Like a weary pilgrim who has finally made it to Santiago de Compostela or a marathon runner who has negotiated “the wall” and now has the finishing line in sight, I am glad the pre-budget journey is now complete. I do like a bit of pre-budget speculation for a few days……but this has been a few months of tiresome rubbish!
I look forward to the day when the Labour Government
begins to calm down. Their obsession with how many billions they need has become
unnerving. The £22 billion black hole became, almost overnight, the £40 billion
funding gap. It all felt as though Labour was playing Billionaire
bingo……with itself.
So, where to find (insert the latest made-up
number) billions?
There has been a broad consensus that Rachel
Reeves’s original sin was to rule out rises in the four big taxes that together
generate three-quarters of Government revenues — Income Tax (£303 billion), VAT
(£176 billion), National Insurance (£168 billion) and Corporation Tax (£101
billion).
By ruling out raising the ‘big four’, RR
created a speculation whirlwind on where the (insert the latest made-up
number) billions was to come from. Rumour upon rumour dominated far too
many for far too long.
But as we limped towards Labour’s first budget,
I had a touch of sympathy for our well-intentioned Prime Minister and his clear
message of not overtaxing “working people”……mainly because nobody from the
Labour party could define who “working people” were.
Various cabinet ministers had a jolly good
go……defining them as people who rely on a pay packet and “go out” to work. Errrrrr……what
about the work from home brigade? That then morphed into Keir saying he doesn’t
include people with income from shares or property or who are able to solve a
sudden problem “by writing a cheque”. A cheque? What next……those that send a
telegram……those who have a ration book?
The Numbers
Labour used a record 117 day hiatus
between winning power and announcing a budget to reveal a 170 page report
delivered in an 80 minute address by the first female Chancellor.
The main headlines will show that taxes will
rise by £40 billion, with employer national insurance, inheritance tax
and capital gains tax the main sources to suffer. The main winner of the tax
was the NHS with £22.6 billion being pledged over the next two years.
RR simply took £25 billion from the
private sector through an employer national insurance increase (the biggest tax
rise announced) and gave it to the public sector via the NHS. Simply chucking
more money at inefficiently delivered medical care without radical reform seems
baffling.
It also seems baffling that the rise in capital
gains tax is on shares (the second biggest tax rise) but not on property. This
will see Number 11 whack productive, risk-taking investments rather than
increasing the tax burden on passive property ownership.
The third biggest tax rise will come from
inheritance tax, with the £325,000 threshold continuing to be frozen
until at least 2030 (it has not increased since 2010) and inherited pensions
brought under the inheritance tax regime for the first time from 2027. This
change will see 1 in 10 now impacted by inheritance tax.
Whilst the promise to unfreeze income tax
thresholds is welcome, it won’t be implemented for another four years. Or to
put that another way……she will increase it just as we are going to the polling
stations!
Despite the fact that the 170 page report
is an incredibly interesting read (yes, really), the following summarises the
key points:
- The Office for Budget Responsibility (OBR)
has forecast that the UK economy will expand by 1.1% this year, 2.0%
next year and 1.8% in 2026.
- The OBR has also forecast that inflation will
average 2.5% this year and 2.6% next year before falling to 2.3%
by 2026.
- The national living wage will increase by
6.7% from £11.44 an hour to £12.21 for those aged 21 and
over. The increase is worth up to £1,400 a year for full-time workers. The
UK will also gradually move towards a single adult rate, increasing the minimum
wage for those under the age of 21 by 16.3% to £10 an hour.
- The headline rate of national insurance for
employers has been increased from 13.8% at present to 15.0% per
cent from April.
- The earnings threshold at which employers
start making national insurance contributions, which currently starts at £9,100,
has been lowered to £5,000.
Capital gains tax rises to 24% on the
sales of shares and other assets, effective immediately. The rate of 10%
which applies when people are selling their own businesses will rise to 14%
from April 2025 and 18% from April 2026.
The non-dom tax regime that allows foreign
nationals living in the UK to avoid paying tax on their overseas income has
been “abolished”, removing a 50% discount for non-doms bringing foreign
income into the UK in the first year.
The freeze on the inheritance tax threshold of
£325,000 has been extended until 2030. Inherited pensions will be brought
under the inheritance tax regime for the first time from 2027. Inheritance tax has
been introduced for the first time on agricultural land and business worth more
than £1 million.
The stamp duty surcharge on second homes has
been raised from 3% to 5%.
The freeze on income tax thresholds will not be
extended and will be uprated in line with inflation for the 2028-29 tax year.
My own favourite number of the month……4……the
little lady bagged Wainwright Number 4 (Gowbarrow Fell).
I was all over the new ‘value for money’ chief being
a certain for the award this month. The chairman of a new quango designed to
ensure taxpayer money is being spent wisely has overseen billions of pounds of
overspend and long delays on major projects such as HS2 and the renovation of Parliament.
David Goldstone, who will head the Office for Value for Money, will be paid the
equivalent of £247,000 per year for an average commitment of one day a week.
That’s the stuff that The Trump would be proud of.
However, the Trump of the Month Award for October
2024 could only be…… Rachel Jane Reeves.
RR introduction of a whopping £25 billion tax
hike on employer national insurance means all sensible companies will now be
calculating the size of their bill, along with the adjustments and cuts
required to pay it.
For all that the Chancellor says her first
budget spares “working people” (whatever that means), businesses are made up of
people. Employees and prospective employees will pay the bill in several ways……lower
wages, limiting pay rises, restricting hiring or redundancies. I’m pretty sure
nobody voted for that.
This is indisputably a tax on work, whatever
sophistry RR may deploy about sparing the “payslips of working people”. It
opens up an ever wider black hole, so to speak, between what it costs to hire
and what the employee takes home, extracting yet more from the working-age
population.
Having waxed lyrical about protecting working
people, RR then went on national media 24 hours after her budget speech to
concede: "It is likely to mean wages might be slightly less than they
otherwise would have been.”
So
exactly how does that spare the “payslips of working people?”
On immediate reflection of the budget, I found
myself worried and wondering whether Labour and RR really understand how the
economy works in practice. I fear they are about to find out.
The Trump of the Month Award for October 2024
could only go to Rachel Jane Reeves.
Crazy
on every level.
Trump Lunacy Rating: 10 / 10
And Finally……
“If you tell the truth, you don't have
to remember anything.”
Mark Twain
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