A tepid U.K. budget...
So the headline news from Wednesday'd budget was a 2% cut to National Insurance.
That means someone on £35K is around £600 a year better off, those on a lower income of £20K around £200 a year better off.
Welcome, for sure, but it's hardly life changing for anyone.
All this extra money is really good for is making life a tiny little bit easier and TBH it really only partially offsets the cost of living increases over the last year.
Even with this 2% cut we're still worse off than a year or two ago!
No wiggle room!
The simple fact is the British State is maxed out after dealing with global crisees over the past several years - financial, pandemic and military.
Add to that the ageing population and still unresolved massive pensions gap - more old people and fewer people working to pay and there is no way the government can keep up with 'necessary' expenditure.
We simply can't afford to lower taxes and pay off our debts, and pay welfare (mainly pensions) and the rest - education, NHS, police etc...
Even this 2% cut is a stretch.
Hoping for fantastical growth...
This budget is also premised on growth happening by 2029... which in turn is premised on there being no global shocks in the next 5 years which is extremely unlikely given that shocks seem to be more frequent and more intense as the world 'shrinks'.
What should the State do..?
I'm of the mind that something more radical needs to be done in terms of Vesting....
The State has hundreds of billions of pounds to spend every year and I think it needs to start Vesting more of that harder in the future - ideally a sustainable future and thinking in terms of a 5-20 year plan.
ATM spending is too reactionary, as are these tax cuts - they are NOT cuts for growth, they are cuts for treading water and a cynical and desperate attempt to win votes.
Final thoughts
Tax cuts - fine! But with what's left we simply need more long term Vesting! X
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They are trying to win some votes, but already pissed people off too much. A few extra quid are not much good if you can't see a doctor and your bills are up by much more. They are scared to tax the rich and gave them a lift by reducing capital gains that most people won't be paying. We need an election, but the next lot have an uphill battle. There are no easy answers.
It's a totally pointless, weak budget.
Most of what it gives away, it steals back again through fiscal drag (the practice of not increasing thresholds and allowances in line with inflation).
Two particularly egregious examples are;
That he made a big thing of increasing the VAT registration threshold from £85,000 to £90,000. That's an increase of 28.5% since 2010, a period when cumulative inflation means it should have increased by 47%. The reality is that the threshold should either be much higher, much lower, or (even better) incorporate taper relief. The current situation means small businesses have to make a tough decision to seriously scale or not before they are really at that stage, so many choose not to expand rather than having to grow by 40-50% before their profitability catches up again.
Even worse is the way he treated the pensioners. Hunt made a big thing about increasing the state pension. But personal tax thresholds remain unchanged. I'm sure the main goal is to pull wage increases that kept up with rampant inflation into higher rate tax. But in the process, it means many pensioners will now be taxed on their pensions for the first time, and the calculation suggests that in many cases will lose the whole of the pension increase.
But hey, the money markets seem to like it, judging by the way GBP has jumped against USD, EUR and CNY. And if they like it, you know it's because it's good for them and not us !