Bull and bear: review on the Autumn Statement - The Share Centre Blog

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Michael Baxter

Bull and bear: review on the Autumn Statement

Written by: Michael Baxter on December 6th 2013

Category: Bull & Bear, News

Bull and Bear – an optimistic and pessimistic view of investment news. In today’s Bull and Bear the focus is on announcements that will affect investors. The Autumn Statement saw changes to ETFs, Venture Capital Trusts, pensions, REITs, property investment, and employees share ownership and quarterly accounting. George promised to stick to austerity, saying that while government borrowing is falling faster than previously predicted, the underlying deficit – that is to say borrowing that strips out the temporary effect of the recession – still needs to fall. He also made some quite interesting announcements on innovation, including quantum technology and driverless cars.

Bull and bear review on the Autumn Statement

In today’s Bull and Bear the focus is on announcements that will affect investors. The Autumn Statement saw changes to ETFs, Venture Capital Trusts, pensions, REITs, property investment, and employees share ownership and quarterly accounting. George promised to stick to austerity, saying that while government borrowing is falling faster than previously predicted, the underlying deficit – that is to say borrowing that strips out the temporary effect of the recession – still needs to fall. He also made some quite interesting announcements on innovation, including quantum technology and driverless cars.

ETFs sees stamp duty reform

Stamp duty that is paid by the end investor on purchases of shares in Exchange Traded Funds (ETFs) will be abolished from April 2014. Mr Osborne put it this way: “Today, we also abolish stamp duty for shares purchased in exchange traded funds to encourage those funds to locate in the UK.”

So what does this mean? Investment funds domiciled and listed in the UK will continue to pay stamp duty on their acquisitions of UK shares. However, the additional stamp duty borne by the end investor that is currently in place has put the UK at a disadvantage compared to some other locations, with fund houses opting to domicile their funds in jurisdictions where this tax is not applied.

Julie Patterson, IMA Director of Regulatory Affairs (Investment Funds and Retail), said: “Today’s announcement on cutting stamp duty for ETFs is a further important step in a series of significant changes made by the Government over recent months to make the UK a more attractive location for investment funds to be based. For every extra £1 billion of new funds domiciling in the UK, an additional £700,000 could be generated in UK tax revenues, as well as contributing to the economic growth of this country by creating jobs around the UK.”

Venture Capital Trusts

Investments that are conditionally linked in any way to a VCT share buy-back, or that have been made within 6 months of a disposal of shares in the same VCT, will not qualify for new tax relief. This change will take effect from April 2014.  However, the government has also reformed rules allowing investments in VCTs through nominees, a measure to help IFAs and other advisers .

Quarterly accounting changes

Back in 2011, the Kay Review argued for putting an end for the requirement for companies listed on London Stock Exchange to report results quarterly. The review said that by doing this the government could go some way to ending short-termism in the city.

In the ‘Green Book’, published yesterday accompanying the Autumn Statement, it was said that the Department for Business, Innovation and Skills is planning to bring forward plans to end the requirement for quarterly accounting.

This is surely a promising development. It is not so much that the City is short-termist, rather it finds it very hard to see much further than the end of the noses of the investors that make it up.

Small and mid-sized quoted companies and retail bonds

One organisation that was especially voluble over the Autumn Statement and how it affects small and mid-sized companies was the Quoted Companies Alliance, which is the independent membership organisation that champions the interests of small to mid-sized quoted companies.

It was pretty chuffed by the plans to bring forward the end of compulsory quarterly accounting, but it wants more reforms. It also took a look at changes to retail bonds, and their eligibility for ISAs, and at schemes designed to encourage greater employee share ownership.

Tim Ward, chief executive at the Alliance, said that the organisation has been calling for a review into whether UK equity markets are fit for purpose in helping small and mid-sized quoted companies to raise finance, grow and create jobs. He said: “We are delighted that the Government has announced that it intends to explore what it can do in this key area, “ but added, “We must ensure that equity markets are calibrated correctly to ensure that the UK’s engines of growth can have ready access to permanent capital which is vital for their success and for wider economic growth.”

The Alliance said: “Plans to explore increasing the number of retail bonds eligible for stocks and shares Individual Savings Accounts (ISAs) by reducing the requirement that such securities must have a remaining maturity above five years are also welcomed.”

Perhaps of more interest are plans revealed by the Chancellor to create more ‘John’ Lewis’ type schemes, designed to create more employee share ownership schemes. This is how the Autumn Statement put it: “Giving employees a meaningful stake in the business they work for can help companies to be more successful.” It is topping up the amount of money to incentivise growth of the employee ownership sector from £50 million announced in the March budget by an additional £35 million. The statement said: “This will fund a relief from capital gains tax on disposals of shares that result in a controlling interest in a company being held by a trust used as an indirect employee ownership structure, an annual exemption from income tax on bonuses or equivalent payments up to an amount of £3,600 paid to employees of companies that are indirectly employee owned and an increase in the maximum annual value of shares that an employee can acquire with tax advantages under the Share Incentive Plans to £3,600 a year for ‘free’  shares and to £1,800 a year for ‘partnership’ shares.”

The Save As You Earn savings contribution limit will be doubled from £250 to £500. This will be the first increase for these schemes in over a decade.

Mr Ward said: “Increases in the limit to SIPs and SAYE plans, simplifying the tax regime for unapproved share schemes and dropping proposed changes to the loans to participators rules will help to fuel the engines of growth – small and mid-size quoted companies – by encouraging further employee participation in the growth of a business. However, we believe that the Government can do even more to encourage employee share ownership and align employee and management goals in driving growth through reform of capital gains tax for Entrepreneurs’ Relief, by removing the condition that employees must have 5% of voting rights and ordinary share capital in order to qualify. This arbitrary threshold restricts businesses from incentivising most employees and is a brake on growth.”

Overseas property investors

The government will introduce Capital Gains Tax on future gains made by non-residents disposing of UK residential property from April 2015.

Reacting to this announcement  Karelia Scott-Daniels, managing director of buying agents Manse & Garret Property Search, said: “In an easy political points win, and one that will be welcomed by almost everyone, the Chancellor has turned the screw once again on foreign property investors, making them pay capital gains tax on the sale of a second property like UK taxpayers.”

She continued: “Will this have an effect on prime areas of the London and broader UK market? Not at all. Some short-term investors may sell up ahead of the 2015 deadline but this will not cause a run on the property market in prime areas. Given continued volatility globally, London is simply too stable an investment for internationally mobile individuals. I also think that, as the UK seeks further assistance from China and others to help finance major infrastructure, it is likely that capital gains could be capped or reduced as a sweetener for major investment in deprived areas of the country.”

London Central Portfolio speculated that we may see a new buying opportunity emerge. It stated: “If the Government intend to rebase property values from 2015, then LCP predict that CGT will have no dramatic effect on the property market. However, should values not be rebased, this may orchestrate a flood of non-resident owned properties to come to market, as they take their profit before being taxed on it. For London especially, where around 70 per cent of properties are foreign owned, this could represent a buying opportunity not witnessed since the house price crash of the credit crunch. As property sales flood the market, prices will undoubtedly fall slightly due to increased stock. Once this tax is psychologically absorbed, these buyers will benefit from the price cuts and future price appreciation as patterns return to normal.”

Asset Bubbles

One interesting moment came during George Osborne’s speech when he drew attention to asset bubbles. On this occasion, Mr Osborne’s words say just about all you need to know.

He said: “We must also avoid the mistakes of the last decade. We want a responsible recovery. That is why I am the first Chancellor to give the Bank of England the responsibility and the power not only to monitor overall debt levels, but to take action to deal with asset bubbles if they threaten our stability.”

In other words, over to you Mark. We don’t want to see any bubbles, and it is up to Mr Carney to ensure we don’t.


The Autumn Statement did include some interesting announcements regarding innovation, and infrastructure investment.

Here are some highlights:

The development of a network of Quantum Technology Centres. Mr Osborne said: “£270 million over 5 years will be provided to fund a programme to support translation of the UK’s world leading quantum research into application and new industries.”

Support driverless cars. A review, reporting by end 2014, “will ensure” or said the Chancellor, “the legislative and regulatory framework supports the world’s car companies to develop and test driverless cars in the UK, and a prize fund of £10 million for a town or city to develop as a test site for consumer testing of driverless cars.”

An investment of £5 million during 2014-15 in a large scale electric vehicle-readiness programme for public sector fleets. The programme aims to promote the adoption of ultra-low emission vehicles, demonstrating clear leadership by the public sector to encourage future wide-spread acceptance.

As an aside

This seems like an interesting one. From 2014, whiplash cheats will be scrutinised by new independent medical panels.

As for the Economy

Mr Osborne said: “We’re set to borrow £73 billion less over the period than was forecast in March,” but he said: “The forecast for the continuing fall in the structural deficit has not improved. Because, as we have always argued, the central task of reforming government and controlling spending does not simply dissolve when growth returns. It supports the case we have made all along that economic growth alone was never going to be enough to repair Britain’s broken public finances.”

Jonathan Loynes, chief European economist at Capital Economics, said: “The shackles may loosen as the 2015 general election looms closer, particularly if the Government continues to struggle to take credit for the economic recovery. For now, though, Mr Osborne has played Scrooge rather than Santa and left the onus squarely on the MPC to keep the economic recovery going.”


hor alone and do not necessarily reflect the view of The Share Centre, its officers and employees

Tags: Asset Bubbles Osborne Bank of England, autumn statement 2013, Capital Gains Tax non-residents, driverless cars, electric vehicle-readiness programme, ETFs stamp duty, London Stock Exchange quarterly reporting, Quantum Technology Centres, retail bonds Individual Savings Accounts, Save As You Earn, Share Incentive Plans, Venture Capital Trusts share buy-back

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