Post Budget:

Post Budget thoughts. What are my Opinons?

Headline measures:

 

Tax yield to increase by £26.6bn a year by 2031. Heavily back ended budget, £9bn by 2031, short term plan for the futyre. 
£22bn of headroom
Reduce energy cost in 2026 by removal of levies (disinflationary)
Per-mile charge for EVs (£1.8bn)
Increased gambling duty (£1.1bn)
Cap of salary sacrifice at £2k (£4.7bn)
Increase tax on dividends & property returns (£2bn)
Freeze of income tax thresholds (£23bn)
Mansion tax – surcharge on valuable homes
Increase in NLW (£12.71 but the Real living wage foundation said that it should be around £13.60)
Removal of 2-child cap to child benefit for those on UC
Corp tax capped at 25% with minor changes to increase tax yield (£1bn). Accounting to prevent anti-avoidance

Many of these forecasts the OBR dont know that these are going to be good for raising revenue. 

Single working parent:

1. Rented accomodation/min wage earner
2. Helped by increase to NML -> increased DI -> increased consumption due to high MPC -> AD
3. Lower utility bills
4. Frzen rail fares could help commute
5. Increased in UC standard allowance could help if eligible
6. FSM extension and limit to school uniform costs
7. A good budget for some of the most vulnerable
8. Time lags- is work stable? Other measures could drive rent up? Is it enough on childcare?

30 YR old fintech worker:

• 140K salary, no inherited wealth, renting south west london, trying to save for a deposit
• Increased income tax due to fiscal drag
• With likely pay increases per annum tax bill per annum to increases 53k to £66.5k
• Loss of salary sacrifice, beyond 2k, worsens fiscal drag
• Rent likely to increase above inflation to measures on landlords
• Mansion Tax could increase downsizing increasing competetion for housing. More demand for houses that are less than 2 million pounds. 
• Increased cost of student debt 
• Extra 1-3 years min renting
• A tough, really tough budget for then. 

24 Yr old non grad work:

• Increase the NLW to 12.71, could increased FT earnings to 26.5k (40 hour weeks)
• Cost of living relief (end of energt company obligation) of apprx.150 pounds a year by the end of 2026 
• Frozen train fares will help the cost of living 
• Potential to access household support fund (HSF) or discretionary housuing payment (DHP)
• A small but meaningful boost to another vulnerable group
• Not transformable and volnerability remains.

70 year old boomer, with no mortgage:

• 50K per annum pension, house is worth 750k, can maz isa and put money into equities
• State pension increase by 4.8% due to triple lock policy- takes to 12600
• But fiscal drag could pull some pension earnings into the highest rate by 2031
• Can still put 20k a year into ISA over 60
• +2 of income on dividends (basic from 8.75- 10.75 on earnings up to 50k and higher from 
• No tangible negative impact from 33.75-35.75 on earning over 50k, plus removable of allowance for higher rate of payers)
• Boomers, the richest generation in history), do well again

40 year old teacher living with 2 kids:

1. married, homeowner, still paying mortage on variable rate, salary of 60k
2. Impacted by FD, likely to costs in excess in extra tax by 2031

24 yr old non grad waiter/nurse

→ increase in national living wage to £12.71 could increase future earnings to £26.5k (40hr working week)
→ cost of living relief (end of energy company obligation) of approximately £150 by the end of 2026)
→ frozen train fares will help cost of living
→ potential to access household support fund (HSF) or discretionary housing payment (DHP)
→ a small but meaningful boost to another vulnerable group
→ not transformative and vulnerability remains

Landlords
→ next to HENRY’s, 2nd worse off
→ tax on property income to go up by 2%
→ mansion tax could impact some (surcharge on expensive homes, resale value £2 million)
→ but no national insurance on rental income remains – still a benefit of passive income
→ aligned with previous measures (mortgage interest claim curtailment, other regulatory costs) could drive landlords away from sector
→ why could this be good?
→ why could this be bad?
      → disincentive to be a landlord – though this could increase supply of housing and therefore decrease price, availability of asset – inequality
      → monopoly or even monopsony (instead of one seller, one buyer) issues? – Blackrock spent £3 billion on UK residential property in 2024/5

The bond market
→ like the fiscal headroom (£22 billion)
→ yields dropped (10 year dropped to 4.42) – what does that mean happened to price?
      → this means it is now cheaper for the government to borrow
→ sterling strengthened
      → what is the impact of this?
→ reduced inflation expectation?
→ laying path for rate cut?
→ a ‘good’ budget for institutional investors – signalled stability
→ but yields in UK still remain high compared to G7

• Really liked this budget
• Yield dropped (10 year dropped by 4.42)- cost of borrowing has gone down
• Sterling strengthened, what is the impact of this?  
• Reduced inflationary expectations
• Laying the base for a rate cut?
• A good budget for institutional investors- signalled stability
• The yields in the UK remain high compared to the rest of the G7

Capital spending
→ confirmed spending of £131 billion
→ transport, housing supply
→ £39 billion for social and affordable homes
→ £2 billion for read maintenance – capital consumption not amelioration
→ around 13% increase
→ what should this do to AD/LRAS?
→ why might it not?
→ what about multipliers/accelerators (crowding in?)

unicorn: firm valued at over $1 billion before being publicly traded
HENRY: high income earner not rich yet
government primary objective: price stability
government secondary objective: growth & employment
amelioration: the act of making something better; improvements

Personally didnt enjoy this budget too much. I felt like there was too much of a squeeze on those easrning around 80-200k of income a year. Some things I guess were important, such as freezing the tax thresholds on income tax, and some things were less so in my opinion, such as hitting landlords hard

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