Should savers and investors care about the Budget?
The Chancellor, Philip Hammond, delivered his second Budget yesterday. Putting aside the politics, gloomy economic forecasts and state of the nation’s finances, what were the big announcements you are most likely to notice in the short term?
- Stamp duty and housing announcements led the media coverage following the Budget speech. Stamp duty has been abolished for first-time buyers purchasing properties up to £300,000 and the government has announced billions of pounds of support for house-building in order to reach a target of building 300,000 new homes a year by the mid-2020s.
- There wasn’t much to get excited about on income tax - the tax-free allowance will rise to £11,850 in April, and the threshold at which income is taxed at 40% will move up to £46,350.
- Taxes on most alcoholic drinks were frozen.
- Tax on petrol and diesel has again been frozen, although vehicle excise duty on new diesel cars that don’t meet the latest pollution requirements will rise in April. The government allocated more than half a billion pounds to support the growth of electric cars and install more charging points.
- £2.8 billion in extra funding for was allocated to the NHS in England over the next three years, some of which is to help it cope with pressures this winter. Alongside this was a promise to give nurses a pay rise.
Was there any news for savers and investors?
There was a notable absence of measures to help people put away more for the future. Following increases in previous years, the Individual Savings Account tax-free allowance is to remain at £20,000 in the next tax year, and the personal savings tax-free allowance stays at £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers. This translates into a cut in these allowances when inflation is taken into account.
It could be argued that in a sense, these thresholds are largely academic for savers, given the poor value provided by banks in terms of returns on savings (for example, our work with the Social Market Foundation in the summer found that over the last five years, savings fell in value by four percent in real terms). However, for those who choose to accept some risk in exchange for potentially higher returns, by investing their money, it is rather disappointing.
We welcomed the Bank of England’s interest rate rise last month as a step in the right direction, but we aren’t surprised that three weeks later, there are few examples of banks passing it on to savers.
Our view is that people deserve a better deal from the financial system. Time and time again, the traditional financial system shows a lack of interest in providing value, and this does individuals and the wider economy no good.
The Budget may have been silent on this point, but one thing you can be sure of is that we’ll continue to campaign for and champion delivering better value - and we hope others will support us.
What are your views on the Budget? Let us know in the comments section below.