‘A Tory MP and arch critic of Boris Johnson has sparked a backlash from Brexiters after suggesting Britain re-join the EU’s single market to help ease the cost of living crisis.’ (02.06.2022 – the ‘Guardian’).
‘Rishi Sunak’s first job is to admit to Brexit ‘lies’ and strike a new deal with EU, says ex-Tory donor Guy Hands … The boss of private equity firm Terra Firma said he will not donate to the Conservative Party until it moves on from ‘internal destructive battles.’ (the ‘I’ 24.10.2022).
Assume that:
·        Labour, under the leadership of Sir Keir Starmer take seats from the SNP in the next general election.
·        This weakens the political resolve of the Scottish people to vote for independence [‘A’].
·        [‘A’] has a political knock-on effect in Northern Ireland [‘NI’].
·        Labour announce a referendum to decide upon re-joining the EU Single Market [‘B’].
·        The result of B is that the people of NI vote to re-join the EU, because:
–      Sinn Féin (‘SF’) supporters want to obtain the economic and service benefits enjoyed by their neighbours south of the border.
–       For Ulster Unionist Party [‘DUP’] supporters, the issue is a no-brainer as their party would cease to exist as a political force following Irish Unification, i.e. B is existential.
Then B will have the following consequences:
·      Labour will have preserved the Union because:
–      In Scotland it will have diluted the political power of the SNP.
–      In NI, by supporting B, the DUP will have pinned their colours to Labour’s mast.
·        People throughout the Union will ask – ‘what was the point of Brexit?’, i.e. because the UK will no longer be free to sign up to FTA’s.
Therefore, a strategic question for Prime Minister Rishi Sunak is how he can design a path for restoration of the UK’s economic fortunes following Brexit and the Mini-Budget, by engaging in a discussion with the EU about the NI Protocol (which is not working and has not conferred the benefits promised)/re-negotiation of the entire Brexit deal, without his Government being toppled by the ERG (i.e. the right wing European Research Group of MP’s in Westminister).
Since those within his own party have questioned the political mandate of Prime Minister Rishi Sunak, see:
‘All hell will break loose: General election impossible to avoid when Rishi Sunak made PM, says Dorries’ (the ‘Independent’ 25.10.2022), 
and he himself has said that his party is facing an existential threat – ‘Incoming prime minister says Tories must “unite or die” and rules out early general election’ (Guardian 24.10.2022), then at some point in the coming months he will have to make a decision about when to ‘take the bull by the horns’ and confront the ESG with economic reality, i.e. hard facts v. wishful thinking and the unorthodox/radical economic theory of a ‘cult’. In other words, Rishi Sunak is sitting on a political time-bomb and the clock for a general election is ticking! Can he square the circle?

See also:

Rishi Sunak could be forced out in six months, says Labour as ‘fuming’ Tories cancel membership (msn.com)

Australia fears UK trade deal could be scuppered (msn.com)

https://www.theguardian.com/commentisfree/2022/oct/25/rishi-sunak-prime-minister-system

A wary Europe greets Sunak’s premiership with relief | Financial Times (ft.com)

Rishi Sunak should bin the EU law bill | Letters | The Guardian

The vindication of Rishi Sunak – POLITICO

UK and EU must work together, bloc’s chairman tells new PM Sunak | Reuters

Where e.g. there is a dispute about the construction of a home made will, costs can be saved and a tax-efficient settlement obtained, by having a conversation before mediation is proposed/proceedings issued.
The parties solicitors will still need to undertake preliminary due diligence about the existence of documentary evidence, e.g. diary entries and correspondence; to take proofs of evidence from key witnesses; and to obtain office copies.
These disputes are fact specific, and the armchair questions to ask at this stage may typically include:

·        If T drafted the will, then what did he intend?

·        If someone else drafted and typed the will, did T understand the scheme of gifting under the will as drafted? i.e. is the will valid?

·        Did T know the full extent of his estate, i.e. did  T have mental capacity?

In such disputes, the ‘big ticket’ asset is likely to be the family home (‘P’).
A logical analytical starting point is that if the will is valid, the gift of P (or of an equitable interest in P) may fail because of a defect in drafting, in which event, T’s beneficial interest in P will fall into residue for distribution in accordance with the terms of the will.

Where T is survived by S, I do not think a judge is going to remove the roof from over his/her head, so what is the point of litigation?

S may also have a claim under the Inheritance Act for lack of provision, and other claims in equity (which could be funded on a CFA basis).

Depending upon the date of T’s death, the re-structuring options potentially include:
·        Disclaimer of the devise.
·        Deed of Variation.
·        Rectification – which is an ‘eye of the needle’ exercise, and is therefore the most expensive option.

To head a probate claim off at the pass, PMA involves:
·        Executors instructing counsel to provide an opinion about construction of the will, and the options available for re-structuring, see my article – Back to the future’ – Part 1 – Mediation and the tax-efficient settlement of probate disputes. Taxation (Tolley) 01.03.2022 (and you will find a link on the ‘Publications’ page at www.carlislam.co.uk).
·        Having a round table WP Zoom call between Counsel [C’], the executors, beneficiaries and their legal advisors so that C:

(i)          As ‘Counsel’, can state his/her conclusions and reasons.
(ii)         As a ‘Mediator’, can start and facilitate a conversation between the B’s and the E’s about the options for solving the problem on mutually satisfactory and tax-efficient terms without incurring litigation risks and costs, i.e. so that estate money is spent on fixing the problem instead of fighting each other.

Provided the value of the claim is within my PI cover, and after scoping the work involved, I can quote a fixed fee for this two-stage: (i) written advice; and (ii) mediation service. To enquire please send an email to clerks@1ec.co.uk.
See also ‘Mediation of Probate Trust & Tax Disputes’ at www.carlislam.co.uk).

Video hearings in the FTT – Davies v. HMRC [2022] UKFTT 369 (TC) is a recent example. The decision of the judges states:

‘With the consent of the parties, the form of the hearing was V (video). All parties attended remotely. The remote platform was the Tribunal’s Video Hearing System. A face to face hearing was not held because of the ongoing effects of the Covid-19 pandemic and it was considered in the interests of justice to hold the meeting remotely. The documents to which we were referred are a Hearing bundle of 588 pages, an Authorities Bundle of 284 pages, a second witness statement and exhibits of … The HMRC officer who been dealing with the enquiry and had issues the information notices, … an additional authority drawn to the party’s attention by the tribunal, the skeleton arguments of the appellants … and the respondents … and an extract from a book admitted in the course of the hearing. It was not possible to complete the hearing in the time allotted and it was agreed, and the tribunal gave directions accordingly, that the parties closing submissions should be made in writing. We also have before us the respondents’ written closing submissions  … The appellants written closing submissions  … And the respondents’ written reply. For the applicable PD – Google, ‘ Pilot Practice Direction: Video/Audio Hearings in the First-Tier Tribunal and the Upper Tribunal.’  Paragraph 4 of the PD stets;

‘Where a tribunal decides that: a) a hearing in a particular case should take place; b) the proceedings are to be conducted wholly as video or audio proceedings; and c) it is not practicable for the hearing to be broadcast in a court or tribunal building the tribunal may direct that the hearing will take place in private, where this is necessary to secure the proper administration of justice.’

A Mediation with HMRC may also be conducted online using Teams. I am currently writing an article for Taxation (Tolley) about the ‘Mediation of Tax Disputes’ which is planned for publication in December.

‘The UK is in the grip of a credibility crisis’ (By Emma Haslett, the New Statesman 19.10.2022)

‘The UK’s fiscal credibility is the reason our economy has historically been so stable: it has kept borrowing costs low, the pound strong and ultimately helped to control inflation. If anything goes wrong, markets reasoned, the government and the Bank of England will find a way to fix it. That makes the UK a relatively safe place to invest, build a business and create jobs.

All that came crashing down after the mini-Budget last month. “Credibility translates itself into real economic and financial market metrics pretty quickly,” said Simon French, chief economist at Panmure Gordon. “Lenders need to take a view on what decisions [their borrower] will take because their money is being locked away.” He points to “credibility signals” as an important factor in how lenders decide how much to charge for their money. “If you start to cast doubt on the wisdom of those decisions, you will require higher interest rates in order to absorb the risk that they might do something stupid.”

Even before Kwasi Kwarteng delivered his mini-Budget on 23 September, watchers of those credibility signals had already seen red flags go up. “What took place before was relevant,” said French. “The siloing of the OBR [Office for Budget Responsibility], the briefing against the Bank of England and the sacking of Tom Scholar signalled that the institutional checks and balances were being, if you’re being charitable, diluted; if you’re being less charitable, they were being sidelined.” 

The mini-Budget itself added two extra red flags: first, it indicated that the people with the keys to the UK economy weren’t the types to think through their decisions properly and, by rejecting the OBR’s forecasts, it also indicated they weren’t prepared to take advice from experts where it was needed. Second, it pitted the government against the Bank of England: after the Bank had spent months preparing investors for inflation-controlling measures such as higher interest rates and a bond sell-off, the reaction of the pensions market forced it to step in and start buying bonds – essentially an inflationary move. When parents fight, it makes the children nervous.

Credibility itself is an intangible thing, but the impact of its loss can be measured. French estimates the government is being asked to pay an additional 0.75 percentage points to borrow (this extra risk premium has already been nicknamed the “moron premium” by the economist Dario Perkins). Yael Selfin, chief economist at KPMG UK, said the mini-Budget will add “one and a quarter percentage points” to interest rates over the long term. As a result, “we’re predicting a fall in house prices of between 10 and 15 per cent,” she warned. 

Meanwhile, Hunt has reduced the length of the energy price guarantee from two years to six months. That means inflation is likely to spike to 11.9 per cent when it ends next April, according to economists at Goldman Sachs, and household energy bills have been predicted to rise 73 per cent in that single month.

How can the government restore credibility? “We need a plan,” said Selfin. “We had a plan that wasn’t going to work, so the government backtracked, but they haven’t really replaced it. It’s now a bit of a patchwork. They’re just putting a plaster over it and trying to buy some time.”

Selfin suggested that markets are giving the government until the announcement of its medium-term fiscal plan on 31 October to come up with a watertight replacement; after that, its credibility may be lost completely. “[Truss] doesn’t have a lot of time in the sense that people aren’t very patient,” she said. “But the longer we are in this limbo, the more the actual cost in terms of the impact on the economy, in terms of potentially higher cost of capital – more uncertainty, people postponing investment and everything else.”

Even when the government does have a plan, it won’t automatically regain the credibility it has lost. “It requires hundreds of small decisions on a daily, weekly, monthly basis to do it,” she said. “Lots of small actions that suggest you have started to read the room, you’re starting to listen to experts.”

What won’t happen is a “seminal moment” in which government bond yields suddenly drop. “It’s going take months and probably years to convince people that our political class have worked out that people listen, investors listen,” said French. “If they keep hearing incoherent, contradictory thoughts, they will put their money elsewhere. You need to regain that trust.”

Selfin, meanwhile, believes there’s only one way credibility can be fully restored in the UK: “A new Prime Minister.”’

If house prices fall between 10 and 15 per cent, anybody selling a house in order to buy a newbuild will get less for their home. Unless they have savings they will require bridging finance to fill the gap between what they sell their home for and the price of the newbuild. The annual inflation rate in the UK rose to 10.1% in September from 9.9% in August, returning to the 40-year high hit in July and surpassing market expectations of a 10% rate. Consequently, the price of a newbuild has increased. Higher mortgage rates = fewer buyers. Add it all together = fewer sales of newbuilds. Because there is less cash received than expected, some building companies, subject to leverage, will have to borrow to finance operating costs. The cost of borrowing to finance short term liquidity has increased and on its current trajectory is expected to exceed 6% in January. That cost erodes profit margin, which impacts upon shareholder value. If banks will not lend to a building company, it may become insolvent. Therefore, another casualty of the mini budget may be the inter-related double whammy of: (i) a housing crash; and (ii) the insolvency of major building companies.  This is not an environment for investment, lending, and economic growth.

‘The cost of long-term borrowing for the Government rose to its highest level since the Bank of England launched its £65bn pension bailout, as analysts warned the jump signalled further market turmoil could be on the cards.  Yields on 30-year gilts rose above 4.5pc, bringing them to their highest since going over 5pc just before the Bank’s intervention on 28 September. 10-year gilt yields also rose by 2.5 basis points at 4.25pc. The surge in borrowing costs came as the Bank announced it will ramp up its market intervention before it closes on Friday. It will also launch a scheme to provide liquidity to banks whose clients are struggling with sudden cash calls. Its decision comes after eight auctions so far in which the Bank offered to buy £40bn worth of bonds but only succeeded in buying £5bn worth. The Bank has been purchasing the gilts using newly created money in a process known as quantitative easing. However, analysts have warned that the intervention fails to adequately address the underlying issue. Antoine Bouvet, senior rates strategist at ING, said: “The suspicion is that risk reduction by pension funds has been too limited so far. “The question is do they have enough cash to meet new collateral requirements if the gilt market sells off again, as the gilt purchases by the Bank of England end this week.
“I think the fear is that the answer’s no and that it will trigger the same snowball effect that we had two weeks ago.”’ (Matt Oliver, the Daily Telegraph online 52 minutes ago).