When the lexicographers popped their heads out of their ivory towers to announce the Word of the Year, there was no surprise when the likes of “growth”, “stability” and “tough-choices” were conspicuous by their absence. Somewhat more surprisingly, “smorgasbord” didn’t make it onto the podium.
Literally, a Swedish buffet with a wide variety of hot and cold dishes. Figuratively, a mish mash of pernicious tax policies presented by a chancellor who didn’t have the bottle to put 2p on income tax or take control of public sector and welfare spending.
Maybe the eighth wonder of the world isn’t compound interest but is its more sinister sibling – fiscal drag.
I was one of the many in business to be wooed by Labour’s pre-election schmoozing. Even in the early days there were encouraging signs of delivering on their promises: it looked like workable, evidence-based, long-term reform to pensions and Isas might finally be on the horizon.
Reeves’s pragmatic decision to row back from reinstating the pensions lifetime allowance was an especially rare Westminster success: a difficult U-turn for a left-of-centre party and, without doubt, the correct one. A dawn of a new era has however quickly unravelled into a false dawn.
The chancellor’s set-piece became, in effect, the closing scene of a farce
One word that won’t be in the top 100 Words of the Year is purdah — that old–fashioned principle that the contents of a budget remain sacrosanct until the chancellor stands up in the House.
Instead of one clear Budget statement, we got months of staged anticipation: briefing, denial, re-briefing and the occasional U-turn when the numbers or politics didn’t land. The early release of the OBR material finished off any pretence of control or suspense. So, the chancellor’s set-piece became, in effect, the closing scene of a farce.
And to the smorgasbord of tax–raising measures?
First up on the buffet table was the stealth classic — income tax thresholds frozen through 2030/31. The chancellor avoided raising income rates, so as not to be seen to breach Labour’s manifesto promise. But make no mistake: the money raised through this policy will be broadly equivalent to the alternative foregone.
Next on the menu: the “salary–sacrifice special”. Pension savers can still enjoy the tax efficiency of salary sacrifice, but only up to £2,000 a year. From April 2029, anything above that goes through the National Insurance shredder.
Nothing says ‘we want you to save for retirement’ quite like charging you extra for doing it
Nothing says “we want you to save for retirement” quite like charging you extra for doing it. It’s forecast to raise nearly £5bn in its first year — which is impressive for something sold as “tidying up”. In practice, it’s a stealth tax on the diligent: a bitter surcharge on anyone trying to be sensible, served with a garnish of rhetoric.
And just when you think the chancellor has finished devouring the pickled pension hors d’oeuvres, she moves onto the other staple budget fare of scrambled Isa.
We were promised simplification and a push to boost retail investing — the kind of sensible reform that makes it easier for people to move from hoarding cash to building long-term investment portfolios.
Instead, we got a policy that manages to be simultaneously fiddly, confusing and utterly self-defeating: the Cash Isa limit is cut from £20,000 to £12,000 for under-65s from April 2027 – while over-65s are spared, presumably because you don’t start a war of words with people who have the time to write letters.
The truly revealing thing isn’t any single measure. It’s the pattern: constant tinkering mistaken for reform
The overall Isa allowance stays, but perversely the Cash Isa will carry a scarcity value that may encourage some to fund that before a Stocks and Shares Isa. Savers will also think twice before transferring their accumulated Cash Isa into a Stocks and Shares Isa.
The chancellor didn’t listen when the industry came together to argue if she is to tax unused pensions on death, not to do it via IHT. So, why should she listen when the industry argues that this Cash Isa policy is at best self-defeating and at worst a sign that no one at the Treasury understands our retail savings landscape or basic behavioural economics?
Much of the post-Budget debate has centred around whether the chancellor lied to the electorate. For ‘public finances black hole’ read ‘cash cow to fund an increase in welfare benefits’.
What hasn’t received the same level of scrutiny is the tax raid on Stocks and Shares Isas – conveniently referred to as a charge, rather than a tax, on interest on cash or cash-like instruments held in a Stocks and Shares Isa.
Weekend Essay: Can anyone govern a country this restless?
As the post-Budget reflection has got gloomier by the day, the cynics out there could be forgiven for thinking changing the Isa rules to support the UK markets – which it quite clearly doesn’t – is no more than another trojan horse tax raid.
Further down the buffet table, we find that rather salty trio of a two percentage point increase from 2026 for tax on dividends, interest and property income. And who says income tax hasn’t increased!?
And then, the headline crowd-pleasers. A new annual charge on homes over £2m from April 2028 — a so-called mansion tax that will divide opinion between blue and red like a Merseyside derby.
Next to the peanuts, we find the pay-per-mile for EVs (3p) and plug-in hybrids from April 2028 (1.5p), sold as “fairness” and “replacing fuel duty”. My diesel Range Rover just breathed a huge sigh of relief.
Reeves has managed to achieve her two main aims, namely to appease her back benchers and not spook the markets
The truly revealing thing, though, isn’t any single measure. It’s the pattern: constant tinkering mistaken for reform, complexity mistaken for seriousness and a governing style that seems to believe growth and stability are things you announce, not things you create.
Maybe the intention was to instil sufficient fear such that the electorate was lulled into the conclusion that it could have been a whole lot worse. Reeves has managed to achieve her two main aims, namely to appease her back benchers and not spook the markets.
Job done, but it will be interesting to see how much Gaviscon is needed to manage the inevitable indigestion. For those that missed it, the Word of the Year winner was ‘rage bait‘ – content deliberately designed to elicit anger or outrage.
Something I fear I may have just fallen victim to.
Andy Bell is co-founder of AJ Bell
