The Chancellor’s Autumn Budget raised the prospect of an end to ‘austerity’ and included headline grabbing announcements such as funds for the NHS and mental health, changes to income tax allowances and money to repair potholes.
Savings and investments were not a prominent feature of the Statement. But some important developments were announced.
The Government reiterated its commitment to its Patient Capital 10-year action plan launched in 2016, with new measures to promote growth and investment in smaller unquoted UK business. This included a pensions investment package to make it easier for UK defined contribution (DC) pensions schemes to invest in growing businesses through pooled investment in patient capital. This change accompanies recent extensions to the Enterprise Investment Scheme and the Venture Capital Trusts schemes designed to encourage more risky investment and entrepreneurship.
These developments present an opportunity to promote the suitability of investment companies to this type of direct investment in the real economy. Investment companies are excellent vehicles for patient capital because their structure does not require them to offer redemption, removing the need to hold cash which potentially reduces investment returns.
On PFI, there were claims of the Conservatives stealing Labour’s thunder with its announcement that it would no longer use PFI (and PFI mark 2) PF2 contracts to fund the building of schools, hospitals and other infrastructure. The announcement came in the wake of the Carillion debacle and an NAO report critical of PFI. This was perhaps not such a big announcement. The move away from PFI funding reflects an established trend in government procurement. PF2 has only been used six times since 2012 when it was introduced. However, the Chancellor was clear that all existing contracts will be honoured.
BUDGET HIGHLIGHTS
Speculation that the Lifetime ISA may be scrapped, were simply that – speculation. In fact, very little mention was made of ISAs. The ISA allowance remains unchanged although children’s savings were given a boost with an increase to £4,368 in line with inflation as the Chancellor encouraged parents to save for the next generation's future. That was pretty much it for savings and investments.
However, the pensions industry will no doubt be pleased that the Chancellor resisted the urge to change pension tax relief or the annual allowance. Retirees also received a boost with the increase in the lifetime allowance for pensions which also increases in line with inflation.
The accompanying Finance Bill, published on 7 November, set out a new tax regime for gains from property disposals. The new legislation which takes effect from April 2019, creates a level playing field for UK and non-UK residents in relation to taxation. The AIC had been concerned that non-UK investment companies would have been disadvantaged and had been engaged with the Government on this issue. We are pleased to confirm that changes have been introduced in the Finance Bill to address this problem. This means our non-UK members will not be disadvantaged compared to their UK counterparts.
All in all this was a relatively quiet budget; but perhaps inevitable as the UK prepares for big Brexit related changes in the coming months.