Tag: Rachel Reeves

Chancellor’s Spring Statement and MP Evans Webinar

I missed watching Rachel Reeves giving her Spring Statement live because it clashed with a presentation from M.P.Evans Group (MPE) I wished to watch – see below. But there were numerous reports I could read later. There were no great surprises. The Chancellor is aiming to save £3.4 billions on welfare payments and £3.6 billions on “other departmental” costs. But there is increased expenditure on the Justice Department to offset that.

A discussion on tv channels afterwards suggested that some benefit recipients, presumably those receiving Universal Credit payments, will lose over £4,000 per year. There is going to be some squealing as a result no doubt. But when you have to cut your budgets to stay solvent, then there is little option.

M.P. Evans Webinar

M.P. Evans Group is a producer of palm oil and associated products in Indonesia (mainly Sumatra). I recently purchased a few shares and the presentation of their final results was most informative – and kept me awake that is more than I can say for some webinars.

There was a useful slide showing the breakdown of the vegetable oil market. That includes rapeseed oil which I recently commented upon and am now avoiding. Palm Oil is now taking up a larger share of a growing market which now includes usage in biodiesel. Production by MP Evans was much the same as in the previous year despite challenges from dry weather but prices of palm oil increased so revenues and profits increased last year. They could therefore afford a17% increase in the dividend.

On a prospective p/e of 8.8 and a dividend yield of 4.8 according to Stockopedia the shares do not look expensive but there may be substantial risks from investing in a country with its main operations in Indonesia even if the company is registered in the UK and has a long track record. It will clearly be sensitive to commodity prices.

It was interesting to note that the war in Ukraine had an impact on the company as their costs are affected by the price of fertilizer.

I will do some more research on the company and track it for the moment.  

The MP Evans webinar was on the Investor Meet Company platform and will no doubt soon be available as a recording there.

Roger Lawson (Twitter: https://x.com/RogerWLawson  )

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Ukraine and the Economy

It is good to see Donald Trump taking a vigorous approach to settling the war in the Ukraine. I have written on the subject of the Ukraine before – for example here in 2022: https://roliscon.blog/2022/03/08/ukraine-a-more-balanced-view/ . My view has not changed. There is now little chance of Ukraine winning the war militarily so they should settle for the best peace terms achievable. An enormous amount of money is being wasted on this war – including billions of pounds by the UK.

Keir Starmer has announced he is “ready and willing” to put British troops on the ground in Ukraine to enforce any peace deal. What lunacy is this? He is pretending to be able to act like a world power such as the USA when we are not. Simply delusional. Our economy can simply not support thousands of troops stationed overseas. The British army only has about 75,000 full time personnel and the number has been falling for years. One wag suggested that with all these unaccompanied male illegal immigrants they should be conscripted into the army – a good idea. You give them the option – join the army or be repatriated to where they came from!

If we want to have a growing economy we need to have a peace settlement in Europe where we stop wasting money on military equipment and munitions, and reduce the cost of energy by consuming Russian gas.

The TaxPayers Alliance recently made a very good point. The country’s GDP figures may be slightly positive overall (so small to be within the range of statistical accuracy), but individually we are getting poorer – see their press release here:  https://www.taxpayersalliance.com/taxpayers_alliance_declares_personal_recession_in_response_to_gdp_figures

Our economy is in deep doo-doo in reality with Reeve’s rise in NI meaning many companies are reducing staff and profits are falling. High taxes are leading to economic doom as the TaxPayers Alliance frequently points out. It is an organisation well worth supporting. See https://www.taxpayersalliance.com/donate

Roger Lawson (Twitter: https://x.com/RogerWLawson  )

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

UK Politics and Stock Market Review

According to a report in the FT, the development of the Jackdaw gas field is not quite as dead as I suggested in a previous blog post, which was based on a decision in the Scottish courts. The FT says:

“The government is currently drawing up new guidance for environmental impact assessments in response to the Finch decision, which will be published in the spring. The guidance is expected to set the bar higher for fossil fuel projects. The energy companies will then have to resubmit environmental impact assessments to the Offshore Petroleum Regulator for Environment and Decommissioning, a quango which answers to Miliband.

But Rachel Reeves said last week that ‘we were really clear in our [election] manifesto that we would honour all existing licences including at Rosebank and Jackdaw and we will stick by those commitments’”.

This is all very well but the companies involved are surely going to have difficulties planning future capital expenditure given the outstanding uncertainty as to whether Labour politicians such as Miliband will stick to their party’s commitments. Foreign companies and investors will surely be scared off by this duplicity and dissimulation.

The UK stock market has been trending down. Is this the post-Christmas hangover or just the trend following caused by index tracking funds? I don’t know as Paul Scott might say. He wrote a very amusing blog post recently putting the boot into an AIM company who shall remain nameless that claims to have a cure for erectile dysfunction. He simply said he had tried it and it did not work. I certainly recommend doing some shopping to try products and services before investing in a company.

Meanwhile, AIM continues to lose companies via de-listing or moves to the Main Market. The ones delisting are generally too small to be on AIM where listing and regulation costs are too high. They should rightly leave.

The ones moving to the Main LSE market (see GlobalData today) do not seem to justify the reputational problem of being on AIM compounded by the recently reduced tax benefits. The AIM market has a major problem and will continue to decline unless it is substantially changed with improved and tighter regulations. A change of name would also help.

The Reform Party is now on a roll and is leading in opinion polls. This may not last as people tend to support minority parties between general elections when their minds get more focussed on reality. But Reform is certainly proving more credible even if not everyone likes Nigel Farage. The Labour Government is even panicking to the extent of cancelling elections in some local councils on the basis that the pending local government elections will mean some votes will be wasted as boundaries are redrawn. They are also gerrymandering by proposing to reduce the voting age and allowing anyone who is UK resident to vote (i.e. not UK citizens alone). These moves are certainly very deplorable to anyone who believes in democracy.

Roger Lawson (Twitter: https://x.com/RogerWLawson  )

You can obtain notifications of new posts in future by following me on Twitter (now “X”) – see https://x.com/RogerWLawson where new blog posts are usually mentioned.

Budget Comments    

I shall just make a few comments on the Chancellor’s Budget announcements yesterday. There are many free analyses on the web from the national press and investment companies.

Many of the advance rumours turned out to be true although the worst predictions did not materialise. My stock market portfolio went up by 1.4% on budget day mainly from rises in small/mid cap shares although most of that disappeared this morning.

There was clearly some panicking about potential rises in capital gains tax before the budget causing people to crystalise gains. Yes there are rises – The main rates of CGT are currently charged at a lower rate of 10% and a higher rate of 20%, and these will be increased to 18% and 24% respectively from 30 October 2024. These new rates will match the residential property rates, which are not changing. So there will be some impacts on my personal tax bill as I pay capital gains tax on some share sales in some years. But I can always postpone selling shares to avoid the tax or move them over time into our ISAs where the generous £20,000 annual investment allowance remains in place.

But what about Business Property relief against IHT available on some AIM shares you ask? Removal of this was seen as likely to badly damage the AIM market. This is the key paragraph in the Chancellor’s statement: “The government will reform agricultural property relief and business property relief from April 2026. In addition to existing nil-rate bands and exemptions, the 100% rate of relief will continue for the first £1 million of combined agricultural and business assets to help protect family farms and businesses, and will be 50% thereafter. The government will also reduce the rate of business property relief to 50% in all circumstances for shares designated as “not listed” on the markets of a recognised stock exchange, such as AIM”. This will affect around 0.3% of estates each year including mine.

There is a new limit on Agricultural Property Relief and Business Property Relief – no Inheritance Tax will be payable on the first £1million of combined agricultural and business property, to help protect family businesses and farms. Thereafter, Inheritance Tax will be payable at half the standard rate (meaning 20%). For quoted shares designated as “not listed” on the markets of recognised stock exchanges, such as AIM, this same rate will apply at all times. Carried interest will now be taxed within the Income Tax framework, but at 72.5% of an individual’s marginal rate. Furthermore, the rate for Business Asset Disposal Relief (Entrepreneurs Relief) and Investors’ Relief will increase from 14% to 18%.

I don’t own any farms, but Jeremy Clarkson is not happy. He said on Twitter (X): Farmers. I know that you have been shafted today. But please don’t despair. Just look after yourselves for five short years and this shower will be gone”.

Comment: clearly many wealthy individuals invest in farms as a tax avoidance wheeze. These are businesses that often lose money and are lifestyle choices to a large extent. I have little sympathy for encouraging such businesses. The money would be better invested in new high-tech productive companies.

The government is also removing the opportunity for individuals to use pensions as a vehicle for inheritance tax planning by bringing unspent pots into the scope of inheritance tax from April 2027, which will affect around 8% of estates each year. This is another change that will impact me – or to be more exact, my offspring.

Bearing in mind that the Chancellor chose to raise £40 billion in new taxes, the most damage has fallen on employers National Insurance and the freezing of allowances which will bring more individuals into the tax regime. However the promise is that the freezes in threshold rates for National Insurance and Income Tax set in the previous government will end. From April 2028, these personal tax thresholds will be uprated in line with inflation. Let us hope the Government remembers that promise.

The rise in employers National Insurance and the minimum wage will hit retail and hospitality businesses so watch out for the impact on such shares – generally you have to be very careful with those in modern times anyway.

There is of course still no indexation of capital gains so we will still be paying tax on illusory gains.

The Chancellor Rachel Reeves commenced her speech in Parliament with the usual political platitudes and rhetoric. She spent most of her time criticising the previous Conservative Government rather that outlining her plans for a brighter future. Higher taxes will clearly damage future economic growth. What is the extra money to be spent on? On defence is one thing and on the NHS but I am deeply sceptical that the NHS can benefit from more cash. The problem in the NHS is incompetent management. More cash might simply be wasted.

For full details of the Autumn 2024 budget see: https://www.gov.uk/government/publications/autumn-budget-2024

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

Labour Promises and Taxes

Rachel Reeves, Chancellor, has made comments to the effect that the Conservatives concealed the dire state of the economy and hence taxes will need to rise to meet a black hole in her budgets.

Richard Tice, the Reform UK deputy leader, has said it is a ‘con’. The MP for Boston and Skegness said the government knew about the state of the finances during the general election campaign and accused the cabinet office of “flip flopping” on pledges. The numbers were known, the promises were made. Now Labour is doing what Labour does: fiddle the books, flip flop on pledges. Just like Tories.

This is just like any new management when they take over a company -they kitchen sink all the bad news so they can look good in the future.

The new Government wants to spend money on a number of their favourite policies and the only source is by raising taxation. They have two apparent immediate targets: raising capital gains tax rates to be more in line with income tax and raising taxes on pension savings by reducing pension relief. The former might be sound in principle but ignores what the impact will actually be in cash terms. Capital gains tax can be avoided in various ways such as deferring sales. So the net revenue might be much lower than anticipated. Unintended consequences will abound – such as wealthy people departing to countries with lower or nil capital taxes – or reductions in new businesses being formed as entrepreneurs decide it’s better done elsewhere or not at all, reducing the tax base in the long term. This is a typical Labour Party error – sticking to dogma that the wealthy should be soaked regardless of the consequences.

There is also the prospect of removing the relief from capital gains tax on death – effectively increasing inheritance tax. But the response will be an increase in complex tax planning to minimise that.

Let us hope that the Chancellor listens to advice from the Treasury on the likely impact of major changes in taxation before committing to do anything. Continual changes in major taxes just defeat any sensible financial planning by individuals and companies. Stability is what we need, not continual changes, and we certainly don’t need taxes to rise overall. We are already more heavily taxed than at any time since the Second World War and high taxes discourage wealth creation and reduce the tax base.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson  )

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