The Autumn Budget followed weeks of speculation that created far more noise than clarity. Put in an invidious position created by a difficult economic inheritance, global economic events and choices made during the preceding 18 months, the chancellor has, in our view, chosen to take a reasonably pragmatic approach to balancing the nation’s finances.
This was a curious Budget. Clearly political in its nature through targeted and stealthy tax rises to fund the policy priorities of and gain the support of the Parliamentary Labour Party. And yet it was almost totally lacking a central strategic message setting out what it will achieve.
Frustratingly for us, after 18 months of pro-growth messaging, it is not immediately clear to us whether there is anything contained within this Budget which will either complement or drive what we thought was a central part of this government’s strategy: economic growth.
Growth is something that does not necessarily have to be achieved through flashy policy announcements. Certainty, predictability and coherence are central to delivering it too. PIMFA has been consistent in its view that stability and predictability are the foundations of good financial planning.
Without certainty, the UK will struggle to meet its wider ambition to direct more domestic capital towards productive investment
Individuals who are working hard to secure their futures cannot be expected to make informed, long-term decisions if the rules that shape those decisions shift with every fiscal event. This Budget offered incremental adjustments that may raise revenue in the short-term, but do little to build a sustainable framework for the future.
Stability is an essential component of economic growth. When savers and investors trust that policy decisions will not be overturned or rewritten at the next Budget, they feel more confident to invest, to save consistently and to allocate capital over the long term.
Without certainty, the UK will struggle to meet its wider ambition to direct more domestic capital towards productive investment.
This is why the content and character of the measures announced matter. Although the Government avoided sweeping tax changes, the package still amounted to another round of isolated adjustments.
These included freezes to personal tax thresholds, a tightening of the rules on dividend, savings and property income, and reductions to capital gains tax relief on disposals to employee ownership trusts.
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Meanwhile, the decision to introduce employer and employee NICs on salary-sacrificed pension contributions above £2,000 from April 2029 adds yet another layer of unnecessary complexity when we should be encouraging saving into pensions.
Taken individually, each measure may have a case. Together, however, they reinforce the sense of a tax system that is continuing to evolve in small and, at times unnecessary, ways.
In our recent member survey, nearly two fifths of PIMFA firms identified stability and predictability as the single most important factor in improving long-term client outcomes.
We know that uncertainty has real and immediate consequences. In the weeks leading up to the Budget, member firms reported sharp increases in client contact driven almost entirely by speculation about what might or might not be announced, especially in relation to pensions.
This behaviour is rational when people feel unsure about the future, but it often leads to short-term decisions that reduce invested balances, weakening the power of compounding and undermining long-term financial wellbeing.
The UK needs a strategic approach that prioritises stability, predictability and long-term clarity
To the Government’s credit, some measures do support capital markets and the investment ecosystem. The exemption from Stamp Duty for companies listing in the UK is a positive step that encourages, rather than compels, investment in domestic markets. The move to make Help to Save permanent is also a welcome signal of support for low-income savers.
But if the Government wishes to unlock greater participation in investing and channel household wealth into productive growth, it must set out a long-term personal and investment taxation framework.
Such a framework would allow change to be delivered transparently and coherently, with sufficient notice and clarity to allow households, advisers and businesses to plan with confidence.
The ambition to rebuild the economy and support long-term wealth creation is both right and necessary. But ambition and words need to be reflected in the actions that the government takes. The UK needs a strategic approach that prioritises stability, predictability and long-term clarity.
Only then will savers and investors have the confidence to invest consistently, and only then will the UK be able to realise its full potential as a thriving, resilient and growth-focused economy.
Liz Field is CEO at PIMFA
