Thirty-Three Years, The Budget, and You

What were you doing thirty-three years ago?

At the risk of showing my age, I remember thirty-three years ago (almost to the day) sitting alone watching the first Budget Speech to be televised live. This was delivered by the then Chancellor of the Exchequer?John Major, on?20 March 1990. Television cameras had only been admitted to the House of Commons in November 1989 and the BBC was keen to offer extensive and exclusive coverage.

This was a time of tremendous uncertainty...

And the UK economy was still reeling from the impact of the stock market crash of October 1987.

In October 1990, a month before Margaret Thatcher's resignation, the UK entered the European Exchange Rate Mechanism at a level, which many commentators thought to be too high. Mortgage rates peaked at their highest ever level of 15.40% between February and November 1990.

To meet my financial obligations and survive...

I was holding down four jobs to make ends meet while I was training to be a Financial Adviser. The first qualification I gained was the arranging and advising on mortgage. My mortgage clients at the time were queueing up to lock themselves in to five-year fixed rate mortgage deals set at 9.95%. How things have changed.

Little did I know then how useful being a DJ, Doorman, retailer of roses in a nightclub and budding Entrepreneur would be in later life. More of that another time.?

The Budget

Today (15 March 2023) almost thirty-three years on, The Chancellor of the Exchequer Jeremy Hunt delivered his Spring Budget, accompanied by a full fiscal statement from the OBR (Office of Budget Responsibility). The Budget was focused on measures which supported the Government’s economic plan to reduce inflation, grow the economy and reduce public debt.?

The Chancellor’s aim is for the economic plan to be firmly based on four ‘E’ pillars of Enterprise, Education, Employment and Everything. He also stated the Government’s long-term ambition is for the UK to have “the most competitive tax regime of any major country.”

In that respect the Budget provided us with an insight into the path ahead for business and personal taxes, along with a vision for innovation an R&D strategy and measures aimed at reducing labour market inactivity and boosting economic growth.

I will now provide you with the key points based on the four E Pillars:

Enterprise

·?????As corporation tax on profits over ￡250,000 is due to rise from 19% to 25% in April,– estimated that only 10% of companies expected to pay the increase 25% tax

·?????Full capital investment allowance available on qualifying business investment so businesses will be able to offset 100% of UK investments against their profits to bring down tax bills

·?????An "enhanced R&D tax credit" has been introduced for small and medium-sized businesses if they spend 40% or more of their total expenditure on research and development. They can claim credit worth ￡27 for every ￡100 spent.

·?????Investment Zones - Twelve new investment zones or "potential Canary Wharfs" will be eligible for ￡80m in funding to boost business there, with at least one each in Scotland, Wales and Northern Ireland.

·?????￡200m extra funding for local regeneration projects.

·?????Films – between 34 & 39% expenditure credit

·?????Nuclear power – Great British Power to supply 25% of UK power by 2050.

·?????To celebrate the introduction of the first computer in Manchester 75 years ago a fund of ￡109 million is to be set aside. Of that ￡1 million will be awarded each year to best individual or company achievement in technology?

EDUCATION - Childcare

·?????Help 700000 parents on universal tax credits

·?????Paid upfront and increase by almost 50%

·?????Parents (who are working 16 hours a week) of children aged nine months to five years will get 15 hours free childcare to encourage caregivers to enter the workforce.

·?????This new strategy will be staggered from April 2024 to ensure there are sufficient places. Children up to two years old will get 15 hours free from April 2024. Children from nine months and above will benefit from September 2024. From September 2025 every single working parent of a child under five will have access to 30 hours free childcare per week.

·?????Double allowance for children in care with SEN needs

EMPLOYMENT

·?????Currently there are one million job vacancies.

·?????Estimate there are 7 million unemployed.

·?????The government to abolish the work capability assessment for disabled people and separate benefit entitlement from an individual's ability to work. The aim is to enable disabled people to seek work without fear of losing their benefits. Increase of hours per week allowed to work from 16 to 18 hours

·?????A new programme called universal support will also fund extra support for disabled people to find work.

·?????3.5 million over 50 are unemployed. It is estimated that of these 1 million could work. A new apprenticeship, called a returnership, will be created for those aged 50 and older wanting to return to work. Mr Hunt said it will make existing skills programmes more appealing for older workers and focus on previous experience.

·?????An extra ￡400m will increase mental health and musculoskeletal workplace support to stop people being forced to leave work due to sickness.

EVERYTHING

Pensions

·?????- The lifetime allowance - the total amount workers can accumulate in their pension savings before paying extra tax - has been abolished. Mr Hunt hopes it will stop 80% of NHS doctors from receiving a tax charge.

·?????The pensions annual tax-free allowance will rise by 50% from ￡40,000 to ￡60,000.

Alcohol Duty

·?????Tax relief of 11p has been announced on draft drinks served in pubs from 1 August.

Fuel Duty

·?????An extension of the 5p cut in fuel duty, at a cost of ￡6bn, has been announced for a year. Fuel duty will also be frozen for the next 12 months.

Energy Bills

·?????As expected, the government is extending the energy price guarantee (EPG), which keeps the average household bill at ￡2,500 until the end of June by capping the unit price of electricity. The typical bill was due to rise to ￡3,000 from 1 April. Under the EPG the government effectively caps household costs and reimburses energy companies for the difference between that, and the cost of buying power on wholesale markets.

·?????The energy rebate scheme - paid direct to customers in six instalments of ￡66 and ￡67 a month - has not been extended and will end this month.

·?????The so-called "prepayment premium", whereby those using prepayment meters are charged more for their gas and electricity, will be scrapped from July, enabling four million families to save ￡45 a year on their bills.

Community

·?????An extra ￡200m a year - in addition to the ￡500m already allocated - will be made available to tackle "the curse" of potholes.

·?????Public leisure centres and pools will share a ￡63m fund to help with costs.

Medicine and technology

·?????From next year medicines and technologies approved by other trusted global regulators will be eligible for "near automatic" sign-off

Defence

·?????Defence spending will rise an extra ￡11bn over the next five years. The defence budget is currently about ￡50bn.

·?????￡30 million directed to Veterans UK for veteran support services

Climate

·?????Up to ￡600m in tax relief on energy efficiency measures has been announced for businesses, in a bid to reduce energy use by 15%.

·?????Nuclear power will be classed as "environmentally sustainable" to grow investment in the sector.

·?????A quarter of electricity will be nuclear-powered by 2050, the government plans. To that end Great British Nuclear has been created with the aim of "bring down costs and provide opportunities across the nuclear supply chain".

Back to the future

Economic Outlook

There are some challenges ahead and many of us will be more concerned about keeping our houses warm and putting food on the table than considering the results of the OBR’s forecast.?

While on that subject...

Though the OBR’s forecast highlights a more challenging environment in the medium to long-term too.?The good news is, and should provide you with some relief, that the short-term economic outlook is more positive,?with inflation expected to drop faster this year. Plus, real wages are likely to start growing towards the end of the year too,?potentially marking the end of the cost-of-living squeeze. This could also mean?the economy grows faster than expected this year?as damage from inflation is contained.?

The Chancellor is not off the hook yet...

And is likely to face continued challenges in the medium-term. The first one relates to?revised inflation assumptions for after 2023.?In the autumn the OBR had expected the UK would see a sharply declining inflationary outlook through this year and would be on course to enter a deflationary environment by 2024. Instead, we can expect the OBR’s statement to align more closely to the Bank of England’s expectation that inflation will be relatively higher after 2023,?meaning that debt interest payments on the national debt will probably rise faster.??

There is also a growing awareness of the extent to which the UK’s high figures of economic inactivity are linked to ill health of the workforce. We can expect some measures, such as health MOT programmes, to specifically support those who can return to work and also potentially targeted welfare measures to convert part-time workers into full-time workers.?

Whatever happens I think the current state of affairs, while less than perfect, is a far cry from 1990 when I was a trainee Financial Adviser and mortgage interest rates were at obscene levels and the country was on its knees.

History, while no guide to the future, indicates that providing the government make the right decisions, we could be over the worst.

YOU

As already mentioned...

We still have some challenges to overcome and many of us will be more concerned about keeping their houses warm and putting food on the table. So, if you are in a position to help with offering your time, spare equipment/clothing or financial resource. There are a number of great charities out there that could do with your support.

If you are wondering how you can help with relative ease - then a charity I believe in because it supports veterans, and their loved ones is Transformation for Veterans (Charity number 1141508).

It’s easy to do...

Because you can make your purchases for Mother's Day this Sunday and generate a donation for the charity without costing you a penny. In fact, once registered, you can continue donating for FREE from all your online purchases. How good is that?

To generate free donations and help our veterans with @GiveasyouLive when you order a card, book, a flower delivery or even make a lunch reservation visit https://www.giveasyoulive.com/join/t4v

Remember…

Any queries you wish to discuss or if you would like to find out more about how I can help you plan your future financial security, feel free to send me a personal message.

Oh, and just one more thing…

As a Veteran on a mission, I always want to go the extra mile and help 1 million business owners and veterans achieve the financial freedom they desire, deserve and dream of. For every 10 copies of Pathfinder Ultimate Success Programme purchased I am donating (via the charity Transformation for Veterans) a copy of the same programme free of charge, to a veteran so they can benefit from the life changing content too. I believe this is truly a win win. A win for you and a win for our veteran community. Click here to order your copy.

Have a brilliant day #HABD

Joe

Joe O’Connor

PS: With only a few weeks left before the end of the tax year, it's important to check you have utilised all your allowances for 2022/23. If you'd like to discuss any of the contents of this weeks newsletter, send me a message here on LinkedIn and let's start a dialogue

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