A preview of the Autumn Budget
The keys to Number 11 Downing Street are much coveted in British politics, and the role of Chancellor of the Exchequer is one which grants the chosen individual a great deal of power in shaping the future of the UK economy. But, as the countdown to this year's Autumn Budget intensifies, one has to wonder: who on earth would want to be Philip Hammond right now?
Whatever one's political allegiance, he'll approach the despatch box on Wednesday with a disempowering combination of political turmoil and minimal financial headroom - not to mention an expectant public hoping he will right those societal and economic wrongs most relevant to them. Balancing a menacing national debt with widespread demand from austerity-weary voters for a shot in the arm leaves only one racing certainty: Hammond will leave some people disappointed once he concludes his address on Wednesday.
Nevertheless, rather than taking such a pessimistic outlook, the Chancellor could also view this as a golden opportunity to generate some positive momentum - both for his party and the country. Indeed, the standard pre-emptive rumblings about what to expect have included some encouraging signs.
Here are four of the most topical discussion points, and our views on how he should proceed...
With a slow-growing economy, the Treasury will be unlikely to increase VAT or income tax anytime soon, which leaves pensions vulnerable. There is much talk of a raid, with Hammond said to be determined to redress a perceived imbalance between the older and younger generations’ financial prospects. Many experts anticipate a cut to pension tax relief for older workers in order to offset a reduction in National Insurance Contributions for their younger counterparts.
While the sentiment to assist younger workers is a noble one, it seems unwise to take such drastic measures, and to provide discouragement to hard-working savers who are approaching retirement. Aside from the fact that pensions have already endured their share of meddling and overhaul in recent years, surely such a policy conveys the wrong message, and risks leaving many later-life workers short in retirement?
Nest eggs may be a soft target for boosting Government coffers, but such a measure would be regressive. One can only hope Hammond finds a better way to fund his well-intentioned handouts to younger workers.
This is an issue that will be with us for years to come, and one which will not be resolved by a solitary Budget speech. But Hammond can make a good start on Wednesday, and he looks set to do exactly that by axing stamp duty for first-time buyers. Stamp duty has hardly been a force for good, bringing in half the amount of forecast revenue since its introduction in 2014 - not to mention the handbrake-effect it has inevitably had on the housing market.
While axing - or at least reducing – stamp duty for all in sundry would be an even better move, this proposed measure (coupled with an anticipated £10bn boost to the Help-to-Buy scheme) will eliminate another hurdle for those looking to step onto the housing ladder, and inject some life into a flat market. Additionally, it will ease the stranglehold landlords currently have on tenants, thus putting downward pressure on rents.
The £1.9bn Enterprise Investment Scheme (EIS) looks set to be in the firing line come Wednesday. The EIS provides tax breaks (30% tax relief on investment, along with Capital Gains exemption on share disposal after an agreed period) for those who invest in ambitious startup companies which are deemed to be high-risk.
Yet official figures reportedly show that over 65 per cent of these funds masquerading as investment in high-risk companies have quietly been shifted to initiatives that are actually low risk, thus rendering the EIS a haven for the wealthy, and failing to boost the fledgling companies it was intended to assist. A cut from 30% to 20% has been mooted as the likely outcome in terms of tax relief, and/or an increase in the length of time shares must be held until Capital Gains exemptions kick in.
One hopes that Hammond doesn't overplay his hand on this issue, but any policy change which sees more money going to the startup companies who need it has to be viewed as a positive move. Ultimately, the success of such an intervention can only be measured retrospectively.
Fintech, peer-to-peer lending and more
Peer-to-peer lending is one area which has been impressively-supported by Government over the years, and, with a little over two years having elapsed since the announcement of the Innovative Finance ISA, our sector will not be expecting much in the way of significant change this time around.
Further afield, the Chancellor has also shown backing for the digital tech sector. We highlighted the significant investment he has allocated to fintech earlier this year, and it was encouraging to see a Government press release last week announcing £84 million worth of investment earmarked for Artificial Intelligence (AI) and robotics research.
One can only applaud the powers that be for demonstrating how seriously they take the roles of fintech and AI in future economic growth. But, at the same time, next week’s Budget presents a gilt-edged chance for Hammond to dig a little deeper, and lay the framework for Britain to augment its place as the global leader in tech. Let's hope it's one he grabs with both hands.
There is barely a week to go until the conclusion of the 2017/18 financial year, which means that, as ISA season begins to hot up, time is running out to take advantage of your ISA allowance.
At the Summer Budget in 2015, George Osborne had multiple nuggets of good news for investors in peer-to-peer lending (P2P), most notably the announcement of the new Innovative Finance ISA (IFISA).
Over the last decade, there can be little dispute that the reputation of mainstream banks – and particularly the so-called ‘Big Four’ (HSBC, Barclays, Lloyds and RBS) – is at its lowest ebb.
The peer-to-peer (P2P) lending industry is now regulated by the Financial Conduct Authority (FCA). The regulatory framework has been designed to protect customers and promote effective competition.
Loan underwriting is the process that we undertake to analyse all of the information provided by each loan applicant and their credit file to assess whether or not that applicant meets our minimum loan criteria. As part of that process all data is verified, analysed and summarised to paint a picture of each applicant.
When you earn interest from a regular bank savings account, for example, the bank automatically deducts basic rate tax (currently 20%) before paying your interest. With interest earned from peer-to-peer lending, tax is not deducted automatically so lenders will need to declare their income to HMRC.
As 2018 draws to a close, with our bellies full of Christmas turkey, it's only natural to look back on the past 12 months and reflect. No doubt, it's been a turbulent one economically and politically, and not everyone has had it all their own way.