Rishi Sunak, the Chancellor of the Exchequer, delivered his second Budget speech of the year on Wednesday October 27th. It was, he declared at the start of the speech, “a Budget for a new age of optimism”. He sat down an hour later with Conservative backbenchers furiously waving their order papers as he promised “a stronger economy for the British people” and even – despite committing to an extra £150bn of spending – promising to cut taxes in the future.
As always with a Budget, the immediate reaction was mixed. The phrase ‘did not go far enough’ was never far from the lips of the special-interest spokesmen. The New West End Company – a partnership of more than 600 businesses around Bond Street and Oxford Street – welcomed the moves on business rates, but complained that they went “nowhere near” meeting manifesto commitments.
The hospitality industry welcomed the cut in beer duty and the simplification of alcohol taxes – but worried about the increase in the National Living Wage and its impact on staffing costs.
Gradually, though, the criticism became more detailed. Paul Johnson, Director of the Institute of Fiscal Studies (IFS), said that “deep in the bowels” of the Budget was an expectation that household disposable income would be “almost stagnant” over the next five years, growing by just 0.8% each year. The tax burden would continue to increase, said the IFS, stating that there was now “clear blue water between now and any time in the past”.
The headline writers put it in rather more simple terms, with many pointing out the increased tax burden on the average family.
There was criticism of the tax burden even from within the Conservative party. Former minister Michael Portillo said: “This is not Conservative philosophy. This is what Conservatives absolutely do not believe in. It is, I think, a bit of an identity crisis for the Conservative party.”
Neither was business happy: ‘a Budget packed to the rafters with promises and light on the means to pay for them’ was one verdict quoted by City AM. Tony Danker of the CBI said that the Budget “did not go far enough to deliver the high investment, high productivity economy the Government wants.” An article in Spiked accused the Chancellor of ‘ducking the challenge entirely,’ and concluded: “The Chancellor has neither the plan nor the willingness to get [the UK] to the high-wage, high-productivity economy we so desperately need.”
There was plenty more along the same lines: a general feeling that the Chancellor was simply ‘muddling through.’ So should our clients worry? There is no question that the UK is facing some serious challenges at the moment, with energy costs seemingly increasing every week and a forecast from the Bank of England’s new chief economist that inflation could reach 5% next year. No-one would bet against the Chancellor being back in March with a new set of figures and forecasts.
So now, more than ever, it is the time for good, consistent, long-term financial planning and regular contact with your financial advisers. Rest assured that we will always keep you up to date with whatever happens in the national and global economies, and that we are always here to answer any questions you might have.