Here are some more comments on the Chancellor’s statement to add to those previously made.
The cuts to National Insurance are substantial. As someone who retired from paid employment over 25 years ago, I won’t get any benefit from that but maintaining the “triple-lock” on state pensions will offset that and mean a rise of 8.5% next year. I think reducing employment taxes was a sensible way of distributing the largesse available to the Chancellor. But personal taxes are still too high overall mainly due to fiscal drag from reduced indexing of allowances.
Retaining 100% capital allowances for businesses will please many companies but I am not sure investors will be that impressed. It might simply mean capital is wasted on projects with a poor return.
- On ISAs it was argued by some that simplification should take place to make them more attractive. But the Chancellor has ignored that and made them more complicated. For example by permitting ‘certain fractional share contracts’ as eligible ISA investments. This is a recipe for encouraging speculation by unsophisticated investors rather than long-term investment and is simply unnecessary.
- The Chancellor is proposing a retail offer to dispose of its remaining holding in National Westminster – the remains of its former holding in Royal Bank of Scotland. Investors should take a very jaundiced view of such an offer. Investing in bank shares is always tricky due to lack of transparency in their accounts (for example on cash flows) so I am personally unlikely to take up such an offer. But it’s certainly good for the Government to exit its holding if it can do so.
- It has been confirmed that the lifetime allowance will be scrapped from pension rules from April next year, as previously announced by the Chancellor. This will make it more difficult for any future government to re-introduce the lifetime pension cap as Labour has pledged it would do if elected.
- Other welcome news is on the treatment of pensions on death. Under current rules, if you die before age 75 your beneficiaries can inherit your defined contribution (DC) pension completely tax-free if it is under your lifetime allowance. HMRC has announced that, contrary to previous plans, this situation will continue.
- The Government is to consult on allowing any house that can be converted made into 2 flats provided the exterior remains unaffected. This could get a lot of opposition in Chislehurst where I live. It would increase population density and traffic/parking problems with inadequate public infrastructure such as schools and medical facilities. Instead of tackling the underlying problem of excessive population growth this is a “sticking plaster” solution to housing shortages.
- There will be £1.3 billion spent on helping 700,000 people with health conditions find jobs. Does that mean that I will be asked to take up some part-time job working from home or lose my attendance allowance? There are certainly too many people of working age and with minor health problems that are living on state benefits at present. I can foresee a lot of resistance to this proposal but it is a problem that needed tackling. Too many people are reliant on the social security system and the cost is one reason why we have high taxes.
Will the tax and other changes help the Conservatives to win elections? I doubt it. They are simply not revolutionary enough.
Roger Lawson (Twitter https://twitter.com/RogerWLawson )
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Fiddling round the edges and the tax take will go up not go down, which is what the country desperately needs. But I suppose he needed one more boring budget so when they actually cut taxes abolish IHT etc next spring they are less likely to be labelled russites
Locally there is a man, let’s call him Sid, who, as far as anyone can remember, has never worked and lives in a council house. Although seemingly fit, Sid is paid invalidity benefits and his partner is his paid full time carer. Sid supplants his income with a window cleaning round. He also had a wealthy uncle his indulged him with regular holidays abroad – nothing expensive but welcome all the same. He also played golf at the local course with a group of friends. Sid’s rich uncles died and left his money to Sid’s partner, thereby not affecting Sid’s benefits. Now Sid takes regular golfing holidays abroad, playing on expensive courses. As he says “there is no point in having money if you don’t enjoy it and it’s nice to meet with other people who also have money”.
True story and a big problem.