Dogged by conflicting demands from different business groups, trade associations, and confederacies, the Chancellor will have to make some tough choices in the run-up to the Autumn Budget on October 27th.
So, what might be on the table for the general public and why?
Looming living costs, interest rates, and inflation
As the recent energy crisis has elucidated, much of the UK will be subject to increased living costs over the coming months, with shortages, supply bottlenecks, and wholesale price increases heralding the onset of an uncertain period. It has therefore been posited that the Chancellor is considering cutting VAT on energy bills to minimise the financial impact on consumers over the winter period – although this is by no means a definitive facet of the upcoming Budget.
The Bank of England has predicted that surges in goods and energy prices will push inflation over 4% this winter – which is a concern for many – although the belief is that this will be transitory. As such, the Monetary Policy Committee (MPC) has voted to maintain interest rates at the historic low of 0.1% for the time being, in a ‘wait-and-see’ policy that aims to keep rising prices in check. There’s still time for this to change though, as inflation continues to affect the economic outlook, which may negatively impact some mortgages and debt repayment schemes.
The end of the Bank of England’s 2021 quantitative easing campaign is expected to offset some of the inflationary pressures that currently exist, with interest rates potentially rising again by February 2022, which may minimise the government’s concern and, as a result, impact Budget decisions.
Pensions
The Chancellor has already stated that the pension triple-lock is going to be delayed for a further year due to the 8% wage increase across some sectors. It will instead be aligned with the inflation increase, as this will prevent a bigger depletion of government funds.
A recurring prediction that the Chancellor will look at the tax reliefs for private pensions appears also to have been thwarted by the current political climate. So, although genuine reform is increasingly unlikely at this particular Budget, there may be some minor changes announced to help chip away at the £40bn cost to the Treasury – including the possibility of raising the pension age.
Climate change
Even amidst the public health crisis of the past two years and resulting economic fallout, the climate will still be a key concern at the Autumn Budget.
Any public spending or measures that are announced will need to demonstrate the UK’s ongoing commitment to carbon neutrality, especially with the Climate Summit in Glasgow occurring soon. This may translate into higher costs for gas, oil, and non-renewable-based electricity suppliers, with the government keen to avoid passing these costs directly onto consumers and hoping to incentivise cleaner energy choices.
After a comprehensive review of the UK’s ‘net zero carbon emissions by 2050’ promise, the Treasury has analysed the fiscal repercussions of such a target and warned that extra levies on motorists and gas bills will be required to reach it – so many will be on the lookout for any levy or tax announcements related to this.
With economic growth weakening and prices rising, the Bank of England and Chancellor have little room for manoeuvre in the upcoming Budget – all eyes will be watching to see where we go from here.
We will provide a comprehensive summary of the Autumn Budget in the days following October 27th. In the meantime, if you have any questions or would like further advice, please get in touch and speak to one of our knowledgeable advisors, who will be more than happy to help.
