Rishi Sunak could delay the Autumn budget to next year
- UK Chancellor Rishi Sunak is considering delaying the Autumn 2021 budget to 2022.
- Conservative MPs are concerned that the furlough scheme could delay UK economic recovery.
- Rishi Sunak could implement an inheritance tax hike.
- The UK state pension age is unlikely to be reduced despite a petition.
- UK Prime Minister Boris Johnson will now self-isolate following contact with COVID-positive Health Secretary Sajid Javid.
- FTSE 100 tumbles as the UK enters its Freedom Day from coronavirus restrictions.
UK Chancellor Rishi Sunak is considering delaying the Autumn 2021 budget to next year to allow him to assess further the economic impact of the UK government’s business support schemes.
It’s expected that the UK Chancellor will reveal the three-year spending review during Autumn 2021 but will likely delay tax measures until spring next year. Economists have argued that Mr Sunak should err on the side of generosity during the review to help buoy the UK as coronavirus cases are set to increase.
The most significant financial concern is the UK government’s furlough scheme due to wind down at the end of September 2021. Many Conservative MPs are anxious that the end of the furlough scheme could impact the UK’s economic recovery from COVID-19.
The UK furlough scheme has protected over 9 million jobs, costing over GBP 65 billion of taxpayer money. However, a former UK cabinet minister was critical that the furlough scheme had been extended to September 2021, arguing that it encouraged staff to remain on the scheme unnecessarily, funding their summer staycation. Meanwhile, thousands of businesses, particularly in the labour sector, are complaining of staff shortages.
Recent data indicates that 2.4 million people are currently on furlough, including 34% of hospitality workers and 29% of those within the arts industry.
September 2021 is also crucial for the UK economy as it will also see the end of wage subsidies and financial support to self-employed individuals.
There is likely to be an influx of new COVID-19 infections from today, being the UK’s Freedom Day, where all COVID restrictions are lifted. Therefore, the end of UK government financial support, coupled with a rise in coronavirus cases, will likely mean the autumn and winter months will be a turbulent period for the UK economy.
Official UK employee wage figures for October 2021, which will be the first month without wage subsidies, will not be available until November or December 2021. As a result, it’s challenging for the Office for Budget Responsibility (OBR) to judge the UK’s economic outlook on public finances without this data. The OBR must have at least 12 weeks’ notice to deliver effective budget forecasts.
Should the UK Chancellor delay the Autumn 2021 budget, this would be the third consecutive year where this has been the case. The Autumn 2019 budget was delayed due to the UK general election, whilst 2020 was postponed due to COVID-19.
Mr Sunak has acknowledged the importance of getting UK public finances in order, with 2020 marking the highest UK borrowing on record, with rumours of saving GBP 3 billion by scrapping the pensions triple lock policy.
UK state pension age unlikely to reduce despite petition
As the pensions triple lock policy remains under threat, Chancellor Rishi Sunak is also being encouraged to reduce the state pension age to help boost the UK’s economic recovery. A petition entitled ‘move the state pension age back to 60 for both men and women’ has so far been signed by 44,324 people but needs 100,000 to be eligible for parliamentary discussion.
The UK state pension age is currently 66, with Mr Sunak urged to lower the age to 60 for both men and women. It’s been argued that with young people struggling to secure employment during the coronavirus pandemic, allowing staff to retire earlier could free up jobs for younger age groups.
Despite the suggestion, Steve Cameron, a pensions expert at Aegon, stated lowering the UK state pension age was unlikely to happen, given that life expectancies continue to rise. The UK state pension age was recently increased to 66, and it is set to rise to 67 in 2028 and to 68 in 2034.
UK pensioners are becoming increasingly concerned by the future of the pensions triple lock policy. The policy first appeared in the Conservative manifesto in 2019 and stated that pensions would rise depending on the highest out of Consumer Prices Index (CPI) inflation, rise in average wages, or 2.5%.
UK Prime Minister Boris Johnson previously stated the UK government would honour the Conservative manifesto and would continue with the policy. However, with UK wages rising rapidly year-on-year due to the coronavirus pandemic, pensioners could see payments rise to 8% during April 2022.
Mr Cameron stated that the UK Chancellor was unlikely to scrap the policy completely, wanting to honour Conservative pledges. However, it’s thought that Mr Sunak could make some changes to the policy to avoid high costs to the UK taxpayer.
Rishi Sunak could hike inheritance tax
In a bid to generate further funds, UK Chancellor Rishi Sunak is also considering hiking inheritance tax, stating that the UK needs to find further money. During May 2021, the UK Government sources said that Mr Sunak was edging closer to an increase in inheritance tax to help pay off the UK’s COVID bill, which is now nearly GBP 400 billion.
Although sources claim that Mr Sunak is moving towards the tax hike, no timeline for the increase was revealed.
The Treasury currently gathers GBP 5.3 billion annually from inheritance tax, and analysis shows that a 1% increase could raise an additional GBP 130 million a year, while a 5% rise could bring in an extra GBP 650 million.
Steve Cameron at Aegon says reforms on wealth taxes should be considered and could be used to fund UK social care.
Although a potential rise in inheritance tax would likely cause frustration amongst many UK citizens, tax reforms are a valuable way to increase funding for crucial areas in the UK.
Boris Johnson will self-isolate following contact with COVID-positive Health Secretary
The excitement of the UK’s Freedom Day was overshadowed by a public backlash that UK Prime Minister Boris Johnson and Chancellor Rishi Sunak would not isolate despite being pinged by the NHS COVID app.
Mr Johnson and Mr Sunak were both in contact with the UK Health Secretary Sajid Javid, who recently tested positive for COVID-19. Mr Javid tested positive despite receiving both coronavirus vaccines, though he is said to have only mild symptoms.
Despite meeting with the UK Health Secretary a day before he tested positive for COVID-19, Downing Street originally stated that Mr Johnson and Mr Sunak would not self-isolate. It was claimed that the UK political leaders were part of a pilot scheme, meaning they would not have to self-isolate if they presented a negative COVID test.
The announcement created a significant backlash in the UK, highlighting that it was unfair that the politicians followed different rules from the rest of the UK. Last week over 500,000 UK citizens were pinged by the NHS app, sparking outrage that the UK Prime Minister could bypass the regulations.
Following the public outrage, the politicians soon u-turned, and both took to social media, stating that they would not partake in the pilot scheme and would self-isolate as normal. However, former UK Prime Minister Tony Blair noted that Mr Johnson should not have to self-isolate and should be behind his desk doing his job.
Mr Blair highlighted that the current UK Prime Minister had been double vaccinated, had already contracted COVID-19 so, providing the COVID tests were negative should continue to work.
Businesses across the UK have become frustrated by the NHS COVID app, with thousands ordered to self-isolate at home and unable to attend work in what is being called the ‘pingdemic’. However, step 4 of the UK government’s COVID-19 roadmap will mean that double vaccinated individuals will no longer need to self-isolate if they are a close contact of a COVID positive person.
FTSE 100 tumbles as the UK enters its Freedom Day from coronavirus restrictions
European stocks took a tumble during the start of today’s trading session as the UK enters its Freedom Day from coronavirus restrictions.
The FTSE 100 dipped 1.3% lower, Germany’s DAX deteriorated 1.1%, and Paris’ CAC 40 was down by almost 1.3%.
Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown, stated UK investor confidence declined by 5% in July 2021 from the previous month and a significant drop from the 2% forecast.
It’s thought that the rise of COVID cases across the UK teamed with the lifting of coronavirus restrictions has knocked confidence for British pound (GBP) investors.
Ned Rumpeltin, head of European currency strategy at TD Securities, says the British pound (GBP) will remain vulnerable to further downside pressure due to the cautious market mood and low-risk appetite.
Whilst there is a significant concern for the future of the UK economy, the opening of nightclubs and unlimited capacity for live events could help underpin financial progress.