Overall – a sensible, prudent and non-inflationary Budget shorn of gimmickry; Sterling and stock markets rallied.
The best news to come out of the Budget was the OBR estimate (caveat emptor) that inflation would fall to under 2% over the “next few months” – a bigger fall than we suggested a few days back when “under 3%” looked reasonable. If the OBR is correct, this should mean that even the “slow to react” Bank of England could be cutting interest rates soon. That remains to be seen – but if correct should have positive implications for mortgage holders - and at the national level the burden of servicing national debt; an under-spend here could give the Treasury more ammunition to cut future taxes. Over-shadowed by the Budget was the announcement that activity in the construction sector picked up last month – we suspect driven by anticipated interest rate cuts. Construction sector “optimism” rose to a 24 months “high”.
The OBR increased its estimates for UK economic growth to 0.8% this year and to 1.9% (from 1.5%) in 2025 and 2.0% in 2026 (faster than France, Germany & Italy on a 5 year view); these estimates imply faster growth in real household disposable per person income compared with estimates made just 4 months ago. Essentially the Budget measures are designed to boost employee take-home pay, get the able-but-inactive back to work coupled with a drive to increase efficiency in the public sector whist cutting the Budget Deficit. These aims come on top of household support that cost the Treasury some £3,400 per household in the last 2 years following the impact of Russia’s invasion of Ukraine plus another £400bn of support during the Covid pandemic. Nonetheless annual borrowing as a percentage of GDP (the fiscal deficit) is scheduled to fall to 1.2% by 2028-29 from 4.2% this financial year.
The head-line grabber is the second cut in the National Insurance rate in 4 months – by another 2% points. That means the NI tax rate has been cut from 12% to 8%. For the individual on average wages the combined moves cut their NI bill by ~£900 – putting an extra £900 in their pocket. For a household of two working couples this gain rises to £1,800 in a full year. Furthermore the Chancellor stressed his ambition to eliminate NI as soon as financial conditions allow. The OBR suggests the NI changes would add 0.4% to GDP growth. It also means the average UK employee will now benefit from the lowest effective personal tax rate since 1975 – one lower than in America, France, or Germany. For those with families the cut off threshold for child benefits will be raised to £60,000 from £50,000 – exempting some 170,000 families from this charge entirely and reducing the charge by ~£1,300 for almost half a million families; the OBR estimates this will encourage extra hours of paid work equivalent to 10,000 full time jobs. Additionally other measures will be taken to encourage those able to work back to the work including enhanced child care.
The efficiency drive starts with a NHS – although 400 more nurses and 250 more doctors have been recruited by the NHS for every month this Government has been in office – most recently productivity has fallen. £3.4bn is budgeted for new IT systems in order to slash the13m hours lost annually to “stone-age” IT systems. These efficiency gains should save ~£35bn for re-investment in the service. The police force will receive a similar IT overhaul. For perspective the OBR estimates a 5% increase in public sector productivity would be the equivalent to ~£20bn – others suggest more.
Elsewhere the alcohol duty freeze is extended for another year as is the 5p cut in fuel duty saving the average car driver ~£50 per annum. In rural counties like Herefordshire where 2 cars are often a must, this is particularly welcome. The VAT threshold will increase to £90,000 for small businesses - the first rise for 7 years and exempt tens of thousands of business from VAT altogether. A new British ISA will be introduced allowing an additional ISA allowance of £5,000 if invested in UK shares or UK debt. Part of the Government’s 32% holding in NatWest (ex-RBoS) will be sold via a retail offering.
The Flip side. The non-dom benefit will be pared back - limited to 4 years . Tax breaks for short-term furnished lets will be abolished but capital gains tax on let property/second home sales will be cut to 24% (28%). The oil industry windfall tax will be extended for one year – but if oil prices fall to “normal” levels this will be reviewed. This latter move should bring in ~£1.5bn. A vaping tax will be introduced next year.
Changing the subject – have you seen the latest frivolous 8-page “life-style newspaper” from Herefordshire Greens. Pretty pictures galore – but where is the one of Surrey-born Ellie in handcuffs prior to her police detention for a public order offence at a London “climate protest” in 2019. Forget the hagiography & the recipe, but ask her why the Greens.....
Favour a world without borders.....where people can move if they wish to do so”(ie. an open border policy).
Favour legislation to reform land tenure and access to land. (Farmers beware).
Want to Reduce to a minimum the overall volume of international trade and shareholders rights to dividends.
Will Begin Immediately ...dismantling our nuclear weapons, cancel Trident and remove any foreign nuclear weapons from the UK, ban exports of nuclear weapons related material, ban nuclear armed ships from UK territorial waters.
Favour turning the army into a humanitarian aid brigade – which with dis-armament leaves the UK defenceless.
Favour an annual wealth tax.
Promoted by Ross Carter on behalf of North Herefordshire Conservative Association, both of 8, Corn Sq. Leominster. HR6-8LR Tel. 01568-612565; e-mail; [email protected]; web site www.nhca.org.uk
