ALEX BRUMMER: Savings need a tax benefit

Killjoys at the Bank of England threaten to undermine consumer and business optimism about Britain's prospects.

There is a full understanding that the Monetary Policy Committee wants to eradicate inflation. But it would be a terrible shame if Britain fell into an unnecessary recession.

Chancellor Jeremy Hunt began the process of easing the tax burden in last month's autumn statement.

The benefit of the two-point cut in national insurance contributions will be visible in January payslips, when it is most needed after the seasonal excesses.

The business community will hopefully step up investment plans given the decision to make the 'full cost' of new plant and equipment permanent, allowing it to be written off against tax.

The Tories are on small boats and in a bad place in Rwanda, and are in the spotlight when it comes to making the most of their tax changes and the better picture emerging from surveys.

The most recent S&P/CIPS purchasing managers index shows that service providers are regaining their confidence. Despite the best efforts of Governor Andrew Bailey and his less than cheerful lords (and ladies), Britain should be able to avoid a recession. Driven by services, the overall index is at its highest level in six months and is in positive territory. There are also signs that the cost of services, while still high, is falling.

Contrary to much conventional wisdom, consumers feel better about life. Confidence rose for the second month in a row in December, which GfK researchers say bodes well for nervous retailers.

Fears about the impact of borrowing costs on the housing market and spending are decreasing. Mortgage brokers from across the country are reporting strong survey numbers in November and December.

The Chancellor could do much more to stimulate production. However useful the autumn statement may prove, it has delivered little for savers and entrepreneurs. Instead of waiting for pension fund reform, he could help revitalize the city by undoing baked-in changes to the capital gains tax credit. This is expected to shrink to just £3,000 by April 2024, compared to £12,000 two years ago.

Likewise, he should look again at the reduction of the tax credit for dividends. Someone should remind Hunt of the damage done to pension funds and UK stock investments by Labour's abolition of dividend tax breaks way back in 1997. It is time to abandon the pessimism about the cost of living and growth and to get behind policies that could pull back the country's economies. nation out of despair.

Sanctions pain

Sanctions as a weapon of war are slow, but they can do real damage. President Putin used a rare press conference this week to reiterate his determination to continue his reconquest of Ukraine. He is heartened by the standoff over future military and economic aid to Kiev in Washington and Brussels.

But it is reassuring that all is not well with the Kremlin. The Russian central bank has just raised interest rates by a full percentage point to 16 percent. Despite shifting energy exports to India and China, Moscow faces rising inflation, labor shortages, high borrowing and a weak ruble. Since July, rates have increased by 8.5 percentage points.

Following a recent trip to the Middle East, David Cameron has tightened sanctions on Iran over its support for terror.

The government has taken power to attack Iran's decision-makers, including the Islamic Revolutionary Guards Corps, the Quds Forces, and individuals linked to Hamas and Palestinian Islamic Jihad. Enforcement is made more difficult by cryptocurrency – a gift to terrorist groups.

The latest sanctions include an asset freeze, preventing British citizens or companies from doing business with named groups or individuals, including Mahmoud Zahar, the Gaza-based leader and co-founder of Hamas. The noose is tightening.

Soft touch

Another woolly review on NatWest from lawyers Travers Smith. It acknowledges that rules were broken when the accounts of Nigel Farage and others were closed, but that the law was not broken.

Accounts were closed because a customer was deemed 'inconsistent' even though the decisions made were not political but contrary to Coutts' 'business purpose'.

Coutts showed open disquiet and accused Farage of having “xenophobic, chauvinist and racist views.” That's quite political.