Experts were mixed on Jeremy Hunt’s latest Spring Budget, with some labelling it a “flop” while others suggested it was the best he could do given the economic circumstances.
There were major changes including the abolition of non-domicile status, a reduction to the higher rate of capital gains tax on property and a 2p cut to national insurance. You can read about the major parts of the Budget here.
Perhaps the biggest rabbit out of the hat was the UK ISA, giving investors a further £5,000 allowance on top of the current £20,000. Some fund managers welcomed the move as a constructive first step towards bolstering the UK’s ailing stock market, whereas other experts criticised it as adding unnecessary complexity to the ISA regime.
Below, Trustnet focuses on market experts’ reactions to the overall Budget following Hunt’s latest speech.
‘A flop’
Nigel Green, chief executive of deVere Group, described the Budget as a “flop”, noting that much was already known ahead of the statement on Wednesday.
“The chancellor is dangling the carrot to potential voters by hinting at more tax cuts to come in the next parliament – but only if the Conservatives win the general election this year,” he said.
Additionally, the tax burden in the UK is now to reach the highest levels in 70 years, something which could encourage people to move elsewhere.
“In many ways the chancellor’s Spring Budget was lacklustre. It was a flop and that which could be a masterclass in the ‘law of unintended consequences’ as it could push more hard-working people and investors out of the UK,” he said.
‘A Budget unlikely to change much’
Vivek Paul, UK chief investment strategist at BlackRock Investment Institute, said in an election year tax cuts are always in the cards, but noted that those imposed were “unlikely to change much about the near- or long-term picture in the UK”.
“In the near term, we don't expect a repeat of autumn 2022's gilt market fallout – the books balance, according to the Office for Budget Responsibility. During the forthcoming election campaign, the opposition will likely continue to resist the temptation to open up meaningful gaps with the government's tax and spending plans. And after the election, fiscal policy could change again, whoever wins power,” he said.
‘It hasn’t really moved us any closer to where we need to be’
Tom Clougherty, executive director of the Institute of Economic Affairs, noted there are always positives and negatives in every Budget, and this one was no exception.
“Today’s Budget tax cuts will provide some relief from the rising cost of living, but ultimately won’t do much to revive the stagnating economy that lies behind most of our current woes.
“It didn’t really address the UK’s long-term fiscal challenges, particularly around the impact of an ageing population. On the other hand, it did highlight the absurdity of setting tax policy based on highly variable five-year debt forecasts. Fiscal rules should be a good thing, but the way we’re using them makes no sense at all.
“As always, there are good and bad things in this Budget. But if we take a broader view of economic policy, it hasn’t really moved us any closer to where we need to be.”
‘Balanced and reasonable’
Not everyone thought the Budget was as bad as those above. Michael Browne, chief investment officer at Martin Currie, described it as “balanced and reasonable”.
“Extending tax breaks for companies leasing remains positive and there are no rises on duty or alcohol. This will cut the inflation rate by 0.25%. Markets get no surprises at all, and we can see vital signs – the currency and Gilts are stable. Hargreaves Lansdown has rallied hard on the British ISA introduction but it’s smaller than we anticipated.
“This is not going to scare the markets but for the political agenda it looks as if it will do very little to move the dial. It’s a challenging situation when debt is at 92% of GDP and interest costs are going to rise to £44bn in 2024.”
‘He did his best’
Chris Beauchamp, chief market analyst at IG Group, said the chancellor did all he could to keep markets “on side” and noted that improving growth prospects give the Conservative party something to talk about in the run up to the anticipated general election later this year.
“At a time of crisis, everyone has to do their bit, and today was Jeremy Hunt’s turn to step up and try and revive flagging Conservative prospects at this year’s election,” he said.
“He had little to play with but has done his best to conjure up some real impact for taxpayers, while at the same time trying to look tough on business via the air levy, as well as announcing a new regime for non-doms, though not their abolition.”
‘Going for broke’
Laith Khalaf, head of investment analysis at AJ Bell, said Hunt had “emptied the sweetie locker once again to hand out goodies”, but warned there could be a “sugar crash” for the next chancellor to deal with.
“The chancellor is literally going for broke with tax cuts ahead of a general election. Workers, parents and landlords won’t look a gift horse in the mouth, though whether these measures will move the polls remains to be seen,” he said.
Debt is still high, making it a “pretty bleak fiscal picture” and the public “won’t welcome Austerity 2.0 in the midst of a gruelling cost-of-living crisis,” he added.