Attwells comment on 2025 Budget

Rachel Reeves 2025 budget might best be understood as an exercise in demonstrating that the lessons of Liz Trusses immortal and disastrous September 2022 mini budget have been well and truly learnt.

Whilst Truss promised tax cuts without any explanation of how that would be paid for, Reeves is putting taxes up and not making too many promises in return.

The immediate reaction, probably best measured by the response of the stock market, was that the measures introduced by the Chancellor were necessary. That is not to say that all of us will be happy with Miss Reeves’ announcement. This was a revenue raising budget and in that sense it hit fairly hard.

However, all of us must know that public finances are on their knees. Roads are riddled with potholes, 4 million people cannot get a dentist appointment, the court service is barely functioning, libraries are closing, local authorities are broke, the list goes on.

The only answer to this predicament is to raise money and how does a Chancellor raise money, well through taxes of course!

Notable measures announced today together with our comments are as follows.

• Income tax thresholds are frozen. This is raising taxes by stealth, over time more people will be drawn into higher tax bands.
• The headline rates of income tax, VAT and national insurance will not go up, naturally they will not come down either.
• We will see the first iteration of the long discussed mentioned tax, properties worth more than £2 million will pay a council tax surcharge of £2,500 a year rising to £7,500 a year for properties worth more than £5 million.
• Savers will be hit, the cash ISA limit will be set at £12,000 a year from the 6^th April 2027, this is down from £20,000. The extra £8000 can still be shielded in an ISA  provided it is invested in stocks and shares. This measure, leaked before the budget, has caused material concern to building societies. Those building societies use the deposits that savers place with them to lend to borrowers who want to buy houses. There is a concern that if the level of saving falls the level of lending will fall with it,  making access to home ownership even less accessible.
• The two child benefit cap has been quashed. This seems like a fair measure. Of course people choose how many children to have but those children do not choose to be born and they should not have to be raised in poverty simply because of the size of their families.
• Fags and booze – duties continue to rise at the rate of two percentage points above the RPI measure of inflation while alcohol goes up in line with inflation. It must be acknowledged that over consumption of these products might result in a placing an additional burden on the NHS. However, there is an opposing argument which is that these things are simple pleasures often enjoyed by working people and there must come a point at which people are unfairly penalised for the consumption of these products, perhaps we are there?
• Milkshake Tax! – it transpires that some canned drinks contain astonishing levels of sugar. The threshold for additional taxation on these products has dropped from 5 g to 4.5 g for every 100ml. Is the government trying to drive healthy behaviours or punishing people for having a little treat? Given that we’re not fans of a canned latte it’s not something we feel strongly about…
• There will be a new tax for electric vehicles, drivers will be charged at the rate of 3p a mile for electric cars and 1.5p for plug-in hybrids. Whilst we acknowledge that the decline in use of petrol and diesel cars and the tax that they generate does cause a problem for the government, this measure seems particularly unfair. We have all been encouraged to invest in electric vehicles and it seems that, having responded to that encouragement, we are now having the rug pulled from under us. Do we want people to drive electric cars, or not?
• Schools and the NHS – the chancellor announced an additional £5 million for secondary school libraries and £18 million for upgrades to playgrounds. Hear that? That’s the sound of a drop in the ocean. More material funding has been promised for the NHS, specifically in the form of £4.9 billion which will be spent on more nurses and GP appointments (we are told).
• Welcome news on business taxes – there will be an expansion of entrepreneurial investment schemes and there will be relief for UK stock market listings, with a three-year exemption from stamp duty. There will be a 40% allowance to allow businesses to write off more of their upfront investment costs. There will be permanently lowered business rates for 750,000 retail, hospitality and leisure businesses with higher rates on properties owned by out of town warehouse giants. This might be some welcome good news for our ailing High Streets.

In conclusion we will all be paying a little bit more, but that’s probably OK if the money is invested in the public facilities that make up the fabric of our communities. We shall see, our view is that this Labour government will live or die on the question of whether or not people  experience a tangible improvement in the quality of their lives in return for the extra money that they are being asked to drop into the government’s coffers.