Making sense of this crazy world
“Don’t panic, don’t panic!”
This could have been the message this week from Kier Starmer and Donald Trump as they both had their work cut out to persuade their own party to back their policies. They finally got their way, but they had to work harder than expected! The difference is that Labour’s Keir Starmer is facing a backlash from his own party whilst Trump is being heralded as being successful yet again and getting his own way.
There certainly seemed to be somewhat of a panic prior to Tuesday’s vote in the House of Commons. Kier Starmer had to abandon plans to restrict many benefit payments, which would have saved around £5 billion.
Labour party members were in uproar about the proposals, and Starmer had to react quickly to save face on the vote. The subsequent speculation about Rachel Reeves and her position was enough for the pound, stocks, and bonds to slide before recovering as Starmer and members of the cabinet openly supported her. It doesn’t instil confidence, especially when a government with a majority of 165 seats are close to losing such a vote.
There is now a great deal of conjecture about how and where the government are going to reclaim the money that has just slipped through their fingers. A couple of clients have already commented since Tuesday that they are worried about elevated tax hikes in this Autumn’s Budget. The UK has proved very resilient in the face of much adversity and, amongst the G7 countries, had the best growth for the first quarter of the year. It remains to be seen whether this government can maintain this momentum and deliver much needed confidence as data across the economy begins to weaken.
It makes a change for the UK to be grabbing the headlines but we can’t be complacent as in the US, the 90-day pause in tariff hikes looms next week. The pause was implemented to enable trade talks to progress, but the only confirmed deals have apparently been with the UK and China, with negotiations still ongoing for a whole raft of other countries.
Market-wise, there are now concerns in some quarters that the restoration of tariffs will threaten market stability. Apparently, Trump has written to a number of countries setting out the terms, but don’t ignore the real possibility that extensions will be forthcoming. All this coming on the back of the S&P 500 and the Nasdaq having nudged record highs this week.
This week’s content:
- Which taxes are expected to rise in the Autumn Budget?
- Could sentiment be changing for US interest rates?
- Global ESG backlash but good news for green bonds
- Boost to the defence and infrastructure sectors as Trump’s tax bill narrowly makes it through
- UK equity funds see smallest outflows for 4 years
- IPOs in the UK, the weakest since 1997!
- UK house buying activity disappoints
- A change to our Momentum portfolio
- Summary
Which taxes are expected to rise in the Autumn Budget?
It is likely that there will now be financial consequences because of Labour’s retreat on welfare. Makes life interesting for us all! Unless we see some significant growth in the economy, it looks like we are facing round two of significant tax hikes. The question for us as planners is what are the likely tax levers the Chancellor will pull?
Labour, in their manifesto, ruled out raising income tax rates, National Insurance, Corporation Tax and VAT. However, in their first Budget, Labour increased employers’ National Insurance contributions by £25 billion a year, but surely, she can’t hit the business sector again. Can she?
Continues…
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