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The Spring Statement was played out in the way the Government intended it.
Rachel Reeves’ desire to have a single event that deals with tax and departmental spend (the Budget) and an update in the Spring meant that there was little in the way of tax policy to report on this time around. The focus in the past few months has been on cutting departmental budgets to balance the books, and all of that was well-trailed to the media in advance. Proof of this was in the muted response from markets, which didn’t see anything to get excited or anxious about.
The UK’s tax burden is set to rise to its highest ever point, of 37.7 percent of GDP by next year, as the impact of Rachel Reeves’ 1.2 percentage point hike in Employer National Insurance Contributions starts to bite. On the same day, the Chancellor also warned of the potential impact of Donald Trump’s proposed tariffs, which could wipe out any growth, and there were warnings from the Office of Budgetary Responsibility on the consequences of Labour’s overhaul of worker’s rights, championed by Angela Rayner, the Deputy Prime Minister.
Elsewhere in the Spring Statement, there was better news around house building, a the Government’s planning reforms could add £15.1bn to the UK’s economy in the next 10 years, but there is growing discontent in the Labour Party about its approach to welfare and its effect on some of society’s most vulnerable people. The government has announced its plans to consult on the structure of the cash ISA, with the goal of opening up investment in the UK to boost growth.
There was better-than-expected news on inflation, as it fell below the predicted 3 percent level, but economists are already warning about stubborn inflation later in the year.
From a financial planning perspective, the tax burden and ongoing inflation challenge means it’s even more important to maximise allowances and have a diversified investment portfolio. Of course, some of the measures announced in the Budget continue to loom large, notably Inheritance Tax, which we’re dealing with a lot at the moment as clients look ahead to 2027.
As ever, if there’s anything in our attached report that you have questions over, please don’t hesitate to contact your Financial Planner.
