In line with our risk management framework, today we published our Q4 2019 performance update.
Autumn Review: 4 things we'd like to see from George
Who would want to be George Osborne right now? Still reeling from his humiliation in the House of Lords last month, where his plans to slash £4.4 billion from the tax credit bill were controversially foiled, the Chancellor faces a stiff task in finding an appropriate place to wield the axe. After all, the £70 billion fiscal deficit won’t go away by itself, and Friday’s horrific events in Paris have had the side effect of added additional strain to the balance sheet.
Indeed, between Osborne and David Cameron’s announcements this week, we now know that almost £3 billion more will be spent on a combination of cyber security and increasing the UK’s intelligence staff. Such overwhelming amounts of money must come from somewhere, so next Wednesday’s Autumn Statement – which is doubling as the Spending Review – is a timely occasion for him to tell us how the books will be balanced.
However, it promises to be a grisly occasion for some. Government has already confirmed that ‘revamped’ plans on tax credits will be unveiled, meaning any cuts will likely be a lot gentler than the proposed figure of £4.4 billion. This shortfall will inevitably be bad news for others though, with Osborne determined to recoup this elsewhere. Perhaps chewing the most off their fingernails will be those in the public sector, who seem to be very much in the firing line. However, even supposedly ring-fenced sectors such as pensions and the NHS could conceivably bear some of the brunt.
What to expect in the speech
There are things which are near-certain starters in the Review. As mentioned, tax credits will be a significant topic of discussion, and it will be interesting to see what the new plans are, especially with the new Living Wage not yet ‘live’.
The Help to Buy: ISA (H2B ISA) launches in December, and while some names of providers are already in the public domain, further details on which banks and building societies are going to be partaking will likely be on the agenda. Stamp duty is also another hot topic of debate, with revenues having nosedived since rates on the largest property transactions were increased.
Fuel duty, salary sacrifice, tax avoidance and pensions tax relief are also expected to pop up, with the last of these already under review; in particular the different tax breaks on offer to high earners’ pension contributions. However, with the review still ongoing, this matter may well be deferred until the 2016 Budget.
What we hope to see in the speech
For us, there are four areas we’d like the Chancellor to deliver the goods on when he addresses the nation on Wednesday:
IFISA
July’s interim Budget brought us great news, with it being confirmed that the new Innovative Finance ISA (IFISA) – of which peer-to-peer lending (P2P) will form an integral part – is set to go live at the start of the next financial year. We know this means consumers will be able to make P2P loans up to the ISA allowance threshold within their IFISA account each year, and benefit from tax-free returns on the interest paid by borrowers. Less clear though, is the implementation process for platforms to follow, and what the rules for consumers will be in terms of transferring existing loans into this new ISA. We stand at the ready to get the ball rolling, and inform customers of further details. Let’s hope they’re forthcoming on Wednesday.
Businesses
Hands off, George! Businesses will inevitably take a bit of a knock from policies like the Living Wage, the increase in insurance premium tax, apprenticeship levies and other reforms announced in July, and while the reduction in corporation tax offered some relief to the bigger players, businesses small, medium and large are already trying to fall in line with the aforementioned significant changes. Any further bombshells would not only be disruptive, but could end up mocking the very hand that feeds.
Housing
While a positive step, it is clear that H2B ISAs will barely put a dent in the current housing crisis. The Autumn Statement will present another opportunity to offer a clear plan moving forward in dealing with this. The conversion of empty prison buildings into housing (as is the case with Reading prison, which will be sold off) would be a good start. Let’s see what else Osborne has to say on the matter.
KISS
Not the affectionate kind! But we’re expecting to get a glimpse of the Government’s Comprehensive Spending Review, which will not only show the level of spending for the next five years, but also the finer details of how a surplus by 2020 will be achieved. Osborne has made a name for himself by pulling rabbits out of the hat on occasions like these. Perhaps now though, following 18 months of widespread reforms, this can be a plan characterised by stability, predictability and dependable long-term policy in order to restore the faith. Keep it simple, sir!
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