Let’s talk about the budget: Two weeks on
So here we are two weeks on from the budget and it appears that the Chancellor has managed to steer a steady course (remember the fallout from the fiscal event of 23 September 2022). The Government and the Bank of England have had other problems to deal with such as persuading HSBC to bail out the UK arm of Silicon Valley Bank, something which they seem to have accomplished with the minimum amount of fuss (unusual these days). Inflation is up but markets seem to have settled (for the moment). It will be interesting to see if the Office for Budget Responsibility’s (OBR) inflation forecast is achieved by the year end. Let’s face it they don’t have a great track record.
The Chancellor, albeit with limited firepower (new money) has tried to address some of the supply side issues that are slowing down the UK economy, with a focus on trying to get people back to work. The Pandemic has had many unforeseen effects, not least that many people are reluctant to return to the world of work and for some (parents) who want to work but find the cost of childcare a real disincentive. Businesses are struggling to recruit yet we have more people of working age (than vacancies) who are currently out of the workforce.
Although Mr Hunt didn’t ‘row back’ on the forthcoming hike to Corporation Tax he did introduce a number of measures to encourage businesses to invest and grow. All in all he didn’t ‘spook the horses’ as his predecessor did but I do find it bemusing that from all sides of the House (of Commons) there are calls for lower taxes and growth stimulus when not 7 months ago they claimed that Mr Kwartang’s actions were reckless in the extreme!
There was good news for pension savers in the budget with the scrapping of the Lifetime Allowance (LTA), increases to the Annual (contribution) Allowance (AA) and the increase to the Money Purchase Annual Allowance (MPAA).
The increase to the MPAA is especially welcome, this penalised people who might have needed to access their defined contribution pensions when they didn’t have access to any other capital/finance.
I’ll write more about these changes over the coming weeks but I think it’s safe to say that the changes to the LTA and AA are principally driven by the number of Doctors leaving the NHS due to the tax penalties that they pay both during the accrual stage of their pensions and at retirement.