you mentioned, there’s there’s a gambling white paper, which is coming up. So it’s, it’s been in the works since about 2020. So it’s been delayed, delayed, delayed, but the concern from the industry and from industry bodies, is that whatever regulations brought in might be too intrusive. So what this could mean, in its most extreme form is, you know, if there’s there’s trouble troubled addicts or problem gamblers that they may have to prove, you know, they’re not problem gamblers by providing paychecks, or, you know, giving quite personal information to gambling operators. And the concern there from the industry is that that will disincentivize people from gambling, and they’ll therefore, therefore, turn to the black market. And this has been something that’s happened across Europe. So Italy’s quite a poignant example, where they banned advertising of gambling, gambling operations, and this has just caused a huge spike in the black market. So from an economic perspective, this is quite dangerous. Because if people are going towards the black market, then you know, the the tax generated from from the industry won’t be going to the government, it will be going elsewhere. Yeah, of course. And it’s funny. I mean, you talked about a particularly extreme example, that the one that I’ve seen would be that if you were, you know, spotted by an algorithm, having a bit too much of a flutter one day, you’d start to have to submit your bank statements or a household builds proof that you’re in sort of good standing, and that you’re not spending money that you don’t have. Now, having been at Cheltenham couple weeks ago, I definitely spent money that I probably shouldn’t have done. But if I was forced to hand over a bank statement, yeah, I probably would stop, I wouldn’t be gambling. But that’s not good for the British economy. So I don’t think I’m not a problem gambler. So that’s the balance that they have to strike out. What’s the scale of the problem gambling problem? Well, according according to the industry, it’s about 0.3% of the population, which is obviously quite quite a small number. And their main argument there is that it is a very small number, and you shouldn’t have these kind of draconian blanket measures for such a small, small amount people. Obviously, there’s, there’s some questions there that the number might be bigger than that, but it’s definitely not the same level as what the gambling industry says, like alcohol addiction. So yeah, it’s an interesting one there, Andy Silvester 8:22 unless he’s been the Linus or the government. I mean, that’s what Michael said in the interview that we’ve got insofar as people with us, you know, is this industry going to be treated like tobacco, where we’ve just decided that there’s no benefit to effectively you might want to do it, but we’re going to get a really hit you for doing so in an effort to essentially mean a root out? Or is it going to be like alcohol where there are things in place, both at an industry level and of course, a health level, particularly in alcohol, for those who abuse it for those who fall into unhealthy habits, but not stopping them, and it’s people that enjoy it, being able to enjoy it? That seems to be the question that government will have to come up with, I guess the last point on on gambling and everything that’s happening is there’s all this happening in the UK regulatory crackdowns around gambling sorts about how problem gamblers might be addressed. And even companies like flutter putting in their annual reports the amount of cash that they say they lost effectively last year by stopping serving problem gamblers all of that’s happening in the UK at the same time as the rest of the world seems to be deregulating like crazy so all these gambling firms are starting to look state side as well. Leah Montebello 9:34 Yeah, definitely. The state side is definitely somewhere where flutter for example is doing really well with with FanDuel. So yeah, I guess if they can’t get the people making bets here they’ll go elsewhere, which obviously isn’t great based on everything that Jack saying as well for the economy. Andy Silvester 9:49 Yeah, indeed. Noise the question and Leah Jack, thanks for joining us. That’s all for me. This week. Tomorrow we back with our usual tech podcast. From me, have a wonderful weekend. I’ll see you again on Monday.