“We have waited months for this budget to see what Keir Starmer and Rachel Reeves were going to do with their very significant majority in the House of Commons. While many details were leaked to the press, it has been hard to discern the facts amidst all the rumour and gossip.”

This was how I started my commentary on last year’s budget and, sadly, I am able to do so again today.

This year, the Deputy Speaker took the step of upbraiding the Government for the amount of possible policies that were leaked in the run up to this year’s budget. It was somewhat apt, therefore, that the Office for Budget Responsibility released their analysis of the entire Budget half an hour before the chancellor stood up to address the House of Commons.

Whatever happened to the policy of Treasury purdah?

When the Labour Chancellor Hugh Dalton revealed details of the 1947 budget to a journalist in the hour before his speech, he was forced to resign the following day. While leaking specific policy details began under the New Labour Government, even Gordon Brown would have baulked at making an unannounced speech three weeks before the budget to hint that he was going to break a manifesto promise not to raise income tax – only to reverse course a week later.

There is little doubt that this period of speculation and uncertainty has been damaging to the economy. Retail sales have been hit in what should be one of the busiest periods of the year as people wait to see what is happening to their disposable income. The housing market and business investment have been put on hold as businesses and individuals alike waited to see what would be announced.

So, what did we learn from yesterday’s budget?

Rather than take the broad-brush approach of raising income tax across the board, which the bond market had approved of when it was floated earlier this month, there have been a larger number of smaller measures. It will be difficult to see what the cumulative effect of these are for some time.

From the perspective of our clients and their investments, there was little to cause an alteration to strategies:

• CGT was not raised, as it might have been
• Dividend income tax, however, was raised by 2%
• ISA subscription allowances were kept at £20,000, but Cash ISAs are limited to £12,000 for savers under-65
• Pensions were largely untouched, except for the amount that individuals can add through salary sacrifice before suffering National Insurance contributions
• No significant changes to Inheritance Tax reliefs, such as potentially exempt transfers

From a market perspective, nothing much has changed in the short term either. The Government has raised a very large amount in taxation, which will come into force in the coming years. This will put the tax burden at its highest level since the Second World War. It is supposedly to be met with a decrease in spending at some point in the future, but whether the Labour backbenchers will allow that to happen is open to debate. For the time being, the bond market seems satisfied with the amount of fiscal headroom the chancellor has given herself and long-dated bond yields are moving lower accordingly.

Looking out longer term, the budget has not addressed any of the issues facing growth in the UK. Further regulation (not least in the tax code), further constraints on the labour market and the uncompetitively high costs of energy will continue to hamper the prospects for growth.

Last year we were sceptical when the chancellor said that it was a one-off tax-raising budget – and we have been proven right.

We also said last year that there were any number of issues that will determine the direction of financial markets, other than the budget, and the same applies this year. The main themes driving global stock markets remain US trade and foreign policy under Trump, how the rest of the world reacts to those policies, the path of interest rates and the stability of the AI boom. Not a tinkering budget by the UK Government.

Nonetheless, by leaking all possible tax rises, the government seems to have got away with what is not a ‘worst case’ budget. And by dividing up the sources of tax rises, the Government has manged to obfuscate the impact of their measures on the electorate and avoid the opprobrium of any one particular sector of society.

But neither has the Government done anything to markedly improve the outlook for the UK economy. That can has been kicked down the road, as so often before.

I recently attended a conference where Tony Blair said the difficulty with getting meaningful reform through Parliament is that “the sensible people are not radical enough and the radical people are not sensible”. Through that lens, perhaps yesterday’s budget falls into the sensible camp, and for now that is the most we can wish for.

Important Information

The contents of this article are for information purposes only and do not constitute advice or a personal recommendation. Investors are advised to seek professional advice before entering into any investment arrangements. Please note, we are not tax experts, and you should seek professional advice concerning your personal tax affairs from qualified advisers, such as tax accountants.

Please also note that the value of investments and the income you get from them may fall as well as rise, and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.