Open goal
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One month on: has the Chancellor missed an open goal?

Last Updated: 12-04-2024

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    I wrote so much about the latest Spring Budget for our partners, I never got around to writing a post here. So, let’s amend that oversight right now.

    In fairness, we were expecting little from the Chancellor for the housing and mortgage markets. In that sense, he delivered. But, before we start pointing fingers, it’s worth considering the economic background he had to contend with.

    Swings and roundabouts

    Since the Autumn Statement, several economic factors had improved ahead of this March’s budget. Equally, there was much moving in the opposite direction, restricting any plans for loosening the public purse.

    The Fors

    At the Autumn Statement, inflation stood at 4.6%. Come the Spring Budget, it had continued its downward trend towards the target 2%, but has since stalled around 4%. 

    Will inflation reach its target before summer, as was the expectation? The lowering of energy price caps may help. But, with banks around the globe less confident about base rate cuts this month, it may take a while yet to get there.

    Unemployment stood at 3.8%, compared to 4.2% in November. How much faith you put in that figure, considering the ambiguous way data is collected, is up to you. But, on paper at least, it was heading in the right direction for the Chancellor.

    In the same vein, wage growth showed signs of slowing, albeit at a rate still ahead of inflation. The slower that wage growth becomes, the easier the Bank of England will feel about cutting the base rate (theoretically). On paper, another positive.

    The Againsts

    The ‘biggie’ is that the UK is technically in a recession, following GDP contracting in the last two quarters of 2023. No surprise, then, that growth stimulation and continuing to work on lowering inflation were the underpinning drivers of the Spring Budget.

    But how do you encourage growth when you have little ‘fiscal headroom’ to throw at it?

    Fiscal headroom is any spare cash the government has left after working out its target debt versus GDP. For the Spring Budget, the Chancellor had £9bn to work with.

    That might sound a lot. But it’s a drop in the ocean compared with the government’s total spend, which stands at £1.2 trillion. Factoring in these againsts, the Chancellor had very little to work with.

    The Office for Budget Responsibility has since raised its forecast for GDP, which is good news for this and any future governments. But that won’t help now, and any of many current global factors could still affect the UK’s future GDP.

    The results

    What I, and many in the housing and mortgage industries, wanted to see was the much-anticipated reform of Stamp Duty. It never happened. Never even got a mention.

    One has to ask one’s self, “Why?!”

    The government is desperate to stimulate growth. A swathe of the Gen Z populace is chomping at the bit to get onto the property ladder. Homemovers, especially those downsizing, are staying put rather than facing a hefty tax bill.

    I can’t help thinking the Chancellor, and all those this budget affects, will rue his missed opportunity.

    Other ‘highlights’

    There were hops and catches that might make a marginal difference to our disposable income. Fuel and alcohol duty were frozen for a year. But any base price rises in those consumables will be compounded by their existing duty. 

    Even the cuts to National Insurance are a smokescreen. Our personal taxes remain frozen. So, unless you’re lucky enough to have an inflation-beating pay rise, paying less NI is still unlikely to make you any better off. 

    For our contractor clients, there were a few less-publicised tax changes that may make you better off come year-end. But again, with no news on IR35, many will still feel the pinch of working through an umbrella or taking inside IR35 contracts.

    In short

    For the majority of us, it was pretty much a nothing budget. And, I guess, when the Chancellor had so little to play with, it could have been a lot worse.

    It remains to be seen which party’s in charge come this year’s Autumn Statement. If the Chancellor was holding anything back, his horse may well have already bolted. Let’s hope whoever’s in the saddle next can rein in spending and leave us all on a much more stable footing.

    Author: John Yerou

    John Yerou is the owner and founder of the award-winning Mortgage Quest Ltd and its subsidiary brands.

    In 2004, John began his career in financial services as an independent mortgage advisor and broker. He's since been instrumental in negotiating bespoke mortgage underwriting criteria for professional contractors with many high street lenders.

    As such, John's one of the most respected and recognisable names in securing mortgages for the UK's flexible workforce, incorporating independent professionals and the self-employed.

    His recognition as the go-to mortgage expert has grown exponentially, reflected in citations and his own publications in both national and contractor-oriented press.

    Posted by John Yerou

    on April 12th, 2024 16:45pm in Latest mortgage news & opinions.