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In a much leaked Budget that was ultimately released almost an hour early by accident, Rachel Reeves has revealed a genuine smorgasbord of tax hikes.
In this instalment of Week in Business, City AM Editor-in-Chief Christian May breaks down the major measures, and explains what the Budget could mean for you.
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0:00
Right, how was it for you? That was
0:02
quite a budget and quite a buildup, but
0:04
the dust is beginning to settle. So,
0:07
what does it all mean? Welcome to the
0:09
week in business with me, Christian May.
0:14
Okay, bear with me uh because I haven't
0:17
scripted this video. And I know you're
0:19
staggered to learn that my usual week in
0:21
business series uh follows a script that
0:24
I had bash out moments before coming
0:25
into this studio. But as some of you
0:27
will know, thousands of you watched our
0:29
live stream yesterday. Um that was quite
0:32
enough uh more formal broadcasting for
0:35
the week. I think uh it was a great
0:37
success. Um and you can watch it all
0:39
back on our YouTube channel. Um what I
0:41
thought I'd do today is just take you
0:44
through our newspaper, which I think
0:45
gives a clear sense of of the sort of
0:48
opinions and analysis that we're
0:49
beginning to land on. Um the front page
0:52
should speak for itself. What a drag.
0:54
This really refers to the penicious
0:58
decision to extend the freeze on income
1:00
tax thresholds uh beyond the end of this
1:03
parliament. Now the Tories froze them in
1:05
2021.
1:06
I can't remember whether they vowed to
1:08
unfreeze them if they won the 2024
1:10
election or not. But uh Labour having
1:12
won that election did vow to unfreeze
1:14
these thresholds, stop people being
1:16
dragged into higher and higher rates uh
1:19
of income tax. um at the time last year.
1:22
Rachel Reef says it's a tax on working
1:24
people and it's taking money out of
1:26
people's pockets. Those were her words.
1:27
Uh yesterday she says she needs us uh
1:30
all to to bear with it and to stick with
1:32
this environment for a few more years.
1:34
What it means is, and I just look at the
1:36
numbers here, um there will be 920,000
1:39
more Brits paying 40% of their income in
1:43
tax and 780,000 more people dragged in
1:47
to the basic rate of tax. Now, this
1:49
isn't going to be felt in a sudden
1:50
deduction from pay packets. What it's
1:52
going to do is feed into a creeping uh
1:57
emiserating state of affairs whereby
2:00
people just get gradually poorer or they
2:03
certainly don't get better off. And this
2:06
leads me really to the comment piece on
2:08
page two uh where I suggest that our
2:12
entire economy is now a 20 mph zone. And
2:17
on this page you can see a handy piece
2:20
of work by the Institute for Fiscal
2:22
Studies that looked back at every
2:24
parliament um since 1970. Uh this is not
2:27
chronological. That would be too neat.
2:30
Um but every parliament uh and whether
2:32
they were ultimately raising or lowering
2:35
the tax burden. And you can see that the
2:37
parliament we're in now with the
2:39
measures announced yesterday on top of
2:40
the measures that came this time last
2:42
year means that this is a parliament and
2:44
a government that will see taxes
2:46
increase more than any since the 1970s.
2:50
Our GDP tax to GDP ratio will hit 38%.
2:55
That is a shocking new record high. 26
2:58
billion the overall amount of taxes
3:01
raised by the chancellor yesterday.
3:02
That's on top of 40 odd billion last
3:04
year of course. Um and and what does it
3:07
get us? Well, principally it it funds a
3:10
higher welfare spending bill. Welfare
3:13
spending, there wasn't a single cut to
3:15
welfare announced in yesterday's budget.
3:17
You'll remember at the spring statement,
3:18
the chancellor tried to shave about 5
3:21
billion off it and her MPs just said no.
3:23
Uh and we now know that there's going to
3:25
be about a 73 billion pound increase in
3:28
welfare spending which means that by
3:30
203031
3:31
we'll be spending a quite unbelievable
3:34
46
3:37
billion pounds a year on welfare up from
3:41
330 something billion now. Um that
3:45
really is one of the main takeaways from
3:47
this budget. The OBR and we'll come on
3:49
to the OBR because they didn't have a
3:51
glorious day. Um they say that adjusting
3:53
for inflation the median income the
3:56
salary in this country uh will be about
4:00
the same at the end of this parliament
4:02
as it was in 2008.
4:05
Can you just think about that for a
4:06
second? The prime minister said he wants
4:08
to be judged on an increase in living
4:11
standards. The OBR says that living
4:13
standards, household disposable income
4:15
basically going to be flat to the end of
4:16
this year and toward to the end of this
4:19
parliament. Sorry. Uh and towards the
4:21
end of this parliament, all these tax
4:23
rises are going to kick in. Uh and
4:25
people are just going to feel like they
4:26
are continuing to struggle. It's
4:29
incredibly depressing. The OBR said that
4:32
there was nothing in yesterday's budget
4:33
that will materially move the dial on
4:35
growth. I'm afraid it feels like we're
4:39
just sliding into the swamp. I mean, I
4:41
can't I I don't want to be just pure
4:44
doom and gloom. Let me try and find in
4:46
the papers some things that I thought
4:48
were were quite good. I mean, look, um,
4:51
the new rules on on the way we tax
4:54
shares that list on the London Stock
4:55
Exchange for the first few years after
4:57
an IPO, very good, very smart, nice
4:59
move. Uh, we welcome that. It should be
5:01
noted also that the chancellor uh is
5:04
being given the benefit of the doubt at
5:06
the very least by the bond market. Um,
5:08
she says she has found uh enough fiscal
5:11
headroom um taken it from about 16
5:13
billion to 22 billion or thereabouts. Um
5:16
and that is almost entirely um
5:19
hypothetical at this stage. That is
5:21
based on tax increases kicking in in a
5:24
few years time. So for the time being
5:26
the markets appear to say okay we can
5:28
see your intentions. We're going to keep
5:30
a very close eye on this. The most
5:32
alarming thing is the number of
5:34
economists and investors particularly
5:36
holders of government debt saying
5:38
yesterday that they do think there's a
5:40
credibility issue with this budget. They
5:42
do expect now many of them do uh that
5:46
the chancellor is going to come back and
5:47
raise taxes again uh next year. Um now
5:51
that again will just add to the sense
5:54
that we are getting sucked into the slow
5:58
lane and we just don't have the
6:01
wherewithal to pull out into anything
6:03
more fastm moving or dynamic. Um I would
6:07
commend today's newspaper to you. You
6:10
can find it on the city app, which by
6:13
the way has been downloaded over 330,000
6:16
times. Um, and I would just end by by
6:20
sparing a thought for the OBR.
6:23
Quite an extraordinary state of affairs.
6:25
Um, to find myself uh yesterday marching
6:28
across the square mile to the London
6:30
Stock Exchange to do our live broadcast,
6:32
holding a leaked copy of the budget and
6:35
flicking through it as I crossed the
6:37
road and Cheapside by St. Paul's. um you
6:40
know 45 minutes before the chancellor
6:41
was even due to deliver it. How that
6:43
leaked, how that happened um is an
6:46
extraordinarily embarrassing cockup uh
6:49
by the OBR. Um understand today they've
6:52
called in a former spook to try and
6:54
investigate what happened, who hit send
6:58
instead of schedule. Um so we'll follow
7:01
the outcome of that investigation quite
7:03
closely. on cityam.com
7:05
uh you can find a tremendous amount of
7:08
comment and analysis from economists,
7:10
analysts, experts, politicians, business
7:13
leaders. The dust has not really settled
7:15
on this budget. It takes time. As I
7:18
speak, as we film this, um the IFS and
7:21
other great think tanks are pouring over
7:23
the details and we'll see where it
7:24
leaves us. I fear where it leaves us is
7:27
a country with higher taxes, lower
7:30
growth, and it seems inexurably higher
7:34
spending on welfare paid for by people
7:38
who get up and go to work. Anyway, I
7:41
will be back next week where I promise
7:44
I'll write a proper script and we'll try
7:46
and start talking about things other
7:49
than the budget, but I suspect we'll be
7:51
talking about it for a few days yet.
7:53
Anyway, thanks very much. Do download
7:55
our app. Have a look at cityam.com.
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