When you have a large majority and a low opinion poll rating, to what extent does honouring your manifesto pledges actually matter?
This year’s Budget feels like the most leaked, the most pre-briefed and the most anticipated in years. The situation became so extreme that the Office for Budget Responsibility report was published before the chancellor’s speech.
Everyone who factors the manifesto into their voting decision probably recognises that Reeves needed to raise taxes. But would a straightforward increase in income tax have felt worse than attempting to meet manifesto pledges through technicalities and small print?
The latter feels tricky and unfair. The tax I pay no longer seems strategic or planned; it feels more about whether a loophole can be used to tax me more.
She said she would make “fair and necessary choices”, but she’s just not brave enough to make all the necessary ones
The definition of a “working person”, in particular, means people in similar economic circumstances will end up either better off or worse off tonight.
We know the books needed to be balanced, especially when the books are published early. Reeves’ decisions today will shape growth, tax and future tax rates. It feels like a missed opportunity to make more strategic, long-term changes.
She said she would make “fair and necessary choices”, but she’s just not brave enough to make all the necessary ones.
Financial advisers are adept at navigating small print and loopholes. So, while Reeves may rely on them to reconcile her manifesto pledges with spending needs, advisers will simply work them for their clients.
Cutting the Cash Isa allowance to £12,000 by allocating £8,000 solely for investments will not stop clients seeking low-risk, liquid investments tax efficiently, particularly within advised or managed solutions.
Capping salary sacrifice will not prevent advisers from structuring senior managers’ remuneration packages tax efficiently. Nor should it discourage people from saving for retirement. If anything, it reinforces the need for individuals to provide for themselves.
Increasing dividend, property and savings income tax rates by two percentage points can be avoided through multi-asset funds, bonds and investment Isas. But it is likely to boost the appeal of growth stocks and disincentivise the investors and directors of the smaller companies Reeves wants to attract to the UK.
Budget changes usually create advice opportunities, but this year the noise has created enquiries, concerns and actions that were unnecessary.
At some point, the value of advice is undermined by declining trust in the financial system – if not the state itself
At some point, the value of advice is undermined by declining trust in the financial system – if not the state itself. If we want the public to participate confidently in the system, we need stability so that products and services behave in line with consumers’ expectations.
If the government wants to leverage pension and investment assets to fund UK start-ups, scale-ups and job creation, it needs the public willing to invest. Society – and the individual – needs advice now more than ever.
Chris Jones is financial services director at Dynamic Planner
