Itās that time of the year again, like Christmas only with more tax policy changes and less racist grandparents!
Iām sure weāll all be gathered around the wireless at 12:30 for Rishiās big moment so letās take a look at what we āknowā. So far there is roughly Ā£20bn in leaked proposal coming from No 11 that include -
Ā£6.9bn to spend on train, tram, bus and cycle projects.
Ā£5.9bn to tackle the backlog of people waiting for tests and scans. That covers Ā£2.3bn for diagnostic tests including clinics in shopping centres for scans; Ā£1.5bn on beds equipment and new āsurgical hubsā; and Ā£2.1bn to improve IT.
A rise in the National Living Wage from Ā£8.91 per hour to Ā£9.50
A freeze in fuel duty for a twelfth year in a row.
VAT on household energy would not be cut.
Ā£5bn over the next three years for research and development.
Ā£2.6bn will be spent on creating 30,000 new school places for children with special educational needs and disabilities.
Ā£1.6bn over three years to roll out new T-levels for 16 to 19-year-olds
Ā£1.8bn for building around 160,000 new homes on derelict or unused land
Ā£1.4bn will be given to āinternationally mobileā companies to invest in UK infrastructure.
Ā£850m to restore museums and art galleries including the V&A in London and Tate Liverpool;
Ā£150m for the British Business Bank to encourage development of Dragonsā Den-style regional investors outside of London and south east
In the year ending April 2021, the government borrowed Ā£320bn - the highest figure seen outside wartime. With another Ā£180bn more this year expect led this year. They never leak the bad news and all of this will all need funding.
Ā£12bn Health and Social Care Levy
Lowering the threshold that graduates start to pay back student loans
Urgh whatever the news today itās all looking grim. The public finances are in worse shape than after the global financial crisis. Got a really bad feeling about these next few years.
I love living here but I really canāt put up with any more taxes. Capitalism requires at least the illusion that you can āmake itā if you are ambitious and work hard enough. I donāt feel like I can get ahead anymore. Itāll just be an endless treadmill to pay off the countryās debts and leaderās pet projects until I die. The state pension will be long gone when I am old.
And what services do we receive for all this taxation? 3rd world health care, atrocious roads, uninspiring education system and police that wonāt show up for anything short of a murder.
As a young person, you have the choice to relocate to another country which may have more beneficial taxes but the grass might not always be greener elsewhere.
Go to Dubai and pay no tax but live under their tough regime and laws?
Go to Hong Kong and pay up to 15% tax but with property prices more expensive than London and your kids having to sing Chinaās national anthem every day?
Be digital nomad and live cheaply in Thailand but do you want to live like that in your 30s and 40s, bring your kids up there, etc?
Agree that things are not great here but it could be worse, a lot worse.
Sure thing! By comparing us solely to places that are worse, nothing changes for the better though. We should always strive to compare ourselves to systems that do some things better and try to emulate that success.
Similar to the US, however, most people here assume the UK is already the best place and immediately shut down the possibility of learning from other countries.
The reality is almost the only way to make it now is inheritance.
The one thing you can guarantee with this budget is that itāll be paid for out of income. The asset (especially land) rich will be largely unaffected, continue to get generous welfare and be able to pass on their wealth largely untaxed to their grandchildren.
Of course itās not the best place, nowhere near.
But since I personally cannot influence or change legislation or hope that the government will make things better (for everyone), then in order for me not to be miserable and constantly moaning about how bad things are, I think about how things could be worse and actually count myself lucky!
Countries which do things better?
Norway have first class health and public services which puts ours to shame. To emulate that however, we would have to copy their high personal income tax rate which pays for it all, averaging 45%. It just wouldnāt work here, not when people are already saying itās too high!
The weather in Dubai is a bigger concern for me. I think unless you really like your drugs the laws arenāt too chafing anymore (there were problems in the past).
Portugal and Cyprus also seem like good options.
Every place has its cons but for every new tax they introduce here picking up sticks becomes more and more appealing.
Iām pretty sure any UK graduate will pay more tax than their Norwegian counterparts, they are on 50%+ marginal rates already, even in the standard tax band.
If inflation hits an average at 4% for next year what does that do to decisions? Can we see the Bank of England raising base rates? Will that trigger a drop in some more speculative stocks? Do we expect metal prices to rise or stable dividend stocks?
In terms of policy, that feels like a pre-election budget. If youāre planning a winter 2024 election, now is the time to front load the unpopular stuff with as little counterbalance as can be beared. If youāre planning a summer/autumn 2022 election, this is the budget you go with and next yearās is the intended painful one.
As for inflation, 4% while still substantial feels on the lower end. The one reason I give it credence is if the inflation is front-loaded in 2021-22 then inflation from April onwards the 2022-23 average could well be 4%.
The GDP growth figure for 2022-23 seems bullish given the structural barriers to growth:
EU rules of origin checks coming in January will add another cost/complexity to exports
Energy you would currently expect will be sitting at sustained high levels in 2022-23
Interest rate rises seem a certainty the question is their magnitude
Transport and supply chain issues you would expect to bottom out in 2022 and then start to improve, but I fail to see why that improvement would be rapid. By sea freight costs have exploded. On land, we already have a HGV driver shortage and the average age of those drivers we do have is in the early-to-mid-50s. Brexit may or may not be impacting the supply chain. Global factors may or may not be impacting the supply chain. Iāll go no further on either as thatās straying into politics though the arguments are essentially zero sum in the sense that thereās consensus that there are ongoing barriers to the supply chain which will not go away overnight, and passionate disagreement as to why.
