7 things we want to see at next week's Budget
Budgets never take place within a political vacuum, but it is difficult to recall a Chancellor taking to the despatch box in an atmosphere as febrile as the one Philip Hammond will on Monday. Such is the intensity of the political turmoil at the moment that good-news stories such as rising wages, record-low unemployment, and a reduction in overall borrowing have barely made the news. Instead, the Budget itself is in peril, with the DUP - upon whose votes the Conservatives rely - threatening to vote it down.
Nevertheless, from an economic standpoint, we must work under the assumption that whatever comes out of the Chancellor's red briefcase next week will be the bedrock of policy and financial decisions over the next 12 months and beyond, and it is with this in mind that we've noted seven key matters we want to see tackled when Hammond addresses the Commons.
1. Stay away from pensions tax relief
Although it has dissipated in recent days, the rumour mill went into overdrive that an attack on pension tax breaks was imminent, as the Chancellor described them as 'eye-wateringly expensive'. Indeed, the estimated cost to the Treasury of pensions tax relief is just under £40bn each year. But let's not forget that while there is relief on pension contributions, withdrawals are subject to income tax. As such, a more accurate description of pension tax relief would be a 'deferment', so an assault on contributions would effectively amount to double taxation. At a time where continuity in pensions policy is much needed, and warnings are widespread that many Brits will be caught short in retirement, it seems perverse to launch an assault on those diligently saving for their futures.
2. Hold the line on income tax thresholds
A manifesto pledge of this Government was to raise the minimum threshold for income tax from £11,850 to £12,500 by 2020, while the threshold for paying higher-rate tax would increase from its current £46,351 to £50,000. However, many Westminster insiders fear these increases could be delayed, or scrapped entirely. It would fly in the face of slogans such as 'making work pay', and not reward aspiration in the way that the public has been led to believe. Our take is that, in cases such as these, money in the hands of the individual is more efficiently spent than if it were to fall into the hands of the State, so we hope to see this manifesto pledge fulfilled.
3. Sort out business rates
We believe that SMEs, small business and entrepreneurs are the lifeblood of the economy, and the shameful, outdated policy of business rates - particularly so-called 'downward transitional relief' - has caused immense damage to businesses and shops operating in areas where property values have suffered. Quite simply, the slow pace at which business rates react to property fluctuations is fundamentally unfair, and it is time this controversial issue was dealt with decisively. What better opportunity to score some points with affected voters than Budget 2018.
4. Level the taxation playing fields
It was interesting to listen to CEO of Next, Simon Wolfson, last week. If anyone would have a grudge against online giants such as Amazon amid a bloodbath on the high street for retailers, it would be him. Yet he was reluctant to endorse an all-out tax assault on these online behemoths. We're inclined to agree, although it is our belief that a fair playing field must be established. In keeping with the theme of the paltry levels of tax paid by these global digital firms, it is estimated by the Tax Justice Network that the shortfall in tax receipts from foreign-based multinationals operating through British subsidiaries is £25bn each year. That is a breath-taking amount of money, and, as per the powers afforded to the Treasury by the Finance Act 2016, we hope to see greater transparency in these firm's accounts so that they pay their fair share.
5. Wield the axe on stamp duty
Stamp duty increases have clogged the housing market, particularly at the top, with sales of high-end properties slumping. While tears for the more-affluent members of society may be in short supply, the reality is that this logjam filters down, as expensive moving costs make it harder for people to move up the ladder. It also makes it harder for people to downsize. This trickle-down ultimately hurts first time buyers too, as it means less homes are available. And, to top it off, stamp duty revenue actually looks set to fall by £1bn year on year, according to official figures. There are no winners here - it’s time to cut this regressive tax.
6. Invest in AI, invest in the future
Automation and Artificial Intelligence (AI) elicit trepidation in some quarters about being a threat to jobs, but there is little or no historical correlation between technology advances and rising levels of unemployment. In fact, US economist Enrico Moretti predicts that for every job swallowed up by AI, four more will be created. Furthermore, the potential economic gains are enormous, with GDP projected to rise by £232bn (over 10 per cent) as a direct result of automation by 2030. Britain cannot afford to waste its competitive advantage on this front, so we'd urge the Chancellor to show some intent by giving a boost to AI startups, helping SMEs to access AI, encouraging the finest AI talent to these shores, and to channel AI towards our areas of strength: financial services, law and research.
7. Respect the deficit
Deficit reduction, or 'austerity', hasn't been the most popular undertaking over the past eight years, and no one takes pleasure in seeing the quality of our public services suffering at the hands of budget cuts. However, let us not forget that Britain's national debt currently sits at an uncomfortably-high £1.8tn (84.3 per cent of GDP), and the cost of servicing this debt is roughly £50bn a year. That's money we all have to pay, and it could escalate as interest rates begin to normalise. It isn't easy to implement unpopular policies - not least in the absence of a parliamentary majority. But loosening the purse strings with reckless abandon could leave Britain in a precarious position when the next downturn arrives. Cool heads must prevail.
The 2019 ISA season is now in full swing, and it's as good a time as any to focus on financial planning - and, within that, looking ahead to your retirement years to ensure financial security.
The Lifetime ISA (LISA), announced in 2016, would prove to be one of George Osborne’s last flagship gestures to UK savers and investors as Chancellor, eventually launching against a backdrop of anti-climax a year later in April 2017.
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.