Our Chief Executive, Richard Stone, provides his thoughts on the Budget delivered today.
Longest budget speech in decade delivers little to nothing for savers and personal investors
The Chancellor delivered the longest Budget speech in a decade but had little to say for personal savers and investors.
The backdrop was one of good news. A deficit falling faster than expected, increased employment, increased growth forecasts for the next two years and rising real wages. This enabled the Chancellor to reiterate his spending commitments to the NHS as well as increase spending in other areas such as Defence and supporting Universal Credit, and pull a rabbit from his proverbial hat with an acceleration of the increases in personal tax allowances. This will enable the Conservative Manifesto commitments to increase the income tax thresholds to £12,500 and £50,000 respectively to be achieved a year early in April 2019.
All of this should give personal investors a bit more headroom between their income and expenditure to enable them to save and invest a little more. The Chancellor was though silent on savings and investment. In the Budget Book it is set out that ISA allowances will stay the same at £20,000 per annum (JISA and CTF allowances will increase in line with CPI), but there is little other mention of pensions, savings or investments.
However, buried deeper within the Budget Book which outlines how the Government will fund its commitments, it is clearly expecting individuals to have more money to save and is making a pitch for those savings which it expects to be successful. The Government is targeting NS&I (National Savings and Investments) to deliver a sharp increase in the amount of savings it attracts. It will do this in part by enhancing premium bonds via a new app, reducing the minimum purchase and enabling more people, not just parents or grandparents, to buy them for children. The target for NS&I has been increased by the Chancellor from £6bn to £9bn and an upper range of £12bn – “as a result of changing conditions in the savings market”. This is the Government competing directly with banks for the Pound in savers’ pockets – and believing it can win.
For personal investors if there was not much to see in the budget itself perhaps the greatest interest will be in working out which companies may have seen their prospects enhanced by the Budget. Clearly those who serve the NHS, Defence, Infrastructure or Housebuilding sectors should do well from increased Government resources being spent in those areas. Retailers who have been under pressure will get some relief from changes to business rates but the targeting of this at smaller premises (<£51,000 rateable value) will do little to benefit the large high street stores which have made the largest headlines in terms of their demise.
Overall, the Budget contained no great surprises other than the acceleration in the increases to income tax thresholds. The better than expected economic backdrop is good news for all and the reduction in income inequality was trumpeted on several occasions by the Chancellor in his speech. There was though no recognition of the significant growth in asset or wealth inequality. There was no mention of savings and investment and while the Government clearly expects people to have greater scope for saving and investing there were no further encouragements to do so. There was also no mention of or commitment to further financial education, as The Share Centre has called for, to help provide everyone with the skills needed to secure their, and their families, financial futures. This was a disappointment and The Share Centre will continue campaigning for the interests of personal investors and the need for improved provision of financial education ensuring these vital issues remain in the spotlight until Government acts.