Pre Brexit Budget

At face value, today’s Budget was small change in comparison to some that have gone before. There were only 28 policy changes in comparison to 77 last year. Having said that, there will no doubt be journalists looking to spin headlines. Expect them to be dominated by National Insurance, Public Debt, Social Care and Tax.

 

 

National Insurance

At the General Election in 2015, the Conservatives promised no increases in National Insurance Contributions. Today, saw a u-turn on this and announced an increase in National Insurance Contributions for the self-employed from 2018. A clear breach of the Conservative election manifesto. Politicians not keeping their promise……who’d have thought it!

 

In fact, for those that are not employed in the UK, there was little to cheer as there was also a kick in the shins for shareholders of Limited Companies who will see the Dividend Allowance reduce from £5,000 to £2,000 from 2018.

 

On the one hand, it is not right that the tax paid on an average employed salary by an employer and employee is 3 times that of a self-employed person earning the same. However, on the other hand, there needs to be recognition of the risk to be self-employed the jobs that are created. I am not sure that the measures announced really address either side of the argument.

 

Regardless, the actions proposed will make things “fairer” apparently and bring greater tax revenues into the public coffers.

 

 

Public Debt

Another big headline grabber was the increase in public borrowing as it will be significantly lower at £51.7 billion than the predicted £68 billion. Don’t get me wrong, this is still huge borrowing figures of course but better than forecast. Before you get too excited though, the national debt will peak at a colossal £1.7 trillion in 2017 / 2018 before starting to reduce (hopefully). I appreciate that £1.7 trillion is a figure beyond most people’s comprehension, so let me put it another way……that’s £62,000 of debt per household in the UK. My particular favourite is the interest payment on the debt alone……£50 billion per annum. You could do a lot of good with that.

  

Box Office Phil said “we will not saddle future generations with debt” as he saddled future generations with record debt. Errrr……a little confused there Mr Chancellor.

 

Social Care

There are some very scary figures on the rising age of the UK’s population. We now have 500,000 more over 75’s than we did in 2010. This increase will rise to 2 million by 2020. That is staggering growth in pensioners and as a consequence the social care system is creaking at the seams.

 

The Chancellor announced £2 billion of additional funds for social care that typically is needed to support those aged over 75. The devil was in the detail though, as the funds are to be released over a 3 year period. It felt more like a positive headline grabber and sticking plaster than a long term solution. It’s a start I guess.

 

 

Tax 

In short, you should be better off than you were……assuming you aren’t self-employed or a shareholder of a limited company. 

 

There were no changes to income tax, VAT or other National Insurance categories. Personal tax-free allowance is to rise as planned to £11,500 this year and to £12,500 by 2020. There were no increases in alcohol or tobacco duties on top of those previously announced.

 

 

So there you have it……a bit of a dull Budget. Apparently, the Budget provides a "strong, stable platform for Brexit" according to the Chancellor but he didn’t explain how it does. In his defence, Chancellor’s never explain their statements. However, I’m not sure how it can provide a platform of stability when our negotiations haven’t started. Nice try though Phil.

 

In summary, if you are employed then it’s ‘as you were’. If you are not, you might swear a little more this week……but not much more. It could have been better. It could have been worse. The UK ship continues to sale reasonably safely……for now at least prior to heading into European waters. Brexit choices dwarf Budget 2017 choices.

 

It is always worth remembering that today's Budget is merely a step along a financial lifetime journey and it’s never good to measure the distance between your home and work with a 12 inch ruler!

 

But don’t let that stop journalist sensationalism!