The surge in short and medium term gilt rates illustrated here are clearly linked to the budget, the market does not like fiscal loosening and despite £40bn of tax-cuts , this was a tax and spend budget.
For a fuller examination of the market reaction to the budget, read Toby Nangle’s expert analysis
We must accept that most of the spend – the £22bn for the NHS was necessary but has no immediate economic impact in terms of growth. Spend on health benefits those pre and post work and is paid for by workers.
But a proportion of the spend is for economic growth and I suspect that this is not properly appreciated by the market who have seen the limited growth forecast from the OBR which has actually marked down growth towards the end of the decade (due to the cuts) without crediting the economy with the growth. To be fair to the OBR, they recognise that they haven’t marked in growth and won’t till the consultations on where the money goes are concluded.
Again I’d point you to a good analysis of the OBR report, this time from FT Alphaville.
Whinges from the healthy
At this point, I will reach out to Rachel Reeves who is being blamed for higher borrowing costs (for the Government and for mortgage payers) , back-door austerity (see my previous blog) and for eroding the financial planning of the wealthy. She is not getting the credit – and may never get it – for growth. She is not Liz Truss and should not be treated as she were. I hope the markets will stop their hissy-fit and recognise competence.
I hope that Wes Streeting can get the money raised into the health service as quickly as he claims he can. He strikes me as the sort of person who does things as well as he talks about them but actions do speak louder than words,
Anyone who has had cause to use the NHS (I am one) knows the pressure it is currently on and the need for capital expenditure to bring down the time it takes to get treatment and reduce suffering for those who are in most need.
There are still massive holes in the plan, not least in our failure- yet – to address the issues of social care and long-term care. This may mean yet more strain on the finances of those who work and earn the money but there is no denying the need. If we do not pay the money through taxation , we will need to pay through insurance and ultimately through the liquidation of our properties.
Which brings me from health to wealth.
Whinges from the wealthy
The minimum cost of taking a bus is about to go up 50% as a result of this budget. My partner pointed this out to me – she was told as much by her fellow travellers. Let’s remember this fact as we read the following paragraphs.
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The financial trade press is full of whinging from financial advisers whose carefully constructed strategies for containing the impact of death taxes (primarily IHT) have been upset by the Government’s budget measures. It was not long ago that they were whinging that if Jeremy Hunt abolished IHT they would have nothing to do.
There are four measures in the budget that are going to hurt the wealthy dead.
Farmers- much agricultural land is held in IHT mitigation funds and bought by wealth managers for their clients to reduce IHT.
- Pensions are no longer an IHT tax-haven, that goes as much for death in service and lump sum payments for pensioners dying early as for those hoarding money in DC pension pots.
- Farmland is no longer an investable for the wealthy looking for a tax-shelter
- The AIM stock market is no longer such an investable for the wealthy looking for a tax-shelter
- There is more fiscal drag in IHT thresholds that haven’t changed for 10 years.
So from whinging about having nothing to plan for, the wealth management industry has moved on to whinging about financial planning gone wrong,
The country as a whole should have zero sympathy for this nonsense, as it should have no sympathy for those who turn income to CGT to pay lower taxes on the carry , just as it should have no sympathy for non-doms who want to pay no taxes here, limited taxes overseas but enjoy the facilities of the UK at the expense of the rest of us.
As a working pensioner with skin in the game on most of these fronts, I am happy to pay my dues and even my over dues. There is nothing wrong with being rich so long as you recognise it brings responsibilities.
LOL. This blog reads like a manifesto line for the Labour Party.
Never a fan of Ms Truss, but its just lazy and convenient for the industry and the political classes to blame Liz Truss for the Sept 2022 gilt spike. Was she responsible also for the spike in US rates that sterling followed with an above 95% correlation ? Of course not! Wrong place wrong time, and so much easier to blame the outsider (non-financial, female) than the old boys club that led us down the LDI path and that which is the rightful cause of the LDI debacle.
Growth growth growth v Invest invest invest.
There’s not a fag paper of difference between their aspirations.
And neither actually had a plan for growth/investing. Most of what RR has announced is actually increase spend in public service wages (fair enough that’s who voted her in) and a £25bn tax on private sector jobs and a capture of stored wealth ( all property is theft).
And fair enough, it’s just a case one’s worldview / politics – it’s simply a question as to whether the priority is to bake more cake or share it.
JH
“Whinging”
Surely this whinging is coming from those who have failed to provide adequately for their customers who paid them fees for the last 30 years. Paid to pontificate failure to perform.
Maybe the word should be shame.
Those with a pot unspent after death will have a tax burden of 67% applied (IHT+IT) as fiscal drag increases the proportion subject to this tax on prudence and undermines faith in pensions as a reliable source of income beyond work. Especially amongst those who produce the innovation.
Lets hope that productivity per capita can be improved substantially over the next 57 months to the next election.
Food security seems to be off the agenda.
You seem to be talking about the tax on income beyond death, rather than beyond work.