Tag: 2003

The press release issued by HM Treasury on 25 November 2003.

Treasury Minister John Healey says the Government’s strategy to tackle VAT fraud has saved billions of pounds in revenue, as Customs today reported their latest success, arresting 12 fraudsters involved in a multi-million pound bullion and computer chip fraud.

Chairing an 11 Downing Street seminar with representatives from the mobile phone and computer chip industries and other stakeholders, Economic Secretary to the Treasury, John Healey MP, said Customs’ strategy to significantly reduce the losses from VAT Missing Trader Fraud was on track and was proving the value of the UK Government’s pioneering efforts to tackle the world-wide problem of tax fraud. Mr Healey said:

“VAT fraud is not a victimless crime. It lines the pockets of criminals, forces legitimate traders out of business, and robs the honest taxpayer of more than £2 billion a year. But we are showing we have the right strategies, the right skills and the right people to crack the crime gangs, and protect the revenue we need for our public services.”

“We were the first in the world to measure our VAT losses and bring forward a strategy to tackle them, and we are the first in Europe to address the problem by targeting action at the fraudsters not by imposing blanket regulation on every business. That is why the people I have spoken to today have applauded our efforts not criticized them.”

The fraud relies on bogus trade in high-value, low-volume consignments like  mobile phones and computer chips to steal huge amounts of tax in short spaces of time,  by not paying VAT over to Customs, and subsequently submitting  claims for VAT repayments. As well as describing the overall impact of Customs’ strategy, John Healey told the seminar about Customs’ success in cracking individual criminals and gangs.

In the latest such success, Customs reported 11 dawn searches of businesses and premises in London, Birmingham, Berkshire, Essex and, leading to the arrest of 12 people thought to have pocketed £25 million in a 25 day period last year by trading in computer chips and gold bullion on which VAT was never paid. Details of the investigation– codenamed Operation Devout – were released for the first time today.

The press release issued by HM Treasury on 3 December 2003.

The Task Force considering major operational disruption in the financial system has concluded that no new legislation is needed to cater for disruption in the financial sector.

The Task Force chaired by Sir Andrew Large, Deputy Governor of the Bank of England, today announced a number of recommendations for further improvements to preparations in other areas such as private contracts and the rules of market infrastructures, such as clearing-houses and stock exchanges, while also recommending further contingency planning work by the financial authorities (the Treasury, Bank of England and Financial Services Authority).

Financial Secretary Ruth Kelly:

“I support the Task Force conclusion that no new legislation is needed and accept those recommendations which apply to the financial authorities and support those which are for others to implement.

“I am pleased that the Task Force involved a wide range of people whose work would be affected by major disruption. Membership of the Task Force and its associated working groups was drawn from market practitioners, the legal community, the Bank of England, the FSA and the Treasury.  I am grateful to all those who contributed and to Sir Andrew and the staff of the Bank of England for producing the report.”

The press release issued by HM Treasury on 4 December 2003.

Increased collaboration between business and university research departments will bring significant economic benefits to the UK, according to an independent report published by the Government today. But concerted action by business, universities, and government will be required in order to grasp the opportunities for the UK economy.

The Lambert Review, commissioned by HM Treasury, the Department for Education and Skills and the Department for Trade and Industry in November 2002, makes a series of recommendations aimed at smoothing out the path between Britain’s strong science base and the business community. They include:

• a greater role for the Regional Development Agencies in facilitating knowledge transfer in their regions;
• a new funding stream for business-relevant research, along with increased and improved “third stream” funding for knowledge transfer;
• Universities to develop a code of governance and to demonstrate good management and strong performance in return for a lighter regulatory touch from Government and the Funding Councils
• development of model contracts and a protocol for intellectual property (IP) to speed-up IP negotiations;
• encouraging new forms of formal and informal networks between business people and academics, including the establishment of a business-led R&D employers’ forum; and
• Universities to provide more information on student employability, and businesses to take a greater role in influencing university courses and curricular.

Richard Lambert, who is a member of the Bank of England’s Monetary Policy Committee, concludes that the biggest single challenge lies in boosting the demand for research from business, rather in increasing the supply of ideas and services from universities. However, he suggests that there are reasons for hoping that business investment in research will strengthen in the future, and the Review cites examples of a wide range of companies that have profited from working alongside academic researchers.

Presenting the report to the Government today, Richard Lambert commented:

“I am very positive about the economic potential which business in the UK can harness through developing stronger collaboration with universities. I am also clear that realising this potential will require concerted action by universities and business, with support from Government. My recommendations pose a challenge to all those engaged in this increasingly important area of public policy.”

Welcoming the report on behalf of Government, the Chancellor of the Exchequer Gordon Brown said:

“At their best, businesses and universities in the UK produce world-class results and can build world-beating partnerships, helping to foster productivity growth throughout the British economy. Richard Lambert’s report celebrates success in this field and identifies how as a country we could capitalise on this, building on rising public investment in the university research base. As Richard Lambert suggests, ambitious businesses need universities to meet many of their future technology and skills needs, and regional development agencies should help foster university-business links.  He also suggests a strong case for a share of university research to be driven by the needs of business.  In response a centrepiece of our next budget and spending review will be government playing its part in helping universities and business face up to these new challenges – together we must enable our centres of excellence to succeed in the next wave of science and be at the heart of Britain’s future economic success.”

Patricia Hewitt, Secretary of State for Trade and Industry, added:

“Scientific excellence is at the heart of a competitive economy. We have an outstanding track record of scientific achievement in our universities and British companies are benefiting from this research. But we need to make a better connection between the science base and industry. Innovative products, services and ways of doing business are crucial for the UK in today’s global economy. The forthcoming DTI Innovation Report will set out the Government’s next steps in meeting the challenge of turning invented in the UK into made in the UK.”

Charles Clarke, Secretary of State for Education and Skills, said:

“Our universities are a major national economic asset. The UK’s university research base continues to perform strongly, and is now underpinned by significant real increases since 1997 in public investment. We must ensure that this investment pays off, and that universities can continue to deliver the research and skills which the economy demands. Richard Lambert’s report provides an invaluable assessment of what can be achieved by well-run universities engaging purposefully with business, to their mutual benefit. We will seek to support such good practice in taking forward the Government’s current reforms of higher education in England.”

The press release issued by HM Treasury on 4 December 2003.

The Employer Training Pilots (ETPs) have made a successful start in their first year, according to an  interim evaluation published today. Though still early days, the evaluations shows that, in the six pilot areas, over 14,000 low-skilled workers from 3,000 employers have benefited from training they would otherwise not have received.

Early signs of success led the Government this year to double the number of areas that are taking part in the pilots. It also extended the pilots for another year (to end August 2004) in the original areas: Birmingham and Solihull; Derbyshire; Essex, Greater Manchester; Tyne and Wear; and Wiltshire and Swindon.

The scheme has reached small firms, traditionally an area where training has not been a high priority. The evaluation shows that 70% of the workplaces  have fewer than 50 employees. Over 40% of employers had no previous involvement with Government agencies.

One highly popular feature of the scheme is that courses are run flexibly to suit businesses. For example a training course was run at 4.00 in the morning for a group of bakers.

Economic Secretary to the Treasury, John Healey, said:

“This is a win-win-win scheme as higher skills levels benefit the employee, the employer and the economy as a whole. It reaches employers and employees traditional training programmes have never reached. Employees can benefit through their pay, their job satisfaction and employment prospects.

“Employers gain with employees able to undertake a greater number of tasks, performing them more efficiently and adapting faster and more effectively to change. This will reduce costs and enable firms to produce more innovative products. Highly skilled workforces are more productive, which also benefits the whole economy.”

Department of Education and Skills Minister, Ivan Lewis, commented:

“It is good news that the Employer Training pilots are proving successful in engaging low-skilled employees in training. At the end of the first year we have had over 3,000 employers and 14,000 learners registered to take part, the latest figures show this has now risen to more than 5,000 employers and 20,000 learners.

“The evaluation shows that the pilots are not only attracting both small firms but those that have had no previous contact with Government agencies. Both employers and learners are also expressing high levels of satisfaction with the pilots.

“With the extension of the pilots for a further year and an increase in pilot areas from 6 to 12, this continued evaluation will allow us to draw clearer conclusions on their impact. It will help us work with training providers, employers, unions and individuals to deliver the right skills through our new national Skills Strategy.”

The Employer Training Pilots have proved very successful in placing low-skilled individuals in training courses through their employers. The Government welcomes, in particular, the progress that ETPs have made in attracting learners from small firms and those traditionally thought of as hard to reach.

The majority of learners are; female (55%), aged 25 – 45 (59%) and work full-time (75%). Three quarters of learners left school at or before the age of 16.

Both employers and learners have expressed high levels of satisfaction with the training, information and guidance being made available.

The press release issued by HM Treasury on 5 December 2003.

The Attorney General and Economic Secretary to the Treasury today announced the creation of an independent Customs and Excise Prosecutions Office (CEPO). The new office will be established by the end of 2004, and will be accountable to the Attorney General.

A Director for the new office, with full accounting officer responsibilities, will be appointed as soon as possible, and will be closely involved in the creation of a fully independent CEPO.

The establishment of CEPO as an entirely separate prosecuting authority, accountable to the Attorney General, was a key recommendation of the Butterfield Review, published in July 2003.

Attorney General Lord Goldsmith QC said:

”The independence of prosecutors is a bedrock of our system of justice and a key constitutional safeguard. It is essential for public confidence in the conduct of criminal cases. This move will further enhance the independence of Customs prosecutors.

“They will work closely with skilled Customs investigators to continue building strong cases and delivering robust prosecutions – similar to the way the Crown Prosecution Service does through its close collaboration with the police.

“To be most effective, prosecutors must be independent – and be seen to be independent – by judges, by their colleagues and by the wider criminal justice system. The creation of an independent CEPO, accountable to me, will institutionalise and further protect that independence.

“A fully independent CEPO, with a clear demarcation of responsibility between investigators and prosecutors, will give Customs a sound basis to continue its fight against crime.

“Mr Justice Butterfield said that whilst there has been a significant improvement in the Prosecutions Office, there is more to be done if HMCE prosecutions are to regain their reputation for excellence. Rebuilding that reputation through concrete improvements to the prosecution process is the key challenge for CEPO in the coming years.”

John Healey MP, Economic Secretary to the Treasury, added:

“There have been far-reaching changes made in Customs in recent years which have revolutionised the fight against organised crime. Independence for the prosecution office will consolidate the progress already made, and minimise the chances of past mistakes happening again.
“The new Office will be a strong, fair, accountable and effective prosecuting authority. It will help Customs continue its work to disrupt and convict those involved in drug trafficking, money laundering and other serious and organised crime.

“The ‘Mr Bigs’ of the organised criminal world drive the drugs trade on our streets and fuel an underground economy that steals money from our schools and hospitals. Since the Proceeds of Crime Act came into force, Customs has seized over £30 million from these criminals. In the last financial year it had £68 million in confiscation orders issued by the Courts.

“That is why it is so important that Customs gets it right, so cases are legally watertight and serve the interests of justice. This frees Customs to do what it does best – catching smugglers and hitting organised criminals where it hurts – in the pocket.”

The press release issued by HM Treasury on 9 December 2003.

Professor David Miles today published his interim report analysing why long-term fixed-rate mortgages currently account for only a small proportion of the UK mortgage market.

While many borrowers could benefit from longer-term fixed-rate mortgages few choose these products at the moment.  Mortgages in the UK are overwhelmingly either at variable rates or at rates fixed for around two years.  The report points to three key factors that account for the low take up of longer-term fixed-rate products:

1. Borrowers tend to attach much greater weight to the level of initial monthly repayments than to the overall cost of borrowing over the life of the loan.

2. Many borrowers have a poor understanding of risk and therefore pay little attention to the insurance which longer-term fixed-rate mortgages can provide against unexpected interest rate rises.

3. The way in which many mortgage lenders compete for new business results in cross-subsidisation from existing borrowers paying standard variable rates (SVR) to new borrowers taking out discounted variable and short-term fixed-rate mortgages.  This means that longer-term fixed-rate mortgages appear expensive when compared with discounted mortgages.

The development of a larger market in longer-term fixed-rate mortgages also depends on the efficiency with which mortgage lenders are able to raise funds to finance them, which in turn depends on a number of factors.   Some of these factors would probably prove temporary if greater demand emerged.  For example constraints due to insufficient liquidity or the inability of lenders to assess the pre-payment risk associated with fixed-rate products would ease as a market developed and lenders’ experience of pre-payments grew.  Others constraints, such as capital requirements, accounting rules and legislative constraints on building societies, might require a policy response to enable the market to develop properly.  In the light of further consultation on these funding issues specific recommendations will follow in the Final Report.

The report also presents evidence that borrowers’ tendency to attach too great a weight to the level of initial mortgage repayments can contribute to macroeconomic instability and can make monetary policy more difficult to operate.  Such macroeconomic problems would be much reduced if households in the UK were encouraged to take a more forward-looking approach to borrowing and to choosing between mortgages. This is clearly desirable in its own right, whether or not the UK adopts the euro.

On publication of his report Professor Miles said:

“In recent decades there has been little long-term fixed-rate mortgage lending in the UK.  This report analyses why that is so. For many households, particularly those borrowing a great deal and those whose incomes are uncertain, there are significant advantages of fixing the level of repayments for several years.  Yet few of such borrowers take out longer-term fixed-rate mortgages.

Borrowers need to be helped to understand risk better and to make more forward-looking decisions and lenders enabled to fund loans and handle risk in the most cost effective way. I look forward to consulting further with all interested parties before putting forward recommendations next year.”

Professor Miles will publish his Final Report, with recommendations, around the time of next year’s Budget.

The press release issued by HM Treasury on 10 December 2003.

Launching her Interim Report  – “Securing our Future Housing Needs” – Kate Barker said:

“Housing has a huge impact on people’s quality of life. The Government is already doing a great deal to tackle housing supply problems.  However, it is clear that the UK housing market is not working as well as it should. In particular there is a problem of weak supply, with major implications for the UK’s economic well-being and house price volatility. The review’s final report next Spring will set out policy proposals for addressing the problems I have identified.”

• In 2001, around 175,000 dwellings were built in the UK – the lowest level since the Second World War (see Chart 1, page 9).  And over the past ten years, the number of new dwellings built has been 12.5% lower than in the previous decade.
• Over the last 30 years, UK house prices went up by 2.4% a year in real terms – compared to the European average of 1.1%. In Germany it was 0%, and in France 0.8%.
• If UK house prices had risen in line with the European average, since 1975, the UK economy would have been £8 billion better off.  As a result of these price rises first time buyers in 2001 paid on average £32,000 more for their homes.

The Review considers a range of factors that might be constraining the supply of housing in the UK, arising from industry failures or the policy environment.

The main constraint identified by the Review is land supply.  This problem relates in part to the housebuilding industry, in particular, its response to risk which leads to reluctance to build out large sites quickly.  The regulatory relationship and control over the use of land also influences the way in which land is made available for development.

Key findings:

Housing supply and its implications

Historically, UK housing supply has been unresponsive to changes in price – three times less responsive than in the US and four times less responsive than Germany. Over the last 10-15 years, UK housing supply appears to have become entirely unresponsive – as prices rose, housebuilding did not increase. Inadequate housebuilding constrains economic growth, damaging the flexibility and performance of the UK economy, reducing living standards for everyone.   Regional price differentials also reduce labour mobility and hamper economic growth.  Too few houses and consequent higher house prices also create affordability problems:

• In 2002, only 37% of new households in England could afford to buy a house, compared to 46% in the late 1980s.
• The ratio of lowest quartile house prices to lowest quartile earnings has increased significantly in most English regions. In 1993, a London house cost around four times the annual income of a low income household. By 2002, the same house had risen to almost eight times annual income (see Chart 1.7 page 34).
• Reduced housing supply contributes to homelessness – households in England in temporary accommodation have more than doubled between 1995 and 2003 from 46,000 to over 93,000.
• 35 per cent of first time buyers in London pay at least part of their deposit with a third party contribution, compared to 22 per cent in the North and the Midlands.  Increasing reliance on inheritance and donations drives a wedge between first time buyers who have access to wealth and those who do not.

The housebuilding industry and the availability of land

The housebuilding industry is characterised by a reluctance to invest in brownfield development and low levels of innovation.  Many housebuilders hold considerable portfolios of undeveloped land with planning permission.  There is little evidence to suggest, at any rate across the country as a whole, that these landbanks prevent other housebuilders entering the industry, or allow housebuilders to exercise market power.  But, once land and planning permission has been acquired housebuilders have little incentive to compete for consumers or innovate.

• Only 54% of new home buyers say they would buy a new home or another home from the same housebuilder.
• In order to best maximise profits many housebuilders control production rates and “trickle-out” no more than 100-200 houses per annum from a large development.  This may not be desirable from society’s point of view.
• Modern methods of construction are not well established in England where housebuilding techniques are very labour intensive – around 50 per cent more than Denmark, and 25 per cent more than Scotland. Labour intensity has not changed significantly in England over the last 25 years.  The housebuilding sector suffers from significant skill shortages with 80 percent of firms reporting difficulty finding bricklayers, carpenters and plumbers.

Government policy levers

The Government is an important player in addressing problems with housing supply.  Through the Sustainable Communities Plan and current housing and planning bills, it has already embarked on major reforms of the planning system and of social housing.  Nevertheless there are significant challenges:

• Local authorities have few positive incentives to build and few sanctions if they fail to meet targets, while the planning framework could respond better to market signals and take better account of costs and benefits of development.
• Infrastructure barriers hold up construction of over 40,000 dwellings in the South East alone.
• Only 1% of property institutional investment is in residential property. A tax-transparent vehicle (based on the US Real Estate Investment Trust model) could encourage more investment.
• Higher land and build costs have meant that public money for housing is not going as far as it used to. Social sector building has not risen in line with increased public expenditure in the sector.

Increasing housing supply

The Review reaches no conclusions on how many houses we need to build in future. Government faces choices about how far to meet growing demand, given the environmental and social costs of housebuilding. The report published today does contain estimates of undersupply to help inform the debate:

• 39,000 additional houses a year are required simply to accommodate population growth and changing patterns of household formation in England.
• In recent years between 93,000 and 146,000 households per annum have been priced out of the housing market in England compared to affordability levels in the late 1980s.
• The review has commissioned academic modelling work, to investigate estimates of the number of additional houses consistent with various long-run house price scenarios.  This suggests that an additional 145,000 homes per annum would be required in the UK to lower real house price inflation to the European average of 1.1% and that an additional 240,000 houses would be needed in the UK to lower real house price inflation to zero.  These are likely to be over estimates as greater supply would affect expectations and change the response of prices to additions to the housing stock.

The press release issued by HM Treasury on 10 December 2003.

Improvements in regional statistics are vital to improve decision-making in regional economic policy, according to the First Report of Christopher Allsopp’s independent Review of Statistics for Economic Policymaking, published today.

The Report explains how the devolution and regional economic policy agendas have led to a growing demand for regional data that is not met adequately under present arrangements. Its recommendations respond to the needs of policymakers and the wider user community, including business and academics at both national and local levels. These include:

• bringing Regional Accounts more into the National Accounts framework, including a better quality and more timely measure of real regional Gross Value Added;
• expanding the range of micro-economic and sub-regional data already available, with the infrastructure used by the Office of National Statistics’ (ONS) Neighbourhood Statistics Service becoming  the primary platform for area-based National Statistics;
• ONS or Government Statistical Service presence in the English regions to complement that which already exists in Scotland, Wales and Northern Ireland; and
• greater access for the ONS to administrative data held within government, which could improve both regional and national data while offering important savings in the compliance burden on business.

Publishing his First Report, addressed to the Chancellor of the Exchequer, the Governor of the Bank of England and the National Statistician, Christopher Allsopp said:

“Government policy is, increasingly, emphasising regional and local decision-making.  To be successful, this change must be underpinned by high quality and timely statistical information.  These new demands present a major challenge to the statistical services and a large gap has opened up between what is needed and what is available.

“My Report identifies ways of addressing the demands of regional economic policy.  But this will require significant investment in, and commitment to, the UK statistical services.  The pay-off would be better informed policy at all levels and in all regions and countries of the UK.”

The Report highlights a number of areas where consolidation and review of existing arrangements, some already under way, could offer savings and efficiencies, while recognising the resource and business-compliance requirements of such a statistical agenda.

The Report is consultative and comments are invited in time to inform the Final Report by the time of Budget 2004. It also looks to the second stage of the Review, discussing the extent to which the UK statistical system has reflected the changing structure of the UK economy, in particular the relative importance of the manufacturing and service sectors.

The press release issued by HM Treasury on 17 December 2003.

The Chief Secretary to the Treasury, Paul Boateng, today announced that a consortium of charities has been selected to administer and distribute the £125m futurebuilders fund.  The consortium will be led by Charity Bank, NCVO and Unity Trust Bank. Other organisations that will play a key role are the Impetus Trust, the Community Fund and the Northern Rock Foundation. Together, they bring a wide range of experience in grant-making, loan finance and funding information and advice to the voluntary and community sector.

Chief Secretary to the Treasury, Paul Boateng said:

“In selecting this consortium, we are ensuring that the voluntary and community sector will continue to be in the driving seat in running the fund. This has been a unique and rewarding project to work on and I wish futurebuilders great success as it now begins to filter down to the organisations in the sector that need it most.”

Fiona Mactaggart, minister in the Home Office, who will assume lead responsibility for futurebuilders in the New Year, said:

“This is good news. This investment will help voluntary and community organisations play a more central role in service delivery. It will mean improved and expanded services that offer greater choice to local people. What we all want to see is this money out and working in the sector as soon as possible.”

Sir Michael Bichard, Chair of the Compact Working Group, commented:

“The consortium that is taking on the task has the strength and depth of experience of the voluntary and community sector and of social enterprises to ensure that this exciting new fund reaches far and wide in its investments, and makes a real difference in improving and expanding public services.”

Chief Executive of Charity Bank, Malcolm Hayday said:

“We in the consortium are very pleased to have been selected provider of choice. We are now eager to get on and put our systems in place so that the fund is up and running as soon as possible. We will announce further details just as soon as the formalities of the contract are concluded.”