Don’t reach for your hankies just yet, but I’m beginning to feel a touch of sympathy for our much-lambasted Chancellor Jeremy Hunt.
In virtually every media interview I’ve listened to this week since his Budget he’s been hammered. Spring must be the season for ‘Chancellor bashing.’
To be fair it wasn’t a great Budget but I find it hard to get angry about it. It was a ‘shoulder shrugging’ Budget at best.
The cut to National Insurance will boost incomes for some people but the net difference will be modest and many will not benefit, especially company directors paid mainly through dividends.
The British ISA, a call for patriotic investment, mostly fell on deaf ears but perhaps could be energised by some enthusiastic marketing campaigns. The attack on non-doms is several years down the line so will give most of them the chance to review their domicile options – a few wealth managers will benefit from this.
Overall the rest was pretty much so-so but I do think the Chancellor genuinely had very little to manoeuvre. He simply didn’t have the cash to hand out and was unwilling to max out his credit card to hand out a few sweeties.
For these reasons it was mostly a ‘prudent’ Budget with very little given away and few gifts for taxpayers. Gordon Brown would be proud.
I really do not know what people expected. One factor most people seem to have forgotten is the huge costs of coping with Covid, the cost of living crisis and all the ramification of the Ukraine war, particularly the impact on gas and energy prices. People have such short memories. The government borrowed very heavily fund its spending in these areas. It’s payback time.
Most people know the Chancellor has frozen tax thresholds but they may not realise this lasts until 2027-2028, after Mr Hunt extended the previous date by two years. That’s several years when rising wages will push more and more taxpayers into the higher tax brackets. There is also no guarantee that the freeze will end then. This is the biggest single threat to real incomes and will not change unless Mr Hunt, or a subsequent Chancellor, revisits the plans.
So is it all doom and gloom? Well not quite.
Unemployment is low, inflation is falling and could even turn negative by the summer, tax receipts are rising, public borrowing is mostly under control even if this is painful at times.
According to HMRC figures, the Government raised £788.6bn in taxes in 2022 to 2023 (with the majority from Income Tax, CGT and NICs), an increase of 10.2% from the year before. Tax take is on the up.
The economy is anaemic, however, and needs a transfusion to pump new blood into sclerotic veins. We do need a Budget for business and Mr Hunt has yet to deliver on this.
We should also remember this is an election year. Depending when the election is called, the Chancellor could have another stab at things around the time of the Autumn Statement. The last Autumn Statement was more of a mini-Budget so there is no reason Mr Hunt could not pave the way for some growth measures and perhaps offer some ‘jam tomorrow’ by way of potential future tax cuts in the Autumn. Whether these measures will be implemented will be down to the electorate.
There is no getting away, however, from the fact that without a much bigger rise in income for the government or lots more borrowing Mr Hunt will have little ability to alter the course of the economy.
Despite all this there are more positive signs for the markets. Having missed out much of the share price boom in the US and Japan, UK markets are seen by many investment experts as undervalued with potential for growth.Â
In the Financial Planning sector there is still significant M&A activity and many platforms, providers and planners seem to be overcoming the worst of a torrid last few years. With Spring in the air recovery may not be too far away. We’re not out of the woods yet but barring an unexpected event we may be over the worst.
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Kevin O’Donnell is editor of Financial Planning Today and a journalist with 40 years of experience in finance, business and mainstream news. This topical comment on the Financial Planning news appears most weeks, usually on Fridays but occasionally other days. Email: This email address is being protected from spambots. You need JavaScript enabled to view it. Follow @FPT_Kevin >Top Tip: Follow Financial Planning Today on Twitter / X @_FPToday for breaking news and key updates
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