The Herald Budget Briefing Breakfast 2023: Autumn Statement Comments

Back in March at Herald’s Spring Budget Briefing, I was the only one who thought Liz Truss wasn’t entirely wrong in wanting to kick start the economy. Productivity and growth are now on the floor. It is growing the economy that helps tax raising and tax cutting.

In the interim, inflation has fallen (nothing much to do with government policy) and Hunt seems to want to now do Truss like things but doubtless only for electoral reasons. The governing party has a real identity crisis on its hands, it has no idea which way is up. It is being made out the coincidental fall in inflation allows this new discovery, tax cutting, to be implemented now albeit inflation remains above the 2% target - Truss was saying what is now being said approx. 12 months ago.

Unfortunately, the headlines from the budget suggest not much more than tinkering, in reality. The promise about continued full expensing on capital equipment (which was already baked in) is helpful for those who have got expenditure to make but things being the way they are, they may be fewer than imagined. It’s cost nothing more before the election which is indicative of doing nothing much.

For some employers, particularly small businesses,  some of the tinkering may be countered by the increase in the minimum wage and at a lower age band, which will have a knock-on effect further on up the food chain as adjustments impact those earning above minimum wage in seeking a differentiation for age and experience. Many employers pay above minimum anyway but the upward adjustment across the workforce is bound to hit home at some point.

For employees, the static bands above which higher rate tax is paid is will suck many more into the 40% tax bracket, which makes the 2% NI reduction seem like a conjuring trick, given on the one hand and taken away with the other.  Taxation, in the round, is at an historical high.  2% is way below the fall in real incomes caused by recent inflation levels.

I don’t see anything in this that helps the guts of the economy very much immediately, it’s tinkering, flatters to deceive.  Most people won’t much notice, I don’t think, and I don’t think it does much for the government’s election prospects. They would need Truss like boldness to make any impact on a 20-point lag in the polls ( which is what this is all about) . The taxation regime needs to help accelerate the revamp of the country’s creaking infrastructure, beleaguered public services, house building et al.

The identity crisis is such that Hunt plainly feels embarrassed to throw some of the predicted electoral red meat to his seemingly natural supporters on Inheritance Tax. It is said it only applies to 4% of the population which should first presume they are extraordinarily wealthy, but the truth is, IT, set at its present entry levels, many more than 4% will be caught out as house price inflation over the recent past has been heavy, an effective penalty on ‘hard working families’ (deceased). Abolition (or at least massively upping the thresholds) should be rudimentary to the present government , as is home ownership wealth cascading down the generations, which will stop happening routinely.

Bob Hannah, Supreme Commander, The Business Insurance Bureau (Image: The Business Insurance Bureau)
Many countries (even the more socialised Scandinavian countries) have scrapped Inheritance Tax completely, as has Australia and in the USA the estate must be over $11,000,000.00 before tax kicks in. Basically, at an introductory rate of £325,000.00, we’re seriously out of step, even with family exemptions and escape routes for the married . House prices being the way they are, a tax designed for the filthy rich is going to catch ordinary folk in an unintended way. As it is on income tax, the thresholds for payment should have been uprated. 

Maybe they’ll save that for the March 24 budget as they try and claw their way back into the affections of at least their core fanbase.