At least we now know what we are dealing with following Wednesday’s Budget. Naturally, there is a range of opinions on its effectiveness.
Rachel Reeves appears to have satisfied the backbenchers in her party, and swathes of the population are relieved it wasn’t as penal as anticipated. Many commentators believe that she has simply delayed the fiscal pain, whilst businesses have criticised her and the government for not kick-starting growth in the economy, despite the rhetoric since they came to power.
The Budget has been framed as a “spend now, pay later” plan, according to Helen Miller, a Director for the Institute for Fiscal Studies. Michel Saunders, Adviser at Oxford Economics, stated, “the Budget reinforces the impression that the government is unwilling to take difficult decisions to rein in public spending.”
Shevaun Haviland, Director General of the British Chambers of Commerce, expressed disappointment that the Budget “did not provide a more compelling blueprint to deliver transformational growth.”
Intentionally, I’ve listened and read opinions from the left and the right on the Budget, and frankly, they simply reinforce the stereotypical views. Not surprising that their responses are typically emotional, lacking in both clarity and perspective. To be fair to Rachel Reeves, this is a tough gig because she has had to try and satisfy numerous interested parties, not least the markets!
Market-wise, for the most part, it was a relief that the immediate pain wasn’t as bad as feared. The leaked report from the Office for Budget Responsibility (OBR) sent markets into a tizzy, as traders tried to make sense of the 200-page report. But, as the speech unfolded, the reaction was mixed but not dramatic. Ten-year gilt yields fell during the afternoon following her speech, a sign that markets do not think lending money to the UK has become riskier, and they welcomed the stability the Budget will bring.
Whilst there is a lot going on (as usual) across the world, including peace negotiations for Ukraine, which have bounced defence stocks around, the focus of today’s update will be on the UK Budget.
However, after the previous week’s volatility, and my comment about how, historically, stocks rebound strongly after experiencing a severe ‘about turn’ in one day’s trading, I’m pleased to report that markets have responded positively over the last week.
This week’s content:
- Big picture strategy and numbers
- Headline tax changes
- Implications for wealth management
- Growth strategies
- How did the markets react?
- Performance figures
- In conclusion
Big picture strategy and numbers
Unsurprisingly, it is the top 10% of earners who carry the heaviest tax burden following the Budget, with an estimated £2,000 average tax increase. Just for comparison purposes, the average tax increase across all income strategies is estimated to be £500.
Rachel Reeves identified £26 billion worth of tax rises, although many will be loaded towards the end of this Labour Party’s term.
Here is a good overview with Ed Conway on Sky News – breaking down what has happened, how much money will be raised and who will be the beneficiaries. It is very interesting to understand what’s happening behind the headlines.
Continues…
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Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.