Monday, 29 October 2018

Autumn Budget 2018

(as it's national cat day)
The first Monday budget for almost 60 years...surely some momentous announcements to be made...actually, no...seems to be business as usual.

Given the well-documented tensions between the PM and her Chancellor - many say she would have replaced him after last years election had she got the result she wanted rather than losing her majority. Although he thinks otherwise, I suspect this could well be his last.

At the conference last month the PM announced the end of austerity and in June, additional spending on the NHS so will this mean the abandoning of the battle to reduce out £1.8 trillion debt mountain?

Debt

Our borrowing is still not under control and whilst we are borrowing less than previous years, the total amount owed is still increasing. Net PSBR now stands at £1.8 trillion which is almost 4x the figure for 2007 (~£500bn). Admittedly the annual deficit has been gradually coming down year on year since 2009 when we borrowed £152bn but the fact remains we continue to borrow each year - estimates for this year are £26bn. We are paying around £45 billion each year in debt interest which is ~£1 for every £8 we spend.

The more we borrow, the more we pay in interest which is linked to inflation rates and this means less to spend on welfare, pensions and essential public services, housing and infrastructure. At some point we have to grasp the nettle and start to live within our means.

Budget

Public borrowing was £11.6bn less than forecast which has provided the Chancellor with a little more freedom on spending which includes an extra £2bn on mental health services, £1bn for the armed forces and an extra £1bn for the transition to universal welfare together with an increase in the work allowance.

The OBR confirmed that debt peaked at 86.5 % of GDP in 2017-18 the highest it has been in 50 years.

On Brexit, the government have set aside a further £500m of new money to cover some of the current uncertainties. The Chancellor proposes another budget if there is no deal...project fear mark 2...

On a positive note, I am pleased to see that pensions and savings seem to have been left alone.

The relevant changes are few :
After a big jump in 2017, the ISA limit for 2019-20 will remain unchanged at £20,000.
The lifetime allowance for pension savings will increase in line with CPI, rising to £1,055,000 for 2019-20. 
From next April, personal allowances will increase from £11,850 to £12,500 (up 5.5% well ahead of inflation) and HR tax allowance up 7.8% to £50,000.

Climate Change

So we had the IPCC report in early October warning of severe consequences for our way of living unless we make some fundamental changes to limit global warming. An opportunity for the Chancellor to put forward some radical proposals to demonstrate the UK is serious about this issue.

He could restore grants for basic home insulation, reverse the decision to reduce subsidies for electric vehicles, stop postponing the increases in fuel duty for petrol/diesel, commit to getting back on track in meeting its climate targets, reverse the decision to slash feed-in tariffs on domestic solar energy installations, bring in the phasing out of new petrol/diesel cars much sooner than 2040.



He may have mislaid a few pages of his notes as there was very little mention of the environment... some talk of plastics recycling and a tax on imported plastic packaging with less than 30% recycled plastic to be introduced in 2022. No plans to introduce a levy on disposable coffee cups. A £60m tree-planting scheme (contrast £420m for potholes) and £10m for cleaning abandoned waste sites. A suggestion there may be further measures in the small print of the 'red book' and that's about it.

Alas, a miserable 'green' effort from the man in the grey suit and very little of any real consequence which is a dereliction of our responsibility to provide a cleaner environment for our children and the generations to follow.

This was the conclusion of my recent post on climate change

Our politicians spend much of their time sqabbling over Brexit but our climate scientists remind us all that the existential threat of the hour is global warming. The window to make the changes required becomes smaller with each passing year.

The Chancellor has been under pressure from many quarters in recent months and the relationship with the PM is strained. I suspect his time is almost up and maybe for this government also.

What do you make of it all? Were there any benefits for you? Feel free to leave a comment below.

7 comments:

  1. Thank you, a good summary of the budget!

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  2. Thanks for the summary DIY Investor. Very much struck me as a budget less about what was said and more about what wasn't said. No changes to pensions tax-relief, VAT or self-employed NICs. In fact, very little controversial at all (save, perhaps, for the IR35 extension). So I'd go along with your suggestion that this is perhaps Mr Hammond's last budget.

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    1. I agree YFG, the longest budget speech for 20 years and so much unspoken. This feels to me like the calm before the Brexit storm but Brexit will be a minor side show compared to the problems coming down the line if we do not get to grips with climate change. Here's Toynbee's concluding paragraph on the budget from todays Guardian...

      "Meanwhile, lest we forget, while we count pennies and dispute winners and losers, the overheating planet is reaching a fatal tipping point, but nothing in this budget – certainly not the ninth year of a fuel duty freeze – can save our children and grandchildren".

      We need some politicians with a little more vision and courage. Sadly, there are not too many who spring to mind from the two main parties.

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    2. Yes I noticed on social media that much was being made of "freezing fuel duty for the ninth year in a row". It rankles given the woeful conditions many rail and bus passengers have been putting up. All the while fares continue marching higher. The reality is, the government either takes it's commitment to the environment seriously or not. Given it chooses to continue to play political football with fuel duty and our shambolic trains, I think it makes it clear where their true priorities lie. Everything else is hot air.

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  3. Thanks for this round-up - so much expectation, it was a let down in the end. I'll end up a little bit better off, although the extra in my pay-packet will be swallowed up by the increase in auto-enrolment contribution but I'm not complaining.

    For some reason, I thought there would be something bigger to do with the environment but perhaps it's not that the government isn't concerned, it's because people aren't concerned - they're more concerned about tax on fuel, increase in income tax threshold. Short-term vision, not long term, sadly and as you say, it's the children and grandchildren who will suffer.

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    1. Thanks weenie, and yes the auto enrolment system will be fully rolled out from next April and employees will see an increase from 3% to 4% of pay deducted for their pension and their employer will pay 3%. The 5.5% increase in PA should mean most people on average wage will still be better off.

      I agree that the government do not give climate change much attention because the general public are more focused on day-to-day issues and seem unable to take on board the longer term consequences. I guess we have to wait for sea level rise, droughts, wildfires, severe storms, food shortages, much colder winters and worst of all...interruption to their wi-fi signals before people start to take notice.

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