Increasingly, it looks as if November’s Budget will herald a savage attack on our personal wealth – a financial assault more vicious than last year’s spiteful affair. Tin hats at the ready.
Over the past 24 hours, all the signals confirm this bleak prospect awaits us on November 26, Budget Day – or more like Financial Doomsday.
First, we woke up yesterday to news that the economic revival of the country promised by Labour isn’t coming any time soon. No surprises there, then.
According to respected economists at the Organisation for Economic Co-operation and Development (OECD), the UK economy is beset by anaemic growth.
This year, they forecast that growth will limp along at 1.4 per cent before dropping to 1 per cent next year – with Labour’s £25 billion National Insurance (NI) tax raid on businesses largely to blame.
In light of these underwhelming forecasts and the Chancellor’s focus on elusive growth, it is highly unlikely that Rachel Reeves will risk targeting UK businesses as a source for much-needed tax revenues a second time around.
Stand and deliver: A tax raid on household wealth is coming as Chancellor Rachel Reeves looks to tackle the £50bn blackhole in the nation’s finances
It would be the equivalent of economic suicide, resulting in more workers losing their jobs and swathes of small firms going out of business.
This all means there is only one way for Ms Reeves to go in order to tackle the £51 billion black hole in the nation’s finances – and that is to loot our household wealth (welfare reform is beyond free-spending Labour).
So, a tax raid on our pensions, investments and savings – and maybe on our homes – is coming, and will be so fierce it is likely to burn a hole in our wealth unless we are thoroughly prepared.
(Yes, readers, I urge you to pore over Helen Crane’s splendid report on how to ensure your finances come out on top, irrespective of what the Budget throws at them).
This leads me nicely on to my second point. Yesterday, right on cue, the Resolution Foundation (a fertile breeding ground for both future Labour MPs and Treasury economic advisers) weighed into the Budget debate with its own proposals for raising extra tax revenues.
Not surprisingly, in light of what I’ve previously said, the ideas were focused on households rather than businesses – although they did mention imposing NI on employer contributions into workers’ pensions and a curbing of salary sacrifice pension schemes (tax-efficient for both firms and employees).
Act now: A tax raid on our pensions, investments, and savings – and maybe on our homes – is coming so fierce it is likely to burn a hole in our wealth unless we are thoroughly prepared
Given that what the Resolution Foundation says usually ends up as Labour policy – think inheritance tax on agricultural assets, family businesses and unspent pensions – its recommendations cannot be dismissed as the rantings of a think-tank madhouse.
They’re both radical and bad news, especially for pensioners. Most controversial of all is a call for Labour to break its pledge not to raise income tax by applying a 2p in the pound increase across all tax bands.
This tax rise, it suggests, should be softened (for workers, not pensioners or those with unearned income) by a corresponding reduction in the rate of National Insurance.
Although I would be surprised if Ms Reeves opted to adopt this idea in November’s Budget, you’d be a fool to rule it out altogether given the fact that Labour and the Resolution Foundation are joined at the hip.
After all, in the report’s acknowledgements, the author thanked HM Treasury officials for ‘helpful conversations’.
So, maybe not this Budget but next year’s if, as expected, the UK economy remains in the doldrums and desperate measures are required.
The report suggests other tax measures such as a hike in dividend tax rates for basic-rate taxpayers and a prolonging of the freezing in personal tax thresholds into 2028 and 2029.
All, in their own way, horribly corrosive, especially with inflation predicted to average 3.5 per cent this year.
So, please read Helen’s report and, where appropriate, take heed of her Budget-beating advice. Ignore her words at your peril. Labour is gunning for your money.
