Chancellor Rishi Sunak is pinning his hopes on a supercharged boost to productivity to ensure future economic growth.
The Budget unveiled by Mr Sunak had more of the hallmarks of former Labour Chancellor Gordon Brown than one you would typically associate with a Conservative government.
Rather than austerity, Mr Sunak announced an extra £150billion of cash for schools, hospitals and the justice system, paid through a combination of better than expected economic growth and higher taxes.
The Office for Budget Responsibility (OBR) underscored this by revealing that the overall tax burden will be the highest since the post-war Labour government of 1945-51 and spending at its highest since the 1970s.
While the early recovery from the pandemic has been better than expected, the Government is clearly confident it can get a further positive reaction by pumping more money into the economy, stretching out Government spending and keeping a lid on inflation.
To encourage greater productivity, the Chancellor made a series of funding pledges in areas including R&D, technical education and skills training, building on the announcement in March of the Super Deduction capital allowances to boost investment rates and described by Mr Sunak as the “biggest tax cut ever for businesses”.
But I am concerned by the level of debt this Government is willing to shoulder, something that is being mirrored around the globe with other governments taking a similar approach.
With the focus on spending, there was little movement on personal tax and notably absent was any mention of Capital Gains Tax, Inheritance Tax or Pension Tax Relief.
CGT had already been absent from the March Budget despite talk of a possible alignment with income tax.
And, with no mention this time around, it is now not inconceivable that any further changes may now be delayed until after the next General Election, which may come sooner than expected if the Chancellor’s gamble on increased productivity pays off or if Prime Minister Boris Johnson wants to rush to the polls before trouble hits the fan.
For all Mr Sunak’s positivity in his Budget speech, the elephant in the room remains inflation.
We are currently in the final stages of managing the effects of rising inflation on our client portfolios and it is something that naturally gives clients cause for concern because of the impact it has on the value of their income and assets.
A single percentage increase in interest rates takes an average 10% off bond values.
While inflation is now only expected to hit 4% in 2022, below previous forecasts, this still represents the highest it will have been for the majority of the last 30 years.
Any worsening of this and Mr Sunak’s announcements such as the increase in Minimum Wage and the end to the public sector pay freeze will count for little if people find the value of their pay packet has barely increased.
Despite the boosterism of this Budget, the Government will undoubtedly be watching nervously where inflation goes over the coming weeks and months.
While MPs, particularly those in the so called ‘Red Wall’ seats that fell to the Tories in the 2019 election, know that austerity is definitely not a vote winner, they will also be only too aware that rising inflation isn’t either.
Jan to undertake Himalayas trek to raise money for Claire House
/0 Comments/in News /by EdwardLambThis month will see Jan Jones, one of our colleagues at Phillip Bates & Co, raising money for children’s hospice Claire House, by trekking in the Himalayas.
Jan, part of our accountancy team, will be travelling to Nepal to trek to Everest Base Camp, a trek of over 80 miles at high altitude and temperatures as low as -20oC.
In October, she will also be attempting to run the London Marathon as the second part of her attempt to raise a minimum of £2,500.
As many of you will know, Claire House is a local charity which helps seriously and terminally ill children live life to the full, creating wonderful memories and bringing back a sense of normality to family life.
Jan said: “Travelling to Everest Base Camp is one of my lifetime ambitions, as I have always wanted to walk in the Himalayas and see the world’s highest mountains. I am lucky to have the opportunity to achieve this while helping such a worthwhile cause.
“I am currently also working really hard in training for the Marathon. I started running last year managing 2 miles, so you can see that there was plenty of scope for improvement.
“I have discovered that 26 miles is a really long way! I am currently running 13 miles and I hope to build on this during the rest of the year.”
If you would like to sponsor Jan you can make a donation directly to Claire House, using her Just Giving page at the link.
Thank you so much for your support.
Ukraine: Diversified, global approach key at times of crisis
/0 Comments/in News /by EdwardLambWaking up to reports this morning of an assault on Ukraine, one’s first thoughts are with potential loss of life and liberty and, sadly, how this may affect the rest of the world.
There was an absolute inevitability that markets would fall sharply first thing. This is the result of uncertainty, more sellers than buyers, resulting in markets falling to find a new balance.
At the time of writing, the fall is in the region of 2%, but this could change as events unfold further.
The reality for clients is that markets go up and markets go down. We will see a resurgence and return of values, although the timescale of this is an unknown.
As we have seen during the last couple of years of the pandemic, previous financial crises and the Iraq wars, patience has been key.
Some other impacts specific to this issue are oil and gas prices rising further, although I would expect central governments to take some steps to limit this.
Gold is already spiking and as a store of value it is useful at times of crisis. Government bonds may benefit from equity valuation volatility.
Similarly, over the slightly longer term of the coming weeks or months, the increasing central government input of funds and liquidity has historically supported markets.
All this analysis reinforces why a sensible, well diversified, global approach to investments is best placed to cushion some of the immediate impacts of events in Ukraine.
We remain confident that this is the sensible and correct approach and do not think short-term reaction to events is necessary.
We will, of course, continue to track events closely as they unfold and will ensure to update clients as appropriate.
Important Changes to Trusts
/0 Comments/in Uncategorised /by EdwardLambYou may have seen some headlines recently about the Trust Registration Service (TRS), which was established by HMRC in 2017.
The TRS is a register of the beneficial ownership of trusts and new rules introduced on October 6, 2020, extended the scope of the trust register.
Trustee clients need to be aware of their obligation to register with the TRS by September 1, 2022.
The wider scope of the registration requirement has led to concerns that some trustees will be caught out.
Some arrangements, popular among parents and grandparents, such as bare trusts and bank accounts for minors, are not exempt from the new arrangements and must therefore be registered by the deadline.
All UK express trusts (usually created with a written deed) and some non-UK express trusts should be registered with HMRC, including non-taxable trusts, unless the trust is specially excluded due to its characteristics.
Trusts that need to be registered are: –
The team at Phillip Bates & Co Financial Services is already in contact with many clients affected by these changes, but please do get in touch if you think that you may be affected by these changes.
Balanced portfolios key to combating global economic winds
/0 Comments/in News /by EdwardLambIt seems that every way we look at the moment, uncertainty reigns.
At home, we have the uncertainty caused by rising energy costs, the latest rise in interest rates (now 0.5% following last week’s Bank of England decision) and the corresponding concerns over people’s cost of living.
Then, there is the continuing saga surrounding Prime Minister Boris Johnson and whether his latest survival strategy will be sufficient to enable him to keep the keys to 10 Downing Street.
Further afield, Russia continues to mass its troops on the border with Ukraine with the world watching closely to see if President Putin will decide to strike and how the western world will react if he does so.
Given so much uncertainty, clients often ask me why the FTSE 100 remains so resilient. The simple answer is that while the FTSE often grabs the headlines, it can mask the wider global economic picture. The reality is that the FTSE 100 is dominated by the ten or so biggest companies which represent around half of the index including the likes of BP, Unilever, Royal Dutch Shell and HSBC.
While we obviously keep a close eye on the FTSE 100, our focus is much more on the broader global financial markets which are significantly more balanced in terms of the stocks represented.
And while we, like the rest of the nation, monitor with interest what is happening in Westminster, whether Boris remains as PM or he is succeeded by someone else will have very little impact on the markets or our clients’ portfolios.
This contrasts with what is currently going on between Russia and Ukraine which, should the situation escalate, will have ramifications for the wider economy not least with energy supplies likely to be one of the dominant issues.
It is our job as Chartered Financial Planners to work closely with our clients to ensure that they have longer term, balanced portfolios in place which are best able to ride out the inevitable ups and downs of the financial markets.
This is not to say that we do not advise clients on shorter-term actions should they be necessary – something we have been busy with in recent weeks in the face of rising inflation and the resulting increase in interest rates, two upward trends we anticipate continuing during the rest of 2022.
But the greater focus is to ensure that our clients have the right plan for them which will evolve over an agreed period of time and give them the best possible chance of enjoying financial security into the longer term.
Season’s Greetings from all our team
/0 Comments/in News /by EdwardLambLooking back at my end of year message to clients a year ago, we were still to face the most testing period of the pandemic and the UK was just days away from leaving the European Union.
Despite these substantial challenges, 2021 has been a year when the markets have shown remarkable resilience and investments have held up.
Almost across the board, client portfolios have largely weathered some of the most turbulent economic times we can remember.
Of course, we are by no means out of the woods yet, especially with the latest Covid variant, Omicron, bringing some renewed restrictions as we approach the second anniversary of the outbreak of the global pandemic.
Overall though, there is unquestionably a more positive outlook than perhaps we could have hoped for this time last year.
There are even murmurings that the Chancellor Rishi Sunak would like to introduce some tax cuts at some point in the near future, although it is hard to see how this can be achieved just yet when so much work remains to be done re-balancing the books after the cost of navigating our way through the economic storms of the pandemic.
As we prepare to enter the New Year, the team at Phillip Bates & Co Financial Services will be continuing to monitor financial markets and trends, ensuring that we are able to advise of any measures that need to be taken to ensure our clients’ portfolios are fully protected and in the best possible position in both the short and longer term.
In recent newsletters, I have commented on concerns regarding rising inflation and the potential increase in interest rates. Thursday saw the Bank of England increase the rate to 0.25%, taking the view that action was now needed to combat inflationary pressures. We will continue to track the implications of this and further changes closely.
Despite the recent rise of Omicron, we have taken the decision to continue to work from the office. We know from our packed diaries that being able to meet with us again in person at our Neston office is something that many of you have appreciated. We will, of course, notify you should this position change over the coming weeks.
Finally, it remains for me, on behalf of all of our team, to wish you and your families a Happy Christmas and a Healthy and Prosperous New Year.
We look forward to meeting up again in 2022.
Our office will be closed between 24th December and 4th January.
Rishi gambles on future productivity
/0 Comments/in Uncategorised /by EdwardLambChancellor Rishi Sunak is pinning his hopes on a supercharged boost to productivity to ensure future economic growth.
The Budget unveiled by Mr Sunak had more of the hallmarks of former Labour Chancellor Gordon Brown than one you would typically associate with a Conservative government.
Rather than austerity, Mr Sunak announced an extra £150billion of cash for schools, hospitals and the justice system, paid through a combination of better than expected economic growth and higher taxes.
The Office for Budget Responsibility (OBR) underscored this by revealing that the overall tax burden will be the highest since the post-war Labour government of 1945-51 and spending at its highest since the 1970s.
While the early recovery from the pandemic has been better than expected, the Government is clearly confident it can get a further positive reaction by pumping more money into the economy, stretching out Government spending and keeping a lid on inflation.
To encourage greater productivity, the Chancellor made a series of funding pledges in areas including R&D, technical education and skills training, building on the announcement in March of the Super Deduction capital allowances to boost investment rates and described by Mr Sunak as the “biggest tax cut ever for businesses”.
But I am concerned by the level of debt this Government is willing to shoulder, something that is being mirrored around the globe with other governments taking a similar approach.
With the focus on spending, there was little movement on personal tax and notably absent was any mention of Capital Gains Tax, Inheritance Tax or Pension Tax Relief.
CGT had already been absent from the March Budget despite talk of a possible alignment with income tax.
And, with no mention this time around, it is now not inconceivable that any further changes may now be delayed until after the next General Election, which may come sooner than expected if the Chancellor’s gamble on increased productivity pays off or if Prime Minister Boris Johnson wants to rush to the polls before trouble hits the fan.
For all Mr Sunak’s positivity in his Budget speech, the elephant in the room remains inflation.
We are currently in the final stages of managing the effects of rising inflation on our client portfolios and it is something that naturally gives clients cause for concern because of the impact it has on the value of their income and assets.
A single percentage increase in interest rates takes an average 10% off bond values.
While inflation is now only expected to hit 4% in 2022, below previous forecasts, this still represents the highest it will have been for the majority of the last 30 years.
Any worsening of this and Mr Sunak’s announcements such as the increase in Minimum Wage and the end to the public sector pay freeze will count for little if people find the value of their pay packet has barely increased.
Despite the boosterism of this Budget, the Government will undoubtedly be watching nervously where inflation goes over the coming weeks and months.
While MPs, particularly those in the so called ‘Red Wall’ seats that fell to the Tories in the 2019 election, know that austerity is definitely not a vote winner, they will also be only too aware that rising inflation isn’t either.
Congratulations to Emma
/0 Comments/in Uncategorised /by EdwardLambWe are delighted to share the news with clients that our client administrator Emma Bowen is getting married to Pete Chegwin on Sunday, October 3rd at Thornton Manor in Wirral.
The couple have had to change their plans twice in the last couple of years due to the pandemic, so we are thrilled that their big day can finally go ahead.
As a consequence, our office will be closed on the morning of Monday, October 4th.
We wish Emma and Pete our very best wishes for a long and happy marriage.
Triple Lock Suspended
/0 Comments/in Uncategorised /by EdwardLambThe other major announcement concerned the so-called ‘Triple Lock’. This ensures that the state pension is supposed to increase every year in line with whichever of inflation, the average wage increase or 2.5% is the highest.
The Conservative manifesto at the 2019 election said that the Triple Lock would remain in place for the duration of this Parliament. However, and probably quite sensibly in the light of subsequent events, this is being suspended for a year.
State pensions will continue to rise by whichever if the greater between inflation or the 2.5%.
But any link to average wage growth has been removed for a year – this is due to wage growth being 8.3% in the three months to July 2021 due to the impact of coronavirus on wages in the previous year.
All of which means that Chancellor Rishi Sunak is now presiding over some of the highest levels of taxation in UK economic history – a direction of travel that seems set for the foreseeable future with tax receipts on track to hit 35% of GDP.
As you would expect, the team at Phillip Bates & Co Financial Services will consider all of our clients’ portfolios in the light of these announcements and whether any changes need to be made to ensure the best tax efficiency in the short and longer term.
Government announcements on NHS, Social Care & Triple Lock
/0 Comments/in News /by EdwardLambThe Government has made a series of important announcements this month as it seeks to address the two biggest issues in its in-tray – the need to start paying down the debt incurred as a result of the pandemic and, secondly, the social care crisis.
The requirement to tackle how social care is funded has challenged governments for years, but on becoming Prime Minister, Boris Johnson made it a key priority.
The plans he has announced will limit the amount people pay for their actual care (rather than accommodation) to a maximum of £86,000 over their lifetime from October 2023. After this cap has been reached, the costs will be picked up by local authorities.
Anyone who has assets under £20,000 will have their care costs covered in full by the state.
Those with assets between £20,000 and £100,000 will be expected to contribute to their costs, but will also get some support from the state.
The changes will be funded in a number of ways:
The Government says the changes to NI will cost £255 a year for someone earning £30,000, and £505 a year for someone on £50,000.
The increased NI contributions are expected to raise an extra £12bn a year which, for the first 3 years will go towards easing the NHS backlog before being switched to social care.
What the Government has not addressed is the way in which care is delivered.
Inflation: An Update
/0 Comments/in News /by EdwardLambMany of you will be continuing to read news reports detailing concerns about the potential impact of inflation on the UK and global economies.
Consumer price inflation in the UK rose to its highest level in almost three years in June – hitting 2.5% against a forecast of 2.2%. Fuel prices and second-hand car sales were two of the main factors for this.
It is a similar story in the United States where inflation has just hit a 13-year high of 5.4%.
However, both the Bank of England and the US Federal Reserve continue to strike a relatively relaxed tone regarding the likely longer-term impact of inflation.
This was outlined in a briefing call I was on with representatives of the Bank of England last week while, over in the States, Jay Powell, Chairman of the Fed, commented: “Inflation has increased notably and will likely remain elevated in coming months before moderating.”
While we track closely the inflationary trends both at home and further afield, the plans we develop with clients are rooted in the need to preserve the value of your money over the longer term.