‘We were led to expect worse’ - North Devon financial adviser reflects on Budget

A North Devon financial adviser has said the Budget could have been far worse and welcomed ‘some positives’ but also criticised a number of ‘missed opportunities’ and fears it will not stimulate growth in the economy.

Philip Milton, Managing Director of Philip J Milton & Company Plc, has been giving his take on the Autumn Budget delivered by Chancellor Rachel Reeves yesterday (Wednesday, November 26).

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Mr Milton told the Gazette: “It wasn’t a bombshell in the end, as we all expected even worse - but it won’t stimulate growth, it denies incentives towards dignified independence to so many on benefits and it will extract more tax from all of us but at least some threatened nasty things did not appear and interest rates will fall again soon now.

“People may be surprised when I say there are some positives in the Budget but as ever, missed opportunities too. Feeling relieved that the tiger only ate one of your children as opposed to three isn’t really a good outcome though.”

PJM & Co celebrated its 40th anniversary this year and four decades of providing financial advisory services and products for people in North Devon and beyond and has seen 11 chancellors come and go. The business now looks after around £290million in assets for its many clients.

Mr Milton went on: “For many of our clients, the biggest pieces of good news were what the Chancellor didn’t do, such as attacking pension tax-free lump sums or tax relief on contributions, plus there was no lifetime tax introduced on Inheritance Tax gifts or changes to present allowances.

“The other positive benefit for the UK stock market and business and consumer confidence generally is that the extended period of ‘uncertainty’ has ended (we can cope with ‘bad’ certainty) and that was stifling.

“Sadly there was little to stimulate ‘the economy’ and that is where higher tax revenues will come from and indeed, because of that there would be fewer demands on welfare as more people work and earn more.”

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He welcomed some of the measures such as an increase in betting duty and the ‘mansion tax’, adding: “It is only right that those with very expensive houses pay higher Council Tax. Band D in Westminster for example is just over £1,000 per year whereas in North Devon it is just under £2,500 – something even more needs to be done about this issue, quite frankly.”

But he believed the Chancellor could have introduced real changes to the benefits system to give more people incentives to work.

Mr Milton said: “All of us will know many cases where those receiving benefits are discriminated against and disincentivised to bother to seek work, or to work at all or to only do a minimum amount if that qualifies them for more benefits. That must change.”

He added: “She has not learnt that economics are about ‘scales’. If you do one big thing there are reverberations – such as a ludicrous increase in wage rates for the young, leading to even higher unemployment for them and fewer job openings. 

“Indeed, increasing the Minimum Wage above inflation again is daft too – increasing the cost of employment and raising inflation as costs have to be passed-on and the State employs the most people, so that has a cost and tax effect. These costs on employing, amongst the highest in the world, are already leading to increased unemployment and vacancies falling. 

“If you really want to cut the ‘cost of living’, do it in targeted ways to help people who would benefit the most, such as cutting their costs and even by nudging people to benefit if they follow particular behaviours. Cut taxes in the things which people buy and that cuts inflation too.”

Regarding the £2,000 cap on ‘salary sacrifice’ to pay into work pension schemes, he said until now only about half of employers had offered that option as it had been something of a grey area.

He went on: “If you are employed and paying into the employer’s pension scheme, then press for your employer to offer it, to save them and you National Insurance! I cannot see any reason either why such a change is not from say April next year – not ‘2029’.”

Finally, while he has supported the notion of cutting the annual tax free limit on Cash ISAs – which Ms Reeves has, from £20,000 to £12,000 – to encourage more investment in the UK economy, Mr Milton said it was ‘bizarre discrimination’ to keep the £20,000 limit in place for those aged over 65.

He added: “If you can afford £20,000 to subscribe every year that is no small sum, so why not indeed cut the limit universally to only £12,000 so the other £8,000 has to be more meaningfully invested? However, how on earth that can all be administered, I don’t know – you can transfer from or to a Cash ISA now, so it’s not clear how will that change.

“At least now after many weeks of wondering and endless speculation, we know the specifics. We can begin to inform and guide our existing clients, or any future ones, on how these measures may affect their own affairs and actions and if necessary, what changes they could make going forward.”