LABOUR’s pension tax raid is set the ditched after warnings it would hammer up to a million teachers, nurses, and public sector workers.

Chancellor Rachel Reeves had planned to raise funds by reducing tax relief on those earning £50,000 or more per year.

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But Treasury officials reportedly told her any move to cut the 40 per cent tax relief on pensions would unfairly punish state employees on modest incomes, like a nurse earning £50,000 who could face an extra tax bill of £1,000 a year.

One Government insider blasted the idea as “madness,” especially after public sector workers just received a pay rise.

Former Pensions Minister Steve Webb told The Times: “I don’t think this is something that Reeves will want to do, not least because it will infuriate public sector unions just weeks after the government agreed pay settlements with them.”

Union leaders are also understood to have cautioned the Treasury against moving forward with the proposal.

Chair of the British Medical Association pensions committee Vishal Sharma said: “Attacking our pensions in this way would completely reverse this progress by once again taking money away from doctors in a different way.

“‘Not only would this negate the recent hard-won pay rises but it would likely reignite the recent pay disputes that have been seen across the NHS.”

The plan has been compared to Labour’s earlier disaster of a proposal to bring back a lifetime cap on pension savings, which was ditched during the election campaign after backlash over its impact on junior doctors.

With Labour still desperate to plug a £22 billion hole in the public finances, Treasury officials are now hunting for other ways to rake in cash.

The Government has repeatedly cautioned the Budget on October 30 will involve “difficult decisions” on tax and spending.

A range of options for generating tax revenue have been touted, including increasing capital gains tax.

CGT is a tax on the profit made when you sell or dispose of an asset, like property or shares, for more than you paid for it.

You only pay tax on the gain, not the total amount received from the sale.

There may also be a temptation to make changes to inheritance tax to target the most wealthy.

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Southern Water, the heavily indebted utility controlled by Macquarie, has turned to investors for nearly £4bn in borrowings over the next five years at a time when water companies are under increasing pressure in debt markets because of the crisis at Thames Water.

Thames Water, which itself was formerly owned by Macquarie, was last week downgraded to the lowest reaches of junk because of its dwindling cash position, increasing further scrutiny on other utilities in the sector with strained finances.

While Southern is not in the same degree of financial peril as Thames Water, its investment-grade rating and its debt covenants have both come under pressure as the group’s total debts have exceeded £6bn, according to its most recent group accounts. Of that total, liabilities related to derivatives have ballooned past £1bn.

The yield on Southern’s short-dated bonds, due in 2026, has more than doubled over the past six months to reach 13.5 per cent, as investors now require a hefty premium to hold debt that would usually offer far smaller returns due to its near maturity.

The water monopoly, which serves 4.7mn customers in the south-east of England, met bond investors in recent days to update them on its credit situation and business plan.

In a presentation to debt investors published on its website, it revealed it planned to raise £3.8bn of debt over the next five years, telling them it had a “proven track record of capital raising”, having raised £550mn of fresh equity from Macquarie in the last financial year.

The utility also needs to raise £650mn in equity as pressures mount on its credit ratings and operating business, which is struggling with sewage pollution and potential water shortages.

The investor presentation comes after Moody’s in July put Southern’s credit rating on review for downgrade, putting it at risk of losing its investment-grade status with one of the major agencies.

Despite Macquarie having already injected hundreds of millions of pounds, “there is no certainty that it would make further contributions if the final determination makes continued low returns likely”, Moody’s said.

Southern’s chief financial officer Stuart Ledger said at the time of the downgrade that the utility had “an excellent liquidity position”.

However, in August 2023, the company’s lenders had to waive a loan covenant breach after its credit ratings and its interest coverage ratio, a measure of a company’s ability to pay its debt, fell below key thresholds.

Lenders agreed to waive these conditions until 2035, meaning Southern can continue to draw down all of its available borrowing facilities and raise new financing, while also allowing the utility to increase the limit on its gearing — a critical measure of debt-to-equity — from 74 to 75 per cent.

Within Southern’s complex structure, the regulated operating company, a “ringfenced” group that is supposed to be protected from stress at the holding companies above, is nevertheless running with gearing of about 70 per cent.

While lower than Thames Water’s gearing of about 80 per cent, the £4.7bn debt pile at Southern’s operating company, which makes up the group’s reported debt-to-equity ratio, leaves out almost £1.2bn of liabilities relating to its inflation-linked swaps.

These are not reported in the utility’s regulatory numbers, but if included, they would take the company’s gearing level to more than 85 per cent. Were the company’s creditors to demand a payment acceleration upon a default, Southern Water’s inflation-linked swaps would rank ahead of principal and interest on its senior debt.

The presentation also shows that Southern is asking water regulator Ofwat to allow it to increase the average annual household water bill to £734 by the end of the next regulatory period, higher than Thames Water and three other water companies cited as comparisons.

Thames Water, which saw investors backtrack on a commitment to provide £500mn of equity in March, became the first regulated water utility to lose its investment-grade rating when both Moody’s and S&P cut its credit rating.

While an equity injection at Southern Water from Macquarie could ease pressure on its operating company, its holding company also has £300mn of debt maturing next year. Representatives of Macquarie told investors at the meeting that it might need to negotiate an extension on this debt, according to one person who attended.

Thames Water’s holding company Kemble, which itself was established by Macquarie during its 2006 buyout of London’s water company, defaulted on its own debt in April, after its present shareholders backtracked on a pledge to put in fresh equity into the business.

Southern Water said the group had strong liquidity and was working towards a positive regulatory settlement. Macquarie declined to comment.

Dynamic Planner has announced a new CRM integration with Adviser Cloud.

Financial advisers who use the new integration will be able to “seamlessly transfer client records easily, efficiently and securely” between Dynamic Planner and Adviser Cloud.

Data is passed between the systems, with Adviser Cloud validating all data, removing the need for rekeying, which minimises manual errors and saves time.

Dynamic Planner chief revenue officer Yasmina Siadatan said: “The Dynamic Planner ecosystem is continuously expanding and today we are pleased to announce another two-way integration, this time with Adviser Cloud. This will be a game changer for anyone using Adviser Cloud and Dynamic Planner, providing a seamless user experience.

“As the latest in our growing suite of strategic partners, this new CRM integration with Adviser Cloud will continue to transform the processes of financial planning firms and drive significant efficiencies.  Integrations are fundamental for our clients and we are committed to our long-term strategy of continuously enhancing the flow of information to and from Dynamic Planner as the system of record.”

Adviser Cloud tech lead Ewan Humphreys added: “Our integration with Dynamic Planner is designed to make financial planning simpler and more efficient. Adviser Cloud has always focused on providing intuitive, user-friendly software for financial advisers, and this integration continues that mission by eliminating data rekeying and enhancing workflows. This partnership enables advisers to deliver even better client experiences while saving time and reducing operational costs.”

Adviser Cloud specialises in intuitive and easy-to-use software for IFAs, designed to reduce costs, increase efficiency, and deliver an exceptional client experience.

The writer is chair of Rockefeller International. His latest book is ‘What Went Wrong With Capitalism’ 

Economic populism is a body of ideas, often random and irrational, crafted to win over frustrated voters. It tends to be good politics, bad economics, and it’s having a moment in the spotlight. As US presidential candidate Kamala Harris vows to subsidise home buyers and punish price gougers, her rival Donald Trump offers universal tariffs and “no taxes on tips”. Such slogans poll well but are likely to backfire if implemented, raising this question: are there populist ideas that can lift the economy and still win votes?

Here’s one missing in the campaign so far, that fits nicely on a bumper sticker: No More Bailouts! Doling out dollars by the hundreds of billions in 2008, and trillions in 2020, state rescues have helped incumbent companies, undermining competition and productivity. Bailouts are the new trickledown economics, claiming that everyone gains from benefits for the rich and powerful, but in the end only fuelling a sense that the system is failing and unfair. 

The US government has developed a suite of bad habits in recent decades, including more state spending in good times and bad covered by more borrowing, thus almost quadrupling US public debts as a share of GDP. Stopping this snowball would, however, require capping Social Security and Medicare — middle-class entitlements that are so popular neither party dares touch them.

Bailouts, in contrast, are generally unpopular, and capping them would at least moderate the escalating crippling debts and related dysfunction. These rescues are slowing productivity growth by supporting corporate deadwood, clogging the system with barriers that prevent newer companies challenging the entrenched.

In 2008, the authorities injected taxpayer money into giant banks while letting community banks fail by the dozens. The public reacted angrily, compelling Congress to rule out that type of rescue. Then the pandemic hit, and authorities found new ways to pump money into financial markets, and into banks and corporations whether large or small, distressed or not.

In 2023, the economy was in recovery, yet losses at two smallish banks (Silicon Valley and Signature) triggered new bailouts, justified by fear that letting depositors suffer could cause “another 2008” — a systemic meltdown. Every bailout deepens the faith of investors that government will always be there to backstop their bets, which inspires them to take more risk, making the system more fragile — and for authorities, justifying ever bigger, quicker bailouts.

Disrupting this doom loop requires resetting expectations of state relief before the next crisis hits. Companies need to know that losses will not be covered by the state, so their risk-taking becomes more rational. This is not as radical as it may sound, since modern bailout culture is so new.

In its first 200 years, the US organised relief for banks and corporations only twice, in crises of the 1790s and the 1930s. The next bailouts were delivered amid the shocks of the 1970s, for select companies such as Penn Central and Chrysler, over fierce resistance. Critics asked why a democracy would single out a few big corporations for help.

The first bailout of a major bank, Continental Illinois, came in 1984. Later that decade came the first industry bailout, in the Savings and Loan crisis, and the first pledge of official support for financial markets — from Federal Reserve chair Alan Greenspan. By 2008, relief spending reached its no-limit maximalism.

The time to slow this momentum is now, before it does more damage. Since bailouts have undermined the dynamism of the economy, they should be doled out less frequently and tilted towards small enterprises, the main engines of job creation. Authorities do need to stabilise markets in distress, but with a sense of balance.

Increasingly, bailouts are indiscriminate, nurturing “zombie” companies. Authorities would do well to recall Walter Bagehot, the father of central banking, who argued that aid should be used to help solvent businesses endure passing storms, not to keep failing ones alive indefinitely.

Fearful of the fragility they have created, governments now vow to err on the side of spending too much, to prevent a depression. The result in 2020 was way too much relief for too long, driving up inflation, debts and risk in the economy. The size of bailouts should be based on need, not deliberate excess.

The alternative: increasingly financialised capitalism that favours the established, leaving angry voters vulnerable to cynical populism. The answer is practical populism, starting with a call to contain the bailout state.

NEARLY half a million people claiming tax credits have been given a six-month warning to ensure they continue to receive benefits.

The warning comes as the government continues to transition all two million claimants on legacy benefits to Universal Credit by the end of March 2025.

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Recipients of tax credits do not need to take action until they receive a migration notice letter from the Department for Work and Pensions.

But, once received it’s important to act quickly to avoid having benefit payments cut off.

Legacy benefits – such as Tax Credits, Housing Benefit, Income Support, Jobseeker’s Allowance and Income-Related Employment and Support Allowance – are all being phased out.

All claimants will be moved to Universal Credit in a process known as ‘managed migration’.

Once claimants have received a letter they will have three months to migrate to Universal Credit.

Sir Stephen Timms, Minister for Social Security and Disability at the Department for Work and Pensions (DWP), said: “I can testify just how busy life can become in just a short space of time.

“But it is important to plan ahead. I wish to stress this especially if you are in receipt of legacy benefits and thinking about your financial future.

“In April 2025, tax credits will close, which means for thousands of people their old benefits will no longer be paid. Notices are being sent out to help transfer people to Universal Credit and I strongly urge you to respond to your letter when you receive one.

“If you do not, your entitlement will end. You may also lose out on financial protection if you do not respond. The majority of those moving onto Universal Credit will not be worse off than what they claimed previously. There are numerous protections in place, including, if necessary, direct payments to top up your entitlement to what you received previously.

“Not responding to your notice may mean these protections are not in place.”

The transition to Universal Credit is not automatic so it’s crucial for households to apply for the benefit within three months of receiving their migration notice.

Timms added: “Once you receive your migration notice, regardless of which old benefit you claim, do not delay in responding. The process is quick and easy which will make sure your future benefit entitlement is secured.”

Since July 2022, the DWP has sent nearly 1.14million migration notices.

However, according to the DWP’s latest figures, 284,660 individuals lost their benefits after failing to act on migration notices received between July 2022 and June 2024.

Some 623,310 individuals have since made successful claims for Universal Credit, and another 232,830 are still in the process of transitioning.

The Sun previously revealed that around 171,750 households receiving tax credits, who were sent migration notices between November 2022 and December 2023, have had their benefits stopped.

That’s according to figures from the DWP, provided to anti-poverty charity Z2K via a freedom of information request.

Experts have previously warned that managed migration poses a risk to vulnerable people who face losing money.

Top bosses at charities, including Mind, The Trussell Trust, Turn2Us and the Money and Mental Health Policy Institute, said in 2022 that around 700,000 with mental health problems, learning disabilities, and dementia could struggle to engage with the process.

More than 20 organisations have called on the government to halt managed migration to fix flaws in the system that could cause those at risk to fall through.

MANAGED MIGRATION PROGRESS

In January, the government announced the number of migration notices it plans to send out in the coming financial year.

Before this date, the focus was sending migration notices to households claiming tax credits only.

However, 110,000 income support claimants and a further 120,000 claiming tax credits with housing benefit started receiving their letters in April.

Over 100,000 housing benefit-only claimants were contacted in June.

More than 90,000 people claiming employment and support allowance (ESA) along with child tax credits started being asked to switch in July.

Meanwhile, 20,000 claimants on jobseekers allowance (JSA) will be contacted from September.

The Sun previously reported that, in August, those claiming tax credits who are over state pension age will be asked to apply for either Universal Credit or pension credit.

It was initially planned that those claiming income-related ESA alone would not be moved until 2028.

However, the DWP brought forward plans to move these households to Universal Credit by the end of 2025.

Since September 2024, 800,000 households have begun receiving letters explaining how to move from ESA to Universal Credit.

HELP CLAIMING UNIVERSAL CREDIT

As well as benefit calculators, anyone moving from tax credits to Universal Credit can find help in a number of ways.

You can visit your local Jobcentre by searching at find-your-nearest-jobcentre.dwp.gov.uk/.

There’s also a free service called Help to Claim from Citizen’s Advice:

• England: 0800 144 8 444
• Scotland: 0800 023 2581
• Wales: 08000 241 220

You can also get help online from advisers at citizensadvice.org.uk/about-us/contact-us/contact-us/help-to-claim/.

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