No news is somewhat good news

While there were a series of measures announced in the budget, by and large they don’t directly affect Wealth Spring clients. I’ve summarised the main points below, some of it is definitely going to happen, some of it might happen, and the rest of it is projection, so take it with a pinch of salt.

Effectively, no shocks that you really need to be concerned with, though the slipping of UK’s growth forecast doesn’t bode well for future tax rises. I’ll cover my thoughts on economic growth in a future blog.

Isn’t one budget enough?

And as an aside, why do we have a Spring Statement? And what does it have to do with a Boston based medical company?

I went to University in Boston from 2010 – 2014, so it is fun for me to find this historical link.

Well in the 1970s Tony Benn, a Labour Minister under Harold Wilson, came up with the idea of an interventionist outfit, the National Enterprise Board, which mostly purchased failing companies to try and modernise the British economy, it somewhat worked. When setting this up in the Industry Act of 1975, the Labour government implemented a duty to publish two annual economic forecasts.

Then when Margaret Thatcher was in power, she combined the National Enterprise Board with the National Research Development Corporation (a 1940s Labour interventionist economic body which was more effective than the National Enterprise Board) to form the British Technology Group. This was then turned into a company called BTG and sold on the London Stock Exchange before finally being bought by Boston Scientific in 2019 for $4.2 billion.

Anyway, back to the main thread, in 1993 under Thatcher the Budget was merged with the spending statement, moving the budget to November. Therefore, to fulfil the Industry Act 1975 requirements, the Spring Statement appeared (used to be in Summer) to provide economic growth forecasts. Then it all flipped back and forth up, budget to Spring – Statement to Autumn etc, until settling in 2018. Phew, simple.

Spring Statement Highlights

Economy

·       The Office for Budget Responsibility (OBR) has halved the UK growth forecast for 2025 from 2% to 1%.

·       The government’s budget will move from a deficit of £36.1bn in 2025/26 and £13.4bn in 2026/27, to a surplus of £6bn in 2027/28, £7.1bn in 2028/29 and £9.9bn in 2029/30.

·       Real household disposable income per person is expected to grow by an average of around 0.5 percentage points a year from 2025 – 26 to 2029 – 30.

Welfare

·       The universal credit health element will be cut by 50% and frozen for new claimants.

·       The universal credit standard allowance will increase from £92 per week in 2025 – 26 to £106 per week by 2029 – 30.

Government spending

·       Defence spending will be increased to 2.5% of GDP.

·       Overseas aid will be reduced to 0.3% of gross national income.

·       £3.25bn of investment to deliver the reforms that public services need through a new Transformation Fund.

·       Capital spending to be increased by an average of £2bn per year.

·       The OBR forecast that CPI inflation will average 3.2% this year before falling rapidly to 2.1% in 2026 and meeting the 2% target from 2027 onwards.

·       A voluntary redundancy scheme is set to launch for civil servants, saying this will deliver £3.5bn in day-to-day savings by 2029 – 30.

Housing

·       The housing reforms will permanently increase the level of real GDP by 0.2% by 2029 – 30, an additional £6.8bn for our economy and by 0.4% of GDP within 10 years, an additional £15.1bn in the British economy.

·       The OBR have concluded that the reforms will lead to house building reaching a 40-year high. This equates to around 305,000 new homes a year by the end of the forecast.

·       Changes to the national planning policy framework will help to build over 1.3 million homes in the UK over the next 5 years.