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Budget 2024
Summer break is over, as is the honeymoon period for the new government. On 30 October 2024, Rachel Reeves delivered her first Budget as Chancellor, which was momentously the first ever Budget delivered by a woman. Aside from that there was worry in advance that the Budget would achieve very little, and simultaneously cries from the media of the untold levels of destruction that would be caused by Labour unnecessarily raising taxes on hard working British workers. Both turned out to be true, at least in some respects. In some ways this Budget started the journey of addressing the many problems we have with our economy that weren’t fixed by the free market as we were promised repeatedly by the Conservatives. In others, the changes made didn’t go far enough to properly redress the gross inequality that we as a country have developed. I am going to be focusing my thoughts in this blog from a political perspective. If you would like to read my thoughts on what this means from a financial planning perspective, my professional blog is available here. What We Welcomed There was a lot to welcome in this Budget, not least of which was the fact that it was the first ever delivered by a female Chancellor. Beyond that, it took steps towards repairing our broken economy, with increases to Capital Gains Tax, restrictions on Inheritance Tax and confirmation that the Non-Domiciled Status would be abolished. Capital Gains Tax, the tax on realised gains from assets bought and sold, was increased from 10% to 18% at the basic rate and from 20% to 24% at the higher rate. This is still not a return to the heady days when Capital Gains Tax was 40%, but 24% is actually the rate that would have been paid on the longest-term capital gains once the maximum effects of Taper Relief were applied (Taper Relief was an effort to accommodate inflation so that people weren’t paying the full rate of tax just due to rising costs). As such, this is a reversion to an old rate of Capital Gains Tax, at least for the higher-rate taxpayers, and it is fair to say that during that time there were still calls for major reform to that particular tax for equality purposes. In particular, it is quite disappointing at first glance to see an increase of 8% for basic-rate taxpayers and 4% for higher-rate taxpayers, but it is important to remember that there will be very few basic rate taxpayers actually affected by this given it is a tax paid predominantly by the very wealthy. The combination of cumulative ISA allowances of £20,000 per person per year and the fact that basic-rate taxpayers would need to be earning under £50,000 a year means they are unlikely to pay Capital Gains Tax at all. Inheritance Tax tightening is welcome, in particular the anomaly that is the unlimited relief from inheritance tax for “unquoted” shares (which perversely includes companies quoted on the Alternative Investments Market, or AIM, which includes several companies worth over £1 billion) after a holding period of 2 years. This was essentially a huge gift to those wealthy enough to make large investments into fairly high risk ventures without worrying about their financial future. It was also available for “working farmland”, which would have included some very large hereditary estates used for things like grouse shooting. These reliefs have been curtailed, with the full relief only available on £1 million of assets, with the excess limited to 50% relief. This might have an enormous long-term effect on the strategies used to sidestep inheritance tax for larger estates, but is very unlikely to stop the process altogether because there are many other workable strategies, including simply gifting large swathes of the estate and surviving for 7 years. Inheritance Tax is largely already considered “optional” once an estate gets sufficiently large, and while it is nice to partially redress some of the oddities in the tax, this is far too little to expect any meaningful results. The abolition of the Non-Domiciled Status is welcome. Essentially this was an option for wealthy individuals from overseas to come and live in the UK but not pay tax on their worldwide assets in the way that a resident born here would have to. This essentially came from the idea that wealth would trickle down, i.e. if we managed to attract wealthy people to the UK through low tax, they would benefit the country by spending their money here. In reality it led to a large industry of overseas trusts and careful management of family finances to pay as little tax as possible whilst enjoying the status of being full UK taxpayers. The overall combination of these changes is expected to be a significant increase in tax take, and from that the Chancellor announced increased budgets for the NHS, justice and education systems, all of which are welcome. Whether these increases are sufficient to fix the various problems within each of these remains to be seen. Also announced were official redress schemed for those affected most by several scandals over the years, including the Post Office Horizon scandal and the infected blood scandal. Frankly these are long overdue, and it is genuinely awful that it took a change in government to get these properly funded. What Was Missing Unfortunately there was a lot missing in the Budget. You would have to have been hiding under a rock not to have heard the calls for a wealth tax, whether as a one-time payment or as an ongoing annual tax, but this was conspicuous by its absence. An effective wealth tax is the only means to address wealth inequality, and whilst Inheritance Tax is a form of wealth tax, as mentioned above it is far from effective. Given this, the changes to taxes in this Budget feel like wallpapering over major structural defects in the UK tax system. Increased Capital Gains Tax might feel like it goes some
Here Comes the New Boss…
Same As the Old Boss… I mentioned before the election that Labour really weren’t the party of change that they were claiming to be. I said on a number of occasions that they were basically the continuity party and that their policies were functionally almost identical to the Tories they were seeking to replace, but with more competent personnel. Yesterday a vote in the Commons demonstrated that this was indeed a correct analysis and that Labour is much more interested in party politics than the good of the country. What Happened? Yesterday MPs had the opportunity to vote on an amendment to the House’s response to the King’s Speech, which sets out the aims of the government now that Parliament has been reopened. The standard unamended response was: That an humble Address be presented to His Majesty, as follows: Most Gracious Sovereign, We, Your Majesty’s most dutiful and loyal subjects, the Commons of the United Kingdom of Great Britain and Northern Ireland in Parliament assembled, beg leave to offer our humble thanks to Your Majesty for the Gracious Speech which Your Majesty has addressed to both Houses of Parliament. Address to be presented to His Majesty by Members of the House who are Privy Counsellors or Members of His Majesty’s Household. Hansard This is a fairly standard response to a King’s Speech, and is entirely non-contentious to simply pass without further comment. However, it is also an opportunity for minority parties to point out to the government that they have missed some key issues that really ought to have been included. In the case of the amendment proposed by Christine Jardine MP (Liberal Democrat, I might add), these issues were: The right to see a GP within seven days A guarantee for cancer patients to start treatment within 62 days from urgent referral Free personal care in England Better support for carers, and a cross-party commission on social care An end to the scandal of sewage dumping against which the previous Government failed to take action, including by replacing Ofwat with a new regulator Support families with the cost of living Tackle poverty, including by introducing a national food strategy, extending free school meals to all children in poverty, and by scrapping the two-child benefit cap Ensure that rural communities and farmers receive adequate support Reform the system for parliamentary elections by replacing first-past-the-post with proportional representation, so that every vote counts The new Labour government voted this down. Not only that, they withdrew the Whip from seven MPs that voted to amend the King’s Speech response (NB, they actually voted for an amendment from the SNP which only focused on the child benefit cap – they didn’t even go so far as to vote for this amendment with its various additional benefits for the country), including the former Shadow Chancellor, John McDonnell. Frankly there is nothing in this amendment that should warrant this type of action from Starmer. His party supports all of these, including proportional representation, so he does not have a mandate from his own party to ignore these requests, let alone the fact that almost every other party in Westminster voted for this amendment (Tories notwithstanding, given they are responsible for most of the mess this would have addressed). Danny’s Debut This year I lost the Uxbridge & South Ruislip election to Danny Beales. At the time I was not hugely disappointed with this because during the hustings Danny set himself out to be progressive in the true sense of the word. Nevertheless, he joined the Labour masses in voting against this amendment. Shame on you, Danny. Every single one of these proposals was in line with what a true progressive would have wanted, and you used one of your very first appearances in our Parliament to vote to retain Tory policies that have harmed our country and our constituency. You should have joined John McDonnell in voting for this amendment if you wanted to be taken seriously as a progressive, but it seems that you have chosen to simply fall in line with what Starmer demands even when it contradicts your own personal morality. A fine example of putting party before country, something you were very keen to accuse Steve Tuckwell of doing. Frankly, if you want to be a progressive, you are clearly in the wrong party. Labour is not a progressive party, as demonstrated by suspending several prominent MPs who dared to vote for some actual progressiveness.
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