The National Institute of Economic and Social Research (NIESR) has warned the economy will shrink by more than 1% in the fourth quarter, reports The Telegraph.
NIESR's prediction follows figures released on Tuesday which show that industrial production fell at the fastest pace in six years in October - another sign that the UK slowdown is more severe than previously forecast.
A spokesman for the body said the measures take in last month's Budget may not be enough to stave off larger falls in the economy. He added: "Output will fall more sharply than it expected to the end of next year. The main problem that it needs to address very urgently is the availability of bank credit; further interest reductions are unlikely to have much effect."
Savers with cash kept in tax havens such as Guernsey and the Isle of Man may be forced to pay tax on their offshore bank accounts to fund a new deposit protection scheme, according to the Guardian.
The move is expected to be announced as part of a Government-backed review into offshore financial centres. The review - which was announced by Chancellor Alistair Darling in last month's Pre-Budget Report - will examine the regulation of offshore tax havens and comes as confidence in offshore banking has plummeted after thousands of British savers lost money in offshore accounts owned by Icelandic banks earlier this year.
The banks were offering savers returns of up to 7% on deposits, but many were unaware that the Financial Services Compensation Scheme (FSCS), which guarantees up to £50,000 of savings, does not protect them against their collapse.
Andrew Jupp, head of tax at Tenon, told reporters he would not be surprised to see a tax levy on income from offshore bank accounts as the "quid pro quo" for granting some level of protection, such as guaranteeing a certain level of cash deposits. "The Treasury could try to strike a deal with overseas banks to ensure a certain amount of interest is withheld at source," he concluded.
Work on the offshore review commenced last week and is being lead by Michael Foot, who was previously managing director of the FSA. The review will cover Jersey, Guernsey, the Isle of Man, Bermuda, the Cayman Islands, Gibraltar, the Turks and Caicos Islands, the British Virgin Islands and Anguilla, but excluded Luxembourg.
A coalition of MPs and charities said that around nine million pensioners should be given a tax cut on their savings and investments as their retirement nest-eggs dwindle in the economic crisis, The Telegraph reports.
The coalition is backing a campaign to help Britain's elderly savers maintain their income through the economic downturn.
The campaign urges Gordon Brown to take measures to stop the over-65s from being stung by taxes on the savings and share investments they have built up to see them through their retirement.
The coalition has called on the Treasury to suspend all taxes on the interest pensioners earn on their savings and on the cash dividends they are paid from their share investments.
"Many older people who rely on the interest from limited savings to top up their income are being hard hit by the double whammy of interest rate cuts and higher basic food and energy bills," said Gordon Lishman, director general of Age Concern.IFAonline
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