Round table takes on Autumn Budget

Scotsman Money asked a range of financial players for their thoughts on what the Budget will contain, as well as the potential impact on the wider economy and their clients, with many of the experts pointing to a general sense of unease...

Q What would you like to see in the Budget?

David McConachie is a director and chartered financial planner at Lossiemouth-based Amber River C&M, and says: “While I think this Budget will likely have a combination of spending cuts and tax increases to fill the £22 billion ‘black hole’, I’d be keen to hear a convincing argument from the Chancellor that any implemented increases will be effective and proportionate.“

Living in Scotland, we can already see the problems Scottish income tax increases have had on businesses trying to attract talent here; I hope therefore that the Chancellor takes a measured, economy-first approach, rather than a political choice of what’s easiest to implement.”

Andy Bolden is financial planning director at 7IM, and is looking to the Budget to continue incentives for investment into smaller businesses, particularly those with a rural or regional focus. He adds: “SMEs, agriculture, and new ventures are at the heart of the Scottish and wider UK economy and, with Labour having been elected on a more centrist platform of economic growth and stability, this Budget needs to deliver on this front.”

Bolden is also hoping for moderate and rational changes to Capital Gains Tax (CGT) rates and rules. “From recent discussions, many investors would accept some change [recognising that current rates are at historical lows], but I would highlight that too big a move by the Chancellor could easily backfire,” he says.

Marie Calvin is regional director, Scotland at Finli, a national financial advice business, and wants a commitment that the government will make logical decisions which avoid negative impacts on the most vulnerable in society, and help customers save with confidence.

Nick Sanderson is the chief executive of Audley Group, a builder and manager of retirement villages, and says: “There is a chronic lack of age-specific housing in the UK… The government must prioritise the delivery of age-specific properties, and do so quickly.”

Phil Jenkins is the chief executive of international corporate finance firm Centrus, and comments: “I would love for the focus of the discussion to move away from solely one of ‘what can government tax more’ to one of ‘how can government spend more effectively’.”

He observes that technology provides an enormous opportunity to drive efficiencies and better outcomes across swathes of the public sector, but believes that this would require a focused delivery unit with a clear remit from the government, and its own capital expenditure budget, to drive change.

Haig Bathgate is head of investments at wealth and financial wellbeing manager atomos, and says: “It would be good to see more coherence in terms of some of the strategies relating to personal taxation and redistribution, and how they might impact and interact with business investment.

“Whilst the government has made a pledge to kickstart growth and remove red tape, it is also important to create an incentive for individuals to want to work in the UK too – the two points are not mutually exclusive.”

He goes on to warn: “There have been so many leaks on areas like CGT, non-domicile status, pension reform, and exit tax for those leaving the UK that it’s created a lot of uncertainty, and we need some clarity to stop a potential brain drain from the UK.”

Kevin Brown is a savings specialist at Scottish Friendly, and observes: “As it currently stands, only parents and legal guardians can open a Junior ISA for their child. Relaxing the rules to allow other family members, for instance grandparents, to open a Junior ISA would encourage others to take advantage of the tax-free savings and investment opportunities ISAs offer.

“This in turn would help to remove the barriers that prevent many from saving or investing, and boost the financial resilience of households, helping to drive growth in the wider economy.”

Q What do you hope isn’t included?

Haig Bathgate does not want to see too many tax increases from the government, as he says this flies in the face of it also wanting to be pro-growth. He adds: “I also hope that the narrative changes to be more positive as it’s been very gloomy to date – there is always a silver lining to every cloud and talking more about the positives and potential for growth, rather than constantly talking about the failures of the previous government, I think would be sensible.“

Whilst it is very important to balance the overall finances, this can be done through a combination of pro-growth strategies and more modest tax increases.”

David McConachie replies: “Ideally, I’d hope the Chancellor stays away from further limiting pension tax free cash, which manyclients – namely those who wouldn’t necessarily be classed as particularly wealthy – use to support their income in retirement.”

Phil Jenkins says: “I hope the Government avoids anything that makes the UK a less attractive place to invest or to do business.“

Rachel Reeves stated in her Mais lecture in March of this year that ‘Growth, ultimately, is what generates higher living standards for households, raises incomes, lifts people out of poverty, and gives people more choices about how to lead a good life’.

“While governments can help to create the right conditions for economic growth, it is a healthy, productive and growing private sector which fundamentally underpins the economic health of the nation.”

Andy Bolden does not want the addition of pension assets into an individual’s estate upon death. “Nearly a decade after pension freedoms legislation, many individuals have planned around a cornerstone of the current IHT-free status of pensions,” he says. “

A change here would have a major impact on individuals’ plans, and potentially result in distribution of pension assets being caught up and delayed whilst awaiting Confirmation, or Probate south of the Border.”

Also to be avoided, according to Bolden, is the removal of the rebasing of capital gains upon death: “This could result in assets being doubly taxed through both CGT and IHT after death. From a personal finance perspective, it could also incentivise individuals to gift assets away earlier than planned – meaning careful planning would be needed to protect their own financial needs into later life.”

Kevin Brown says: “The Chancellor should avoid measures that discourage saving and investment, such as targeting pension pots or scrapping inheritance tax relief on AIM-listed growth companies. If the government aims to promote investment, increase savings and stimulate economic growth, penalising individuals for these actions is counterproductive.”

Tom Schofield is a senior partner at Foster Denovo and answers: “Pension scheme trustees and their advisers have always been focused on optimising returns which ultimately pay pensions. In the case of trustees, they are legally – and rightly – obliged to put this before any other consideration.

“The political pressure on UK-based schemes to mandate investment in UK assets to boost the UK’s infrastructure and economy, while worthy in intention, ignores a key practical consideration: pensions would already be doing just that if analysis of performance justified the asset allocation.”

Q Do you sense unease or optimism in the run up to the Budget?

David McConachie says the former: “Indeed, we’re seeing a significant increase of clients – often those approaching their planned retirement years –contacting their advisers, worried about what the Chancellor might announce in terms of changes to the pension rules and unsure how it may affect them.”

Haig Bathgate shares such sentiments around client unease, pointing to “doom and gloom” spread by politicians and talk of some quite “scary” tax reforms.

He adds: “I think there’s a big opportunity for the Labour party to take more of a moderate stance and start talking up the potential for growth in the UK economy.”

Marie Calvin says her clients main concerns are about the risk of a reduced tax-free lump sum on pensions and how this would impact consumer confidence.

Andy Bolden comments: “Amongst individual clients and business owners there is a split, but the prevailing view is a general sense of unease. In some cases, this runs to outright fear about the ‘painful and difficult decisions’ forewarned of by Rachel Reeves, but with others it is simply the extended uncertainty around what will change.”

Phil Jenkins notes: “It hasn’t taken long for the sense of hope for positive change and renewal that accompanied Labour’s general election win to give way to a sense of gloom and unease.

Ryan Etchells is chief commercial officer at specialist secured lender Together, and says of CGT: “The offloading of buy-to-let properties is not going to be good news to the large swathe of the population who rely on rental stock in the market. Landlords selling up en masse because of the threat of changes to CGT could hugely reduce the number of rental properties available at a time of high demand from renters.”

Kevin Brown is hoping for policies that encourage people to save and invest more, as he believes this will be key to securing long-term financial stability.